Microsoft CRM is available in standard and professional editions and is a stripped-down product aimed at the low-end of the market.
The standard edition lacks important components such as workflow - available on the professional version - and campaign management tools but functionality will be added in versions two and three.
Prices start at $395 (£260) per user.
It can be accessed via Outlook or a web browser and is designed to integrate with Microsoft's Great Plains and Navision software.
The move ties in with the Redmond giant's strategy of using Outlook as a central hub for applications and promoting web services based on its .net platform.
Gartner analyst Jim Davies said the move would contribute to a relatively flat CRM market in Europe this year as IT directors wait to see what happens. However, the market will become "explosive", he said.
Gartner predicts that adoption of CRM among small to medium sized businesses in Europe will grow from 10% to 35% over the next seven years with Microsoft becoming a top-10 CRM supplier by the end of the year and a top-five player by the end of 2005.
Microsoft will distribute the standard edition of CRM through its Small Business Solutions unit.