I think Microsoft will eventually move to the volume license model. This will enable them to cut list price by 40 to 50% and still make the same money. They will have an on premises model and a cloud model.
We will then make our money strictly from services.
This is the route the hardware manufacurers took when they got tired of competing with
Dell ink.
When I started in business the hardware margins were 30 to 40%.
Microsoft just published their quarterly results. If you look at the detail, the Dynamics area was flat for the year with a 4% growth in the last quarter. All the non-Office products in the Business products division make up 10% of that division's revenue - which puts all of Dynamics, including CRM, well under $1B. Microsoft's original target with Project Green, was to turn ERP into a $10B market. Instead it has become Project Red (as in red dell ink). So the solution is sell or split Dynamics, or mass market it.
If the current partner revamp project does not work - and it probably won't, because it does not address the real problems - then the mass market approach may well be next.
You said that very well, and I agree.