Change is in the air in Redmond, Washington. Realizing that the same business practices that made it the world's most-valuable software company won't serve it in the new era, Microsoft (Nasdaq: MSFT) has taken steps that would have been unimaginable for the technology giant just a few years ago. Two recent examples: opening up its applications for several key products and, of course, putting together a $45bn bear hug on Yahoo (Nasdaq: YHOO). Yet, in one area, Microsoft stubbornly clings to business as usual: CRM and ERP software, which it sells under the Dynamics brand. Despite spending more than $2bn on deals – plus untold tens of millions on R&D over the past half-decade – this product line continues to lag rivals significantly, particularly at the high end of the market. Unlike its also-ran online search division, which has turned to a desperation bid for Yahoo to make up lost ground, Microsoft shouldn't look to acquisitions to close the gap on rivals of Dynamics.
 
In fact, quite the opposite. We would argue that Microsoft would be best served by simply acknowledging that it never made much of Dynamics, and selling off its CRM and ERP assets. Ok, that will never happen – but the business case for Microsoft divesting Dynamics is a strong one.
 
Read the rest of The Group 451 analyst report.