Microsoft cuts price, still lags in hosted CRM

That will change in Microsoft's next CRM update, code-named Titan, according to Microsoft and NaviSite, which has been working closely with Microsoft's developers. Still, Titan isn't due for at least another 15 to 18 months, according to Microsoft's public relations representative, and details about what will be in that update are vague.

Until it offers multi-tenancy, Microsoft won't be a serious player in the on-demand applications market, Yankee Group Inc. analyst Sheryl Kingstone said. She also thinks customers would like to see Microsoft offer hosted, subscription-priced applications directly, not only through its partner network. "There's absolutely a demand for that," Kingstone said.

Microsoft has sent a muddled message about how it wants to approach the growing market for managed, Web-based applications, popularized for consumers by Google Inc. and for businesses by Salesforce.com. Microsoft's recently launched Live initiative and Ray Ozzie's famed memo about "The Internet Services Disruption" indicate that Microsoft wants all of its divisions to adopt a services strategy. But the company's lagging pace in the hosted CRM market has left it playing catch-up behind smaller, nimbler vendors.

Kingstone suggested that if Microsoft is serious about the on-demand market, it should buy a company such as RightNow Technologies Inc., a hosted CRM vendor that focuses on service and call-center technology.

Meanwhile, NaviSite's Clayman thinks Microsoft's challenge is to make more customers aware that its CRM system can be used as a hosted, subscription service. "At this level, the pricing is not that significant," he said. "The prices [of all the on-demand CRM vendors] are getting so close it's coming down to features, and there are a lot of customers that want Microsoft's features."