Microsoft is dropping the price 40 percent on its CRM Live hosting for partners who host (and resell) its customer relationship management software, hoping to drive partner demand in a non-partner space.

The new price, announced Oct. 23 at Microsoft's annual Convergence conference, in Copenhagen, is $15 per month per user, dangerously low for competitors, but in a space where few competitors sell to partners.

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Microsoft, with a legacy indirect sales force from its on-premise ERP [enterprise resource planning] and CRM software—some of which is already hosted—is in a bind to include its tremendous partner network in its CRM Live, or on-demand, initiative.

"Several Microsoft executives have made the comment that their partner network is their biggest asset, but it's also their biggest hurdle when moving into Software as a Service," said AMR Research analyst Rob Bois. "If they didn't already have a big partner network, they probably wouldn't have used it in SaaS. But given that they have it, they have to figure out how to use it."

On-demand mainstays Salesforce.com and NetSuite currently sell their software through a direct sales channel, although NetSuite is reportedly experimenting with an indirect model, according to Bois. Other niche on-demand software companies like RightNow Technologies and Workday are selling through direct channels as well. The rationale: it's difficult to sell enterprise-class software through partners, according to a RightNow spokeswoman, because big companies want direct contact with their software vendor. The indirect model, it seems, is more appropriate for the midmarket, where Microsoft traditionally sells its Dynamics software.

Despite the fact that Dynamics is typically sold to small and midsize companies, Microsoft is indeed targeting enterprise users with CRM Live. But its low pricing strategy, one the company has used to enter and dominate a number of markets, could backfire. Microsoft said in July that it would charge $44 per user per month—about half of Salesforce.com's Enterprise pricing.

Read the full story on eWEEK.com: Microsoft Opens Fire Sale on Partner-Hosted CRM Live