Microsoft has made a move against some of the biggest names in the customer relationship management (CRM) market by adding web-based services to its Dynamics CRM offering. 

Steve Ballmer, chief executive at Microsoft, gave a demonstration of Dynamics Live in a keynote address at the 2007 Microsoft Convergence conference.

The software will be a key component in helping the next version of Dynamics Live to go head-to-head with CRM giants SAP, Oracle and Salesforce.com. 

Dynamics Live will be a hybrid that mixes the traditional PC-based software client with a web-based software-as-a-service (SaaS) model.

SAP and Oracle offer similar hybrid products, while Salesforce.com uses SaaS exclusively.

By adding SaaS components to Dynamics Live, Microsoft hopes to combine the customisation of web-based services like Salesforce.com with its current CRM software as well as its other proprietary business apps such as Excel and Outlook.

The company envisions users being able to produce 'mash-up' features that use web services and Microsoft desktop applications.

SaaS CRM systems have become increasingly popular in recent years as web connections have improved and more businesses have taken to e-commerce.

CRM systems traditionally came on several discs and could cost thousands of dollars, putting the software well out of the reach of smaller firms with only a few employees.

By selling the CRM system as hosted service, vendors are able to offer CRM software as a browser-based subscription service that charges per-user.

SaaS is also gaining in popularity with larger enterprises, owing to the flexibility of the systems.

The SaaS services can be managed and edited from a single remote location, or by a team of collaborating developers. Updates can be implemented without requiring a physical update or new installation on every user machine.

The next release of Microsoft Dynamics CRM, codenamed 'Titan', is slated for release by the fourth quarter of 2007.