Satya Nadella, a corporate VP in product development in the MBS unit, said a significant portion of the revenue from the CRM product is coming from enterprise customers. Even Microsoft -- a big Siebel and SAP shop -- is now using Microsoft CRM in a few places throughout the company. Microsoft's new midmarket group, for example, chose the new software.
"They realised they could get up and running faster with Dynamics CRM than by installing further-out Siebel," Utzschneider said.
Wang said that the company's industry builder program, which rewards partners that help tailor Dynamics products for a particular industry, could help the company win over some large accounts. "There's an opportunity for a few showcase accounts in the enterprise," Wang said.
One of the challenges, Wang said, is that the key to winning small and midsize customers is having a strong base of partners that can help the companies install and manage the software. To reach the largest customers, by contrast, companies typically need a large direct sales force, Wang said.
Services proof-of-concept
Even as it tries to grow its own business, MBS is also serving as something as a testbed for Microsoft's software-as-a-service strategy. With the latest version of CRM, for example, customers can either buy the software and use their own servers, or run a hosted version on a subscription basis.
This week, Microsoft announced a version of the CRM software that is specifically tailored for Web hosters, with additional software for provisioning and monitoring the CRM installation. Those who want to offer hosted CRM would pay Microsoft a monthly fee for each business user they sign up, and then resell the service at a profit.
While Microsoft is making this possible with the current CRM product, the version due next year will allow hosters to run more than one company's CRM installation on a single server. That feature is needed to make it viable to sell CRM to companies with fewer than 25 users of the software.
Gates noted that Microsoft will eventually have hosted options for many of its products. "Everything Microsoft does, over time, will be available either running as a server or you can run it on-premise or it can be hosted," Gates said.
One of Microsoft's key selling points is its flexibility, said Brad Wilson, the former PeopleSoft executive who joined Microsoft a year ago as general manager of the CRM business. Customers can start out using a hosted CRM option, but then move the software in-house. Because it is the same code in both cases, such transitions shouldn't take more than a weekend, he said.
"We want to blur the line," Wilson said. "I want to abolish any artificial distinction in how customers deploy the technology."
Clearly, Microsoft has come a long way in the CRM business. However, Credit Suisse analyst Jason Maynard doesn't expect Microsoft to unseat Salesforce.com, the leader in the hosted CRM market, anytime soon. He said Salesforce's approach seems to have more appeal in today's market.
"(Microsoft's) Live CRM did not garner a lot of airtime at the conference, and it doesn't appear that on-demand is a top priority for the company at this time," Maynard wrote in a report released Tuesday. "We like the look and feel of Microsoft's new CRM product, but we believe that Salesforce.com's clear, on demand-focused approach is more in line with market demand at this time."
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