Microsoft Preps Hosted 'CRM Live' For Next Year

The next major release of Dynamics CRM, version 4.0, is due out by June 2007 and will be delivered as a pure on-premise solution, a pure hosted option or some combination of both, depending on customer needs. The hosted iteration, called CRM Live will be hosted and sold by Microsoft, at least initially. Until now, Microsoft has talked little about the hosted CRM project, code-named Titan.

"We will have a single platform to drive both hosted, on-premise and hybrid CRM," Brad Wilson, general manager of Dynamics CRM, recently told CRN, which first reported on Microsoft's plans for hosted CRM in October.

Satya Nadella, corporate vice president of Microsoft Business Solutions, said the hosted CRM strategy will be a learning experience for the company. "Our current theory is that we'll start with CRM in terms of the Live offering direct from Microsoft, and we'll learn from that and make decisions based on that," he said. The planned target audience for CRM Live is very small businesses.

Many Microsoft partners expected that Microsoft would have to scrap and rewrite most of its current CRM code base or acquire multitenancy technology to make this happen. But that's not the case, according to Nadella and Wilson. Dynamics CRM 4.0 will be an evolution of the current code and offer true multitenancy, in which several customer instances of CRM can run on the same server infrastructure separately and securely, they said.

"Our model for CRM Live will have a private database for every instance of the customer, not a pooled data model like Salesforce.com, which causes consternation with government agencies," Wilson said. "There will be a private data space for every organization. It will not be commingled."

Microsoft CEO Steve Ballmer is expected to announce the hosted CRM plans Tuesday at Microsoft's Worldwide Partner Conference in Boston.

With the multipronged CRM move, Microsoft is echoing what SAP is doing with its CRM implementation: essentially, hedging its bets that one set of infrastructure can underlie three distribution and management models.

"We believe the SaaS [software-as-a-service] model is super-important, but at the same time we don't believe that distributed computing will die. We need to trump the dogmatic view of software-as-a-service as everything," Nadella said.

Indeed, the well-publicized Salesforce.com outages last year might have spooked some customers who had been willing to take the hosted CRM plunge. NetSuite also offers hosted CRM as part of its hosted ERP service. CRM Live, which will run on Microsoft's Windows Live infrastructure, is slated to hit its first partner Technology Adoption Program (TAP) in the fourth quarter of 2006, with the first customer beta possibly coming out in first-quarter 2007. Production availability and billing should be ready starting in the second-quarter 2007, Nadella and Wilson said.

Although there's no technical cap on how many seats CRM Live will support, it will be marketed and sold to small businesses and should help small VARs find an easy entry into selling CRM solutions, the executives said. CRM Live won't allow the use of server-side .Net assemblies in the Windows Live data center, Nadella said. That could cut down on the amount of business process customization available to customers.

Microsoft's push into hosted services has raised fear in the channel--particularly among current hosting partners--of disintermediation, and the Redmond, Wash., company is trying to assuage that anxiety. The fact is, some customers will want to go into SaaS, and "we want the partners to be part of that," Wilson said.

What's more, customers will always need value-added services based both on geographical presence and vertical customization, which partners provide, Nadella said.

Microsoft has taken an evolutionary path toward hosting CRM. The current Dynamics 3.0 release was offered with Service Provider License Agreement (SPLA) pricing that made it cheaper and easier for solution providers to license and host the application. The company subsequently announced a service provider edition of the current product.

Ray Ozzie, recently named Microsoft's chief software architect, said the company has been forced to adapt its sales and distribution model and that its partners must do the same. Partners that innovate and stay ahead of the curve should be fine, he noted.