Microsoft launched their CRM 2011 Online offering in the 18th of January 2011 giving customers worldwide the ability to rent and host their CRM Dynamics applications directly with Microsoft.

Some naysayers and sabre rattlers talk of Armageddon for the CRM Hosting Community and in doing so display their complete lack of understanding of the complex and individual requirements of customers, the capabilities of the hosting providers, their routes to market, and the most importantly the Dynamics business space in general.

To a misinformed few, the belief is that every time a major Microsoft Online launch happens – across its hosting products, any hosting company providing a similar product will be blasted into oblivion.

As CTO of Outsourcery (one of the world’s leading Hosted CRM Providers) and the architect of its product strategy, I think it’s a good time to speak from a service provider perspective; specifically on the launch of CRM Online and discuss the opportunity for service providers like us.

CRM stands for Customer Relationship Management and Customer Relationships encompasses the entire lifecycle of a customer including all interactions – real-time and non-real-time. As business people, we quote, support, sell, market to our customers; but we also talk to them on the phone, meet them, video conference, instant message, and share information with them.

My belief is that CRM technology in general is in a very early stage of development. That withstanding, Microsoft CRM Dynamics is the best CRM technology currently available, helping businesses to streamline their operations and gain greater control of their businesses. However in order to extract the maximum value on a CRM system, we need to cover as many customer interactions in the CRM platform as possible. In order to do this we must integrate with other systems and products; some of them Microsoft, some of them not.

Asking a single Cloud Service provider to integrate a huge variety of products into their CRM offering is an extremely complex task and one which neither Microsoft nor other independent CRM Hosting Providers will deliver tomorrow (or in the next couple of years).

In additional, Customers of scale wanting a CRM deployment in the cloud require heavy customisation and integration of the CRM deployment with other business line applications. Some customer’s require their data to stay within the UK or on a dedicated (not shared) SQL back-end. These types of deployments are more suitable for a DDC deployment and not a Partner multi-tenant or Online deployment.

So is there an opportunity for independent CRM Hosters? Of course there is. Do they need to differentiate?  Of course they do,  what business doesn’t? However, the market opportunity for CRM is enormous as collectively, hosting and on-premise businesses have barely scratched the surface with deployments. What the CRM Online launch does achieve is to give more credence to the hosting or cloud model, be it Microsoft Online or Partner Hosted, something which it has previously lacked.

The real opportunity for CRM hosters is the ability to offer “the power of choice” – Same core CRM product but different deployment options depending on customer circumstance. Soon even a hybrid model will be possible where some users are on MS Online and some on partner hosted – all within the same Organisation.

This is why Outsourcery has chosen an infrastructure agnostic model – same core technology but different deployment options giving customers the power of choice. Outsourcery believes that Cloud is a more efficient distribution model when used at scale – let the internet deliver the software rather than a courier – it’s cheaper for everyone that way.

So what is the real threat to Microsoft CRM hosters’? I certainly don’t think its Microsoft. To me it’s clear: Salesforce.com – just a pity that point wasn’t picked up by the sabre rattlers!