CRM Bookings Drop at Microsoft, Despite Its Big Copilot Push

CFO Amy Hood discussed Microsoft’s “weaker new business” in Dynamics 365 CRM and ERP

CRM Bookings Drop at Microsoft, Despite Its Big Copilot Push
CRMLatest News

Published: January 31, 2024

Charlie Mitchell

Microsoft posted another solid set of earnings results, with overall Q2 revenues topping $62BN.

That reflects a year-over-year (YoY) revenue growth of 18 percent for the tech giant, surpassing most analysts’ expectations.

The growth rate of its Dynamics business reached even higher, with revenues rising to a mighty 21 percent YoY.

However, Amy Hood, Chief Financial Officer at Microsoft, added a caveat during the earnings call. She said:

Bookings growth was impacted by weaker new business, primarily in Dynamics 365 ERP and CRM workloads.

In addition, Microsoft expects revenue growth for its overall Dynamics business to drop into “the mid-teens” next quarter.

Copilot Is Not Delivering a Big CRM Boom

Microsoft Dynamics 365 for Sales and Customer Service customers are using Copilot. Indeed, Microsoft shared an example of how Northern Trust has leveraged the virtual assistant to lower handling times across its contact center operations.

Moreover, Satya Nadella, CEO of Microsoft, stated:

In sales, our Copilot has helped sellers at more than 30,000 organizations, including Lumen Technologies and Schneider Electric, to enrich their customer interactions.

Yet, despite these uses of Copilot – spanning many existing customers – it hasn’t helped spark a massive uplift in new CRM bookings. Instead, they’re dropping.

That perhaps comes as a surprise after the release of Sales Copilot and the humdrum of excitement around the virtual assistant Microsoft has whipped up over the past 12 months.

In addition, the tech giant has raved over the benefits for its CRM customers when teasing Copilot over the past year.

For instance, in one blog post, Microsoft wrote: “Dynamics 365 Copilot brings the latest AI breakthroughs to every line of business, improving customer experience, employee experience and operational efficiency.

That’s quite the promise. Yet, it has not proven enough to welcome a new wave of new CRM or ERP bookings for the Dynamics 365 platform.

CRM Copilots Outside of Dynamics 365

It’s critical to note that Copilot for Sales and Service also comes as an out-of-the-box integration to apps like Salesforce, ServiceNow, and Zendesk.

As a result, businesses may still utilize Copilot inside of their current CRM and do not necessarily need to switch to Dynamics.

Nevertheless, most major CRM providers now have their own virtual assistants, which provide users with many of the same benefits as Copilot – with some even bringing new use cases to life.

Salesforce’s Einstein 1 Copilot is an excellent example. It even goes further than Microsoft by triggering automations across individual sales, service, and CRM apps.

As such, Microsoft Copilot appears less of a differentiator that will drive new CRM business. Instead, it’s becoming a staple of all solutions.

That said, besides Copilot, Microsoft has other CRM differentiators. These contribute to Microsoft’s positioning as a leader in “the CRM Customer Engagement Center (CEC)” space – as per the recent Gartner Magic Quadrant.

In that report, Gartner shared an example of one such differentiator:

Microsoft introduced an integration between Dynamics 365 Customer Service and the intelligent voice response platform of Nuance — a natural language technology (NLT) business that was acquired in 2022. This enables enterprises with low voice traffic volumes in their customer service operations to route the voice channel within Microsoft’s CEC platform.

While Microsoft could lean further into such capabilities – alongside its broader portfolio and global presence – to build on its market share, it will almost certainly keep banging the AI drum.

As an example of this, two weeks ago, it even added a watered-down version of Copilot to Dynamics 365 Customer Service customers for free – attempting to build more buzz around Copilot.

These actions could do the trick, but they’ll likely do more to encourage existing CRM customers to start utilizing the virtual assistant.

Of course, they could also sustain Microsoft’s image as a broader AI thought leader, yet the tech juggernaut may need to go further to build on its 5.8 percent market share in the CRM market (source: IDC).


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