After a nearly two year hiatus, Microsoft has leapt ahead to version 3.0 of its customer relationship management (CRM) software. Once work is completed, CRM 3.0 will replace the 1.6 release as Microsoft's front line solution to battle with more established vendors including Oracle, PeopleSoft, Siebel Systems and SAP for a more sizeable share of the market.

The most significant aspect of the release en route toward achieving that goal may be Microsoft's adoption of more on-demand services. Rather than rely solely on its partners to provide hosted CRM software as it had previously, Microsoft will roll out a subscription-style pricing model and provide its CRM tools to customers over the Web.

This lowers the barrier to adoption for shops that have scant IT resources.

"There are plenty of small or medium-sized businesses that would be good candidates for hosted CRM, if for no other reason than lacking technical expertise. More importantly, the CRM hosting license would give select Microsoft partners an alternative to salesforce.com, at least in the lower-end of the market," explained Senior Jupiter analyst Joe Wilcox.

Other upgrades fill in the gaps that were left in Microsoft's first CRM release. Microsoft now offers marketing automation tools -- its chief competitors already have -- that keep tabs on advertising and marketing campaigns, customer response and manages client lists.

There is also further integration with Microsoft Office: New scheduling tools hook into the Microsoft Outlook client software. Other hooks troll out to snare third party developers into creating customized solutions that service vertical markets. But that may not always be necessary, because Microsoft now provides customization options for specific business processes.

"Every business — whether large or small — needs a fast, flexible and affordable way to manage and grow their relationships with current and prospective customers," said Brad Wilson, general manager of Microsoft CRM.

"Microsoft CRM 3.0 provides exactly what our customers and partners need: a simple user experience based on Office and Outlook, a flexible CRM platform that easily adapts to fit each business, and fast implementations that can result in a low TCO. The feedback on this release from customers, partners and industry analysts has been tremendous."

Microsoft CRM 3.0 will be generally available in the first quarter of 2006 with the license upgrade paths yet to be announced. Although, customers that subscribe to Microsoft's Software assurance program and have purchased the Professional edition of the previous release will receive the updated modules.

Language support has been increased to 23 languages and the product is available in 53 different countries.