Titan or Titanic?

To do that, Microsoft has to make up some significant ground. The new version of Dynamics CRM shares the same code between its traditional licensed-based version and the “on-demand” version–both can be configured as “multi-tenant”–supporting multiple organizations from the same installation. And Microsoft is attempting to make CRM 4.0 more attractive as a hosted solution by cutting the subscription fee for hosting partners by 40 percent.

The ability for customers working with a Microsoft partner to switch easily from on-demand to on-premises is a major selling point. So is the integrated workflow in 4.0, and integration into the Outlook client and the rest of Office.

Microsoft is also going to host CRM 4.0 itself, as part of Dynamics Live. That may be a draw for some of the small businesses who’ve bought into the Office Live world, but it’s doubtful that any mid-sized enterprises will work directly with Microsoft hosting.

Salesforce has a pretty big leap on Microsoft in terms of building a true web-based application platform for CRM. While Microsoft has plenty of partners, it’s going to be difficult for Microsoft to leverage them the same way Salesforce has with its burgeoning platform community. Sure, there are lots of .Net-experienced developers out there, and Microsoft has talked up a number of verticals for 4.0.

But when you look at Microsoft’s CRM feet on the ground–its actual CRM partners and existing installed base–it looks a lot less like Microsoft can dominate this space. Salesforce’s Bruce Francis has been dismissive of the quality of Microsoft’s offering, saying ,”Microsoft will do for Software as a Service what Zune did for music players.”

Most likely, if Microsoft is lucky, Titan will help it hold its ground against Salesforce. But it won’t even begin to address competitive issues with the larger enterprise CRM players like Oracle and SAP.