Microsoft CRM 3 was designed to be installed on-premise or in a dedicated hosting model using a hosting partner. Each deployment of CRM was unique to that organization and could not be shared between multiple organizations. Hosting multiple separate clients for CRM 3 in a datacenter frequently needed dedicated servers or a substantial hardware with virtualization for each CRM deployment - it was an expensive operation and each new client required a lot of setup and ongoing maintenance efforts. CRM 4 brings new hosting models and a concept called multi-tenancy to the product. Multi-tenancy means that a CRM deployment can be configured to host multiple and separate clients. This would allow for both a larger organization to deploy multiple CRM systems (ie: one for each major geographic region) or for hosting and partner companies to provide CRM hosting services to multiple clients using a single CRM deployment. Using the new multi-tenancy model, an organization can invest in a stable CRM hosting platform and host multiple separate CRM instances - a much cheaper and easier to manage method compared to CRM 3. This will open up new markets for Microsoft as the cost and complexity of hosting client CRM solutions is reduced substantially, and that in turn will also reduce the cost of CRM systems to end users, increasing Microsoft's market share for CRM.

Microsoft has designed CRM 4 to fit the software-as-a-service model quite well with a single product that can be subscribed to directly as a service (live), hosted by partners (partner hosted), or deployed within a customer's own environment (on premise). All of these models use the same code-set and have the same (or relatively the same) capabilities. Customers can get started right away with no up-front infrastructure or software costs by signing up for crm live, which significantly reduces the efforts for users to evaluate and move onto the Microsoft CRM platform. Microsoft is even allowing for a partner revenue model for partner referrals to CRM live, although I am not familiar with the details of that at this time. Partners can also use CRM 4 to set up their own CRM hosting services and offer yet another billable service to their clients. This will encourage partners to leverage CRM more in their own products and services because the hosting model and cost of deployment has been significantly improved. Customers can still chose to install CRM in their own environment using the on-premise install. This allows larger customers to maintain full control and operational accountability of their CRM system without having to worry about the security, privacy, and accountability of a hosting partner or Microsoft live. I consider this a very strategic move for Microsoft by embracing all the good things about the software-as-a-service paradigm while still allowing for flexibility for the partner eco system to add significantly more value and customers to choose to install it where they like. This makes the business case for partners selling Microsoft CRM a lot easier - it really doesn't matter which option the client wants, there is a model to fit their needs.

It should also be noted that the CRM platform is now fully capable of being deployed in a complex data center with attention to detail for scalability and high reliability. I would expect most reputable CRM hosting providers to have load-balanced CRM services that have high availability and great performance for their clients.