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Microsoft to Offer CRM as a Service

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Posted July 12, 2006 By Andy Patrizio     Feedback

Dynamics CRM will take on — but not until the second quarter of 2007.

Article appeared originally on

Microsoft's Dynamics CRM product line will be the latest to make the transformation into a "Live" service when it ships next year. But first, Microsoft has to gives its customer relationship management (CRM) software an upgrade that will make it viable as a service.

The current release, Microsoft Dynamics CRM 3.0, has been on the market for two years but is limited by its lack of multi-tenancy support. That means that as of now, Dynamics CRM can only support one customer account per physical server, so each customer requires its own separate hardware.

Microsoft Dynamics CRM 4.0, code-named "Titan," provides true multi-tenancy, which will allow for multiple customer accounts on a single server. This will make Microsoft CRM much more competitive with software-as-a-service (SaaS) (define) providers like, Microsoft's primary target with the release of CRM Live.

"To tackle the markets we wanted to serve, we did believe a multi-tenant model is what we needed to be viable," said Kevin Faulkner, director of product marketing for Dynamics CRM. Microsoft (Quote, Chart) will initially aim CRM Live at small businesses and host the servers in its datacenters.

Both Titan and CRM Live are planned for a Q2, 2007 release. With Titan, customers will have three deployment options: CRM Live hosted by Microsoft; CRM Live hosted by a third party; or deployment on their own systems. The latter option is popular with multinational corporations, said Faulkner.

The news was hardly a surprise, given the details of Titan have been available for some time, as is Microsoft's desire to move to SaaS. Steve Ballmer, Microsoft's CEO, called it "the least surprising announcement in Microsoft history" when he delivered the news at the company's Worldwide Partner Conference, currently taking place in Boston.

"It's not surprising. The fact that has done quite well certainly suggests to Microsoft that there's a customer segment out there that wants hosted CRM services," said Chris Alliegro, lead analyst for Directions on Microsoft.

This move will put Microsoft squarely in competition with , although unlike, Microsoft won't allow CRM Live users to run third-party server-side code in its datacenters. Wall Street didn't feel a need to worry;'s stock rose $0.80, or 3.42 percent, despite the news.

The company's CEO doesn't seem terribly troubled, either. Marc Benioff sent an e-mail to his staff, singing another verse of glory to SaaS and saying not to worry about Microsoft.

"Everyone agrees that the future of software is no software at all---but rather an industry dominated by tens of thousands of heterogeneous services delivering everything from traditional Office productivity to Verticals to VOIP to ERP and CRM systems. All companies and executives now agree: no software application will remain standing at the end of this widespread transformation," he wrote, in part.

Alliegro said it's too early to tell if Microsoft can be competitive, since pricing for CRM Live is not known.

"This is commodity stuff. What it boils down to is companies will go with a vendor they believe they can trust, a vendor they believe will be around, and a product that's cheap. Microsoft certainly looks like it will be a solid contender on all of those fronts," he said.

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