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announcement Tuesday that it plans to enter the customer-relationship management field with a product for small businesses has sent potential competitors scrambling to explain that they serve a different market.

But while that's likely to remain true for enterprise software makers such as


( SEBL)and


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, other public and private companies that target mid-sized businesses may be likely to face Microsoft in the future.

"I think eventually they

Microsoft will move to the mid-market," said Jon Ekoniak, an analyst with U.S. Bancorp Piper Jaffray, whose coverage includes enterprise software makers





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but not Microsoft. "That will be sometime in the future, but as they continue to move up with their databases, they are likely to move up with their applications."

Microsoft's Great Plains division announced Tuesday it will begin shipping its customer-relationship management product targeting small- and medium-sized businesses in the fourth quarter. Microsoft acquired Great Plains Software in December for $1.1 billion. The deal was seen as an attempt by Microsoft to move into the growing, Internet-based business market, in part by building on its bCentral business Web site. The CRM product will be offered both as a packaged product and hosted online through channel partners.

Shares of Microsoft fell fractionally in recent trading.

CRM players that target small companies, such as Britain's

The Sage Group

and privately held may be most at risk from Microsoft's new product, analysts say.

"The lower down in the market a vendor is, the more they should watch out for Microsoft," said Bob Austrian, an analyst at Banc of America Securities. "Up at the Siebel levels there's little if any worry anytime soon." Austrian has a buy rating on Siebel and his firm has done banking business for the company.

Indeed, Microsoft said it does not plan to target the enterprise CRM market, but will continue to sell to medium-sized enterprise customers through an alliance with Siebel.

Goldman Sachs analyst Rick Sherlund estimated Siebel derives $250 million in revenue from the midmarket. While Sherlund believes Microsoft's new CRM product targets the lower end, he said he still believes both SAP and Siebel have been anxious about Microsoft becoming a CRM competitor.

SalesLogix, the U.S. subsidiary of The Sage Group, said it will target its installed base of 1.2 million customers to combat Microsoft. Less than 4% of that customer base has purchased its CRM product, said Kevin Myers, vice president product and services marketing for SalesLogix.

Meanwhile, companies such as


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Onyx Software


say their midsized customers operate larger businesses than Microsoft plans to serve. Their average deal size ranges from $200,000 to $400,000, far more than small companies can afford, and they operate a direct sales force, unlike Microsoft.

Shares of Siebel were down 1.37% in recent trading. Onyx was flat and Pivotal shares fell 3.5%.


Microsoft infrastructure is all about volume through channels at low prices -- not about custom work," said Onyx CEO Brent Frei. Still, Frei does not discount the possibility of Microsoft moving up the chain to compete against Onyx.

"That's a concern we've had since we founded the company eight years ago," he acknowledged. "What we've done is stay very, very close to Microsoft and understand what their strategy is and be an important component wherever they go."

For instance, Onyx is a partner with Microsoft in the financial services market, and works with Microsoft on Web services business, Frei said.

For Microsoft to move up the chain, it would have to not only build a sales force but also offer a more customized solution, said Matt Duncan, Pivotal's vice president of marketing. "The low-end companies are really looking for something that is more shrink-wrapped, out-of-box functionality," he said. Medium-sized companies want an application that costs less than what large enterprise companies like Siebel offer but that can be customized so that it's up and running in three to six months.

But with companies more focused on budgets these days, that may not always be true, noted Austrian of Banc of America Securities. "The fact that times are tough pushes buyers to packaged software that works out of the box. So there's more propensity for ready to go products," he said.

And that of course, is where Microsoft has dominated.