Microsoft announced a global beta of Microsoft Dynamics CRM 2011 today and appears to be heavily promoting the cloud capabilities of the new version.  In our recent article presenting the investment case for Microsoft, we pointed out that cloud computing is one of the major threats facing Microsoft and a mainstay of the bearish case against the company.  Let’s take a quick look at today’s announcement.

The Microsoft CRM product is a customer relationship management package that focuses mainly on sales, marketing, and help desk functions while integrating with Microsoft Office products.  The product is used either through the Internet Explorer browser or through a plug in for Microsoft Outlook.  Microsoft offers the product either as an on-premise solution installed by the customer or as a cloud-based hosted model.  Salesforce.com offers much of the same functionality but Microsoft has the advantage of tighter integration with the Microsoft Office suite of products.

While the technical details of the Microsoft CRM product are beyond the scope of this article, we believe that Microsoft’s release announcement today is important for at least two major reasons.  First, the release continues to advance very tight integration with Microsoft Office which still has a dominant market share in the corporate market despite attempts by Google and others to take market share.  Microsoft is using the large installed base of customers who are already familiar with Office to sell more specialized solutions like Microsoft CRM.  Second, we can see that the company is taking the threat of the cloud very seriously and has taken steps to position its product in a way that can attract customers interested in this deployment model.  One negative aspect of Microsoft’s approach is a tight coupling with the Internet Explorer browser and unclear product road map support for popular alternatives such as Firefox.

Microsoft appears to be pursuing product strategies that leverage the dominance of Microsoft Windows and Microsoft Office to attract customers who desire cloud based deployment but are also interested in leveraging their existing investment in Microsoft products and the easier learning curve associated with tight integration with Microsoft Outlook.  As we pointed out in our earlier write up of the company, this can present risk averse business clients with a less radical alternative that permits existing software investments to be leveraged rather than discarded in favor of an entirely new platform.

Disclosure:  The author of this article owns shares of Microsoft.