Microsoft continues its advance into the enterprise application market. Its latest target -- software to manage businesses relationships with customers -- is a crowded field that's rife with competition from well-established vendors. Microsoft is using its longstanding and usually successful marketing strategy with Microsoft CRM 1.0: Introduce a product for small and midsize businesses that's less complex, easier to use, and less costly than most of the products dominating the market.

Microsoft hopes to carve out a piece of a sizable market that's expected to grow. Worldwide revenue for customer-relationship management software this year is projected to be more than $3 billion, flat compared with last year and down from the peak of nearly $4 billion in 2000, according to Gartner Dataquest. But that could grow substantially if the economy improves. Lynn Tsoflias, product manager for Microsoft CRM, says only about 10% of potential customers of CRM applications have purchased the software.

Microsoft's software offers basic CRM features and functions, letting workers track orders, sales leads, and account histories. The initial version of the product suite focuses mainly on sales and customer-service applications. But later this year, Microsoft plans to roll out more marketing applications. "It helps customers build profitable customer relations," Tsoflias says. It's aimed at companies that want to improve customer service and forecasting, she says.

Microsoft CRM, with its scaled-back size and smaller feature set, lacks some of the features found in high-end CRM apps from companies such as SAP and Siebel Systems Inc. It has a limited ability to be integrated with other popular enterprise software and, for the time being, has no marketing apps.

Some business-technology managers are intrigued. "We're definitely interested," says Kathy Beers, VP of operations for investments firm Tiedemann Trusts. Beers has been shopping around for a CRM application for the firm's 20 employees and has looked at a number of products, including those from Best Software, FrontRange Solutions, and Salesforce.com. Tiedemann's parent company uses Salesforce's hosted service. But since Tiedemann handles financial data, its audit committees aren't happy with a hosted service. "I can't have any data off-site," Beers says.

Tiedemann also needs its CRM software to provide the same up-to-date information to all employees, regardless of their roles or when the database was updated. She believes Microsoft CRM will be able to handle that task. "We run differently than a company that sells a product," Beers says. "We all need access to the same data."

Also appealing is the software's flexibility and ease of adjusting screens and reports. "Customization is key to us," Beers says. "That's a big selling point. We've also been looking for something that interfaces with Outlook."