Microsoft Takes On Salesforce

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You have been very aggressive in terms of pricing. Help me understand the strategy behind that.

It's in our DNA to be the high-volume, low-cost provider of software solutions.

This is one piece of a much bigger business for Microsoft. Is this a loss leader?

No. This is a great business for us. Our Dynamics business now overall is about a billion dollars [a year]. And CRM is a very important part of it, it's growing 100% [year over year]. Because we bet on big volume, we can afford to invest broadly.

Gartner recently put out a report on this segment, and Salesforce as well as Oracle's Siebel CRM business were at the top. Microsoft is described as a "challenger." Is Gartner's analysis right?

Well, certainly I think the trajectory that we're on will position us as a leader, and it's just a matter of time.

Microsoft executives have been saying that with regard to this market for years. What's different this time around?

The key is we've got a great product, and we already have a lot of momentum with the product. The user experience from within Outlook is something that people love, and they've been gravitating towards that; the simplicity, the ease of use. But one thing I should be clear about: I'm very satisfied with the success we're having in this business. We've got a business that in a couple years has gotten up to more than 400,000 users. It's got terrific growth, and it's getting even better. Another way of saying it is there's nobody else's position in the industry that I would want.

Does this put you in any competition with your partners, who have been hosting CRM services online on top of Microsoft software?

I think there may be some partners that will want to migrate their solutions to be more specific to some customer segments. The partners who host will do the best if they decide to go ahead and focus on a given industry. So, the partners that are doing more horizontal things will probably change their strategy. We've been very clear with the partner channel about our plans so that they can make those kinds of adjustments.