Microsoft will next week offer more details of a hosting-friendly release of its customer relationship management (CRM) software to better compete with the likes of Salesforce.com.

Currently called CRM 4.0, the new version is intended to make it easier for third parties to offer CRM over the internet via subscription services. The announcement will come at next week’s Microsoft Dynamics Convergence event in Copenhagen.

Another push is to make CRM a platform where complementary functionality can be plugged in, thanks to developer APIs and tools. A workflow engine to automate policies will also be added.

Denis Pombriant of analyst firm Beagle Research said Microsoft CRM products “have approached parity” with rivals, but warned that its focus on partners could block progress. “Microsoft’s model is to sell through an indirect channel to a large portion of the market,” he said. “It is leaving itself open to too much variability in products and service levels, and that could prove to be its Achilles heel.”

Some on-demand purists agreed that firms might be put off by third-party hosting. “The whole idea of the thing is that you’re taking out the middle men and dealing direct,” said Salesforce president Jim Steele.

However, David Bradshaw of analyst firm Ovum believes many customers will happily deal with hosting partners. “It’s horses for courses,” he said. “The problem with the old version was that the host had to have an instance of the software for each customer.”