Microsoft announced a major new release of Dynamics CRM on Monday with the usual feature and function upgrades, but most of the hoopla surrounds a more globally available and aggressively priced Online version.

Microsoft Dynamics CRM 2011 will be available on premise (with software shipping in February), but with the Online version released on Monday, the service is now available for the first time outside of North America. Dynamics CRM 2011 Online service now supports 41 languages and reaches 40 major markets, including most European countries and key markets in Central and South America and the Asia Pacific region.

In going global with the Online version, Microsoft is going after competitors Salesforce.com and Oracle CRM On Demand, both of which are well established internationally. Salesforce, for example, gets 30% of its income from Europe and Asia Pacific.

Hoping to take a bite out of Salesforce.com's fast growth, Microsoft announced aggressive promotional pricing of $34 per user, per month. That's well below the cost of Salesforce.com Professional services, which start at $65 per user, per month, and Enterprise services, which start at $125 per user, per month. Oracle CRM On Demand starts at $75 per user, per month with higher fees for a dedicated version.

Dynamics CRM Online pricing increases to $44 per user, per month once the one-year promotion expires, still well below the cost of its rivals. What's more, Microsoft insists Dynamics CRM Online is best compared to Saleforce.com Enterprise, a $125 per-user, per-month offering.

"We give you full sales, service and marketing functionality in our standard service where Salesforce.com does not offer marketing functionality or real-time intelligence unless you use the Enterprise edition," explained Bill Patterson, director, Microsoft Dynamics CRM, noting that Dynamics dashboards are continuously refreshed whereas Salesforce.com requires users to hit refresh, something they can do only twice per hour without incurring additional charges.

Salesforce counters that few customers need more than a couple of status updates per hour, and Dynamics CRM and Salesforce.com "aren't even close to comparable," said an executive who described the latter as far more social, open and mobile.

"Our Chatter collaboration layer gives users a whole new social way to interact with the application, and that's something Microsoft isn't even close to delivering," said Scott Holden, senior director of product marketing at Salesforce.com. "We also have mobile capabilities running on all the major platforms, including iPhone/iPad, Android and Blackberry. Microsoft is closed off in that respect, so you get what you pay for."

Microsoft does not break out exact on-premise versus online statistics, but it says the two offerings together have some 23,000 customers. Roughly 10% of those firms are running in the cloud. Saleforce.com, the on-demand CRM marketshare leader, now has more than 87,000 customers running exclusively in the cloud.

The feature and function upgrades to Dynamics CRM 2011 include a business process engine that lets power users and administrators develop wizard-driven workflows. A sales team, for example, could create a process that prompts salespeople through the process of qualifying a lead and approving a deal proposal. Microsoft says the Web-based interfaces, workflows and related alerts can be developed without coding.

Dynamics CRM 2011 also offers improved integrations with Microsoft products including SharePoint and Link Online (formerly Communications Server and LiveMeeting). The integrations to SharePoint surface relevant content, such as contracts and proposals, while integrations to Link Online expose presence awareness, customer contacts, chat capabilities, video conferencing and phone contacts.

The new CRM process capabilities can be tied to Azure services to expose customer-facing process via the Web. Azure services offer elastic compute power, so a spike in customer support activity or a big marketing campaign could scale up quickly to support spikey demand.

Given Saleforce.com's size and momentum in CRM, in North America and globally, it's tough to imagine the vendor taking much of a marketshare hit from Dynamics CRM. It's easier to see Microsoft's aggressive pricing impacting the rest of the CRM field, among cautious customers looking for low-cost replacements for aging on-premise deployments.

Microsoft's hybrid on-premise-or-on-demand story looks like a safe middle ground for customers who aren't as sold on the cloud computing and Facebook social networking models that defines Salesforce.com's strategy.