Microsoft chases Oracle, SAP with hosted CRM

Microsoft has launched a long-awaited update to its customer relationship management (CRM) software, which will for the first time include subscription-style pricing.

Dynamics CRM 3.0, released late on Monday, lets companies track and manage customer information. It also adds marketing management and service scheduling capabilities, along with tight integration with Microsoft's Office desktop software, said Brad Wilson, general manager of Microsoft's CRM product line.

The new release, roughly two years in the making, also introduces a hosted version that Microsoft's partners will offer as a service over the web. Microsoft will continue to sell a traditional version of the software that customers install on their own servers.

Competitors in the CRM market, such as Salesforce.com and Siebel Systems, which database giant Oracle plans to acquire, already offer hosted CRM. Industry giant SAP has yet to introduce a hosted version of its products.

Microsoft said that with the updated software, it's also targeting larger companies with a new professional edition. That move will put the company in direct competition with Oracle and SAP.

The hosted version of Microsoft's product, which will be priced by partners, requires no up-front contract, Wilson said. Customers "pay for as much CRM as they use in a hosted environment for as long as they want to use it", he said. Microsoft charges partners a base monthly fee.

Wilson expects hosted prices to vary depending on the amount of customisation done by partners for particular regions and industries, such as financial services.

The software will be available in two versions. The professional edition is targeted at large businesses, costing $622 to $880 per user and $1,244 to $1,761 per server. The small business edition is limited to 75 users and costs $440 to $499 per user and $528 to $599 per server.

Despite the company's big plans, Microsoft does face an uphill battle against entrenched rivals.

SAP dominates the CRM market, with more than $1.6bn in sales in 2004, according to AMR Research. SAP's sales of CRM tools are expected to reach $1.7bn this year. Microsoft, by contrast, sold $202m worth of CRM software in 2004 and is expected to sell $232m worth this year, AMR said.

Mike Ricciuti writes for CNET News.com