Microsoft recently announced that it will launch an online customer relationship management (CRM) service next year. The new venture may be bad news for current CRM specialists, but if they want to look on the bright side it also suggests that demand for hosted systems is growing.

NetSuite and Salesforce.com are the current leaders in hosted applications. And NetSuite, in particular, may benefit from Microsoft’s announcement, which can be interpreted as an important endorsement of hosted systems. This may be good news for NetSuite and its share price as the company is currently planning its initial public offering on the US stock markets.

So what does Microsoft see in this market? Well, it must see the possibility of generating substantial revenues – enough to make it move away from its traditional business model of selling product licences up-front.

Meanwhile, the trend for hosted systems is growing. NetSuite recently announced an expanded contract with Carphone Warehouse, increasing the number of seats it supports to around 2,000. This may indicate how the broader market for hosted applications will develop.

Many people assume that hosted applications are targeted squarely at small and medium-sized enterprises (SMEs), rather than the largest corporates. And clearly SMEs are important customers. But Carphone Warehouse is a very large firm – a FTSE 250 company with a turnover topping £3bn. It could afford to deploy an in-house CRM system if it wanted to, but it clearly considers a hosted system is a sufficiently reliable and cost-effective alternative. And if this model is suitable for CRM, hosted systems might also prove suitable for other applications and services.

Hosted offerings are likely to be used for more and more purposes. They are already showing strongly in the SME market, where companies want to off-load some IT management tasks. And more services could soon be packaged up and outsourced in the same way – for large enterprises as well as smaller ones.

Microsoft is potentially one of the biggest service providers of them all, and is already beta testing its Windows Live project, which could pave the way for online versions of its Office suite.

Meanwhile, Google recently began public beta testing of its online spreadsheet. Behind Google’s neat and tidy front page there are a huge number of experimental projects of this sort.

In the UK, BT hosts broadband customers’ email on Microsoft Exchange servers. And, of course, a number of smaller service providers such as MyOffice.net offer a range of online applications, including email, contacts and calendaring.

Such offerings could find a sizeable market and may also threaten Microsoft’s traditional shrink-wrapped software.