Microsoft Corp. (NASDAQ: MSFT) will deliver what’s expected to be a comprehensive update on its plans to bring the Dynamics line of ERP (enterprise resource planning) software to its Azure cloud service during its Convergence conference, which starts March 18 in Houston.
To date, Microsoft’s four ERP software lines have been sold as well as hosted exclusively through partners. In moving the software to Azure in order to gain benefits of elastic scalability, rapid deployment and integration with other cloud services, Microsoft is also faced with bringing these partners along for the ride as painlessly as possible, lest it damage relationships that will remain crucial to the health of the Dynamics business.
At last year’s Convergence conference, Microsoft executives first revealed their cloud plans for Dynamics, telling showgoers that all of the product lines would end up on Azure, beginning with NAV.
During this year’s show, Microsoft will provide timing and pricing details for the availability of NAV on Azure, said Mike Ehrenberg, technical fellow and CTO for Microsoft Business Solutions, in a recent interview. It will also update the Azure road maps for Dynamics GP, AX and SL, he added.
For Dynamics ERP, Microsoft is following the same strategy as with its CRM (customer relationship management) software, which uses the same code base for both the on-premises and on-demand versions, Ehrenberg said. “We think that’s an important differentiator of what we do in CRM. Pick your product, pick your deployment model. And it’s even more important on the ERP side.”
Many customers will pursue hybrid deployments, and others won’t immediately be interested in Azure at all, Ehrenberg said.
“The large on-premise business won’t magically change overnight, but we’re doing a lot of engineering to get the cloud right.” This work is going to improve the performance of future on-premise and hosted Dynamics deployments as well, according to Microsoft.
While Microsoft may deliver development and engineering muscle to the Dynamics software, its partners own much of the relationship with customers, not only for sales and implementations, but hosting. Microsoft has carefully considered how to help them transition into the Azure age, Ehrenberg said.
“We spent a lot of time with those partners,” he said. “First of all, they are not a shy group about sharing the things that make them hard for them to deliver hosted capabilities. Most of them don’t love actually having the infrastructure. They really are more about serving the customer, and the infrastructure was a necessary evil.”
Microsoft is pushing the idea of consulting partners developing add-ons for Azure-based ERP deployments, but the way forward doesn’t seem as clear for pure hosting companies. For example, Microsoft is not planning to let hosting partners run the Azure software fabric in their own data centers.
Microsoft is well aware of the need to assuage partner concerns, Ehrenberg said. “We have to do a great job with that. I don’t think we completely got that when we first launched CRM Online,” he said. “We went to school quickly at the academy of CRM. It’s always good to go second.”
Overall, there’s still going to be “a vibrant market for hosting in a more traditional way,” Ehrenberg added. For example, a customer may be in a region where laws require a single-tenant architecture, with dedicated servers for each customer, or they may desire a greater level of customization than possible with Azure, he said.
One veteran Dynamics hosting partner expressed little concern over Azure’s potential impact on his business.
“I believe there is a fit for what they’re going to be providing,” said Tom Doerner, president of WatServ in Waterloo, Ontario. “We’ve been doing this for five years, we’ve learned what the market is looking for.”
“The low end of the market, which is where I believe they will start, typically is the [customer] who is looking for something more than QuickBooks,” Doerner added. These customers are looking for systems with under 20 users, few integrations and very simple environments overall, he said.
“We play a lot in the larger market,” Doerner said. WatServ counts large, multibillion dollar companies among its clients, with Dynamics implementations running as high as 1,000 users, he said. “They wouldn’t even dream of running on Azure. They’re connecting from China, in some places they speak German, French and Italian. Who’s going to support that at Microsoft in those languages, 24-7?”
Many of WatServ’s customers also run a series of third-party applications in conjunction with Dynamics, he said. “How is Microsoft going to support all these other products?”
He cited the example of a software package for trucking companies that runs only on IBM’s DB/2 database. “How many DB/2 experts do you think Microsoft has?”
Overall, “I don’t see any threats to our main bread and butter, to our large enterprise customers,” he said. However, “Microsoft’s strength is they get in, they learn, they adapt. They’ll do a fine job at the small end of the market, and over time they will go up-market.”
“We’d be naive to think Microsoft won’t play a factor in our future,” said John Robb, director of strategic alliances at WatServ. “They are definitely the 800-pound gorilla in the marketplace. We just have to make sure we’re aligned with their goals.”
The upcoming launch of NAV on Azure has more immediate relevance to Jon Cooper, director of technology for AVF Consulting of Baltimore, Maryland.
“Really, all that we do is NAV, delivering the best that NAV can be to our customer base,” he said. AVF has been using various Microsoft technologies to run a NAV hosting business for some time now, Cooper said.
But Cooper is ready and eager for the arrival of NAV on Azure.
“Even though we’ve already invested a lot in our own hosting infrastructure we feel that’s a real plus for us,” he said. “We went through the extra onus to get all that off our customers’ hands, but that’s not what we really want to be doing either.” AVF wants to focus on being a value-added reseller and consulting practice, more than a hosting provider, he said.
“If Microsoft is saying, here’s an official hosting solution for NAV that we’re supporting, then we’re totally on board with that,” Cooper said.