Microsoft has delayed its CRM 2.0 update yet again - this time to the end of the year. The software giant said it was expanding its feature set.

The decision comes one week after ex-PeopleSoft executive Brad Wilson took over as the new general manager of the CRM (customer relationship management) product. Partners say the delay is no surprise. Though Microsoft most recently said it would ship CRM 2.0 in the middle of this year, after delaying a planned 2004 release, those involved with the software say Microsoft was clearly not going to meet that deadline.

Microsoft ran a small alpha test of its updated software but hadn't yet begun a planned broader beta test, according to Mike Snyder, principal of Sonoma Partners, a services firm that specialises in Microsoft CRM. "Obviously we'd like it sooner, but I don't think anyone will be surprised," he said.

Yankee Group analyst Sheryl Kingstone echoed that: "We knew it was going to be majorly delayed," she said, citing Microsoft's quietness about planned new features and the pace of its development work. She thinks Microsoft is right to hold off on a release until it can perfect the software. "The worst thing they could do is rush a product to market," she said.

The delay means that almost three years will pass between the initial release of Microsoft's CRM software, in early 2003, and its first comprehensive update. Last year, it released a 1.2 version that addressed a number of the most critical gaps and bugs, but customers say the current software still lags competitive offerings.

"We've basically stopped using it until version 2 is available," said Michael Kruger, information systems manager for Designer Doors. His company picked Microsoft CRM as its sales management software in late 2003, but soon hit major problems with lackluster Outlook synchronisation and reporting capabilities. "We're disappointed. We were hoping version two would be ready soon," Kruger said. "However, I'm pleased they're not going to release it until it's ready. All things considered, I'd rather wait for the right product."

Microsoft has been tight-lipped about what new features will be added in version 2.0, but it said Thursday that the expanded scope of the software now calls for enhanced process workflows with all parts of the CRM suite, including new marketing and service automation features; simplified installation procedures; and component services enabling easier integration with other applications and data sources.

The product is Microsoft's bid for a share of the business applications market, where vendors SAP and Oracle dominate.