The Dynamics Decade: 10 Highlights from 10 Years of Microsoft Business Applications
From the early acquisitions of Great Plains and Navision, to the Burgum-Nadella-Tatarinov executive shakeup, to the company's tentative first steps toward an "all-in" cloud approach, we spotlight the top 10 milestones from Microsoft's decade of Dynamics.
- By Scott Bekker
- April 15, 2011
As 9,300 people gathered at the Microsoft Convergence conference this week in Atlanta, Microsoft marked the 10th anniversary of having bought its way into the business applications market in a big way with the April 2001 acquisition of Great Plains Software Inc.
In a conference keynote address, Kirill Tatarinov, corporate vice president of Microsoft Business Solutions, said, "This week, we're celebrating a pretty substantial milestone for all of us who are involved with Microsoft Dynamics, the 10-year anniversary of Microsoft being the vendor delivering business applications to our business customers."
During the same speech on Monday, Microsoft CEO Steve Ballmer added, "It was 10 years ago we made a bet. We said that if we are really going to do the most we can do as a company to help our customers get the most out of their technology investments and win, we need to be right at the heart of what makes businesses run, and that includes mission-critical business applications."
Ballmer thanked the Convergence audience, which Microsoft said included 1,000 people who had been involved with Microsoft Business Solutions for the entire decade, for "10 outstanding years."
Here are 10 significant events from Microsoft's Dynamic(s) Decade:
April 5, 2001
Great Plains Acquisition
After announcing plans to acquire Fargo, N.D.-based Great Plains Software Inc. in December of 2000, Microsoft closed the deal on April 5, 2001. The $1.1 billion stock transaction gave Microsoft the Great Plains business applications, including Dynamics, eEnterprise and Solomon. Microsoft also absorbed 2,000 Great Plains employees and 2,200 global channel partners.
Microsoft originally created a Microsoft Great Plains Business Solutions brand headed by Great Plains Chairman and CEO Doug Burgum, who became a Microsoft senior vice president and president of the Great Plains Division. Burgum reported to Jeff Raikes, then group vice president of Microsoft's Productivity and Business Services Group.
In the press release announcing the completion of the deal, Microsoft said, "More than 140,000 businesses in 132 countries count on Microsoft Great Plains Business Solutions." Numbers batted around this week to show growth in the Great Plains business suggest that early customer count may have been inflated (see below).
May 7, 2002
A little more than a year later, Microsoft made an even larger investment to acquire another ERP vendor. Microsoft agreed to pay an estimated $1.3 billion in stock and cash for Copenhagen-based Navision. In a statement announcing the deal, Microsoft said, "The acquisition will bring together the complementary geographic and product strengths of Navision with Microsoft Great Plains Business Solutions, enhancing Microsoft's ability to deliver interconnected .NET business solutions for small and midmarket businesses."
With the acquisition, Microsoft got four product lines: Axapta, Attain, Financials and XAL. The company also brought aboard 1,300 employees in 30 countries, 2,400 partners and a customer base of about 136,000 solutions, according to statements at the time.
Just as Microsoft left the Great Plains employees mostly in place in Fargo, Microsoft established Vedbaek, Denmark, as a center of development and operations for Microsoft Business Solutions in Europe, the Middle East and Africa. Navision joined Burgum's division, which was by then called the Microsoft Business Solutions Division.
Jeff Raikes Predicts $10 Billion in Revenues
Although we can't pin down the actual quote, BusinessWeek and others repeatedly referenced a Raikes prediction from 2002 that the Business Solutions business would increase from about $300 million a year in 2001 to $10 billion 2010.
In early 2005, as it was becoming clear to the industry that Microsoft wouldn't reach that goal, Burgum told a Bloomberg News reporter that "he didn't kick Raikes 'hard enough'" when Raikes made the original $10 billion prediction.
"If we do a good job, we'll build the next big growth business at Microsoft," Raikes told BusinessWeek again for a 2003 article.
Microsoft certainly has grown the businesses that it spent about $2.5 billion to acquire, but it's been about an order of magnitude short of the $10-billion-a-year hope.
At Convergence this week, Tatarinov said, "Ten years ago, we had less than 30,000 customers working on Microsoft Dynamics GP. Today, we have over 350,000 customers, and 5 million users logging into Dynamics every morning."
Microsoft officials have previously said that Dynamics crossed into the territory of $1-billion-a-year businesses for Microsoft -- no mean feat.
Trefis.com, a financial Web site founded by MIT engineers and former Wall Street analysts, estimates that the closely guarded Microsoft Dynamics revenues crossed into the $1-billion-a-year range in 2007 and puts the company's 2011 Dynamics revenues at about $1.6 billion. The Trefis forecast calls for Dynamics to be a $2 billion business in 2014.
Jan. 21, 2003
Microsoft Launches Customer Relationship Management
Having spent nearly $2.5 billion on outside companies, Microsoft's next major move in the business applications space was an in-house project. On Jan. 21, 2003, Microsoft announced the North American availability of Microsoft Business Solutions Customer Relationship Management (Microsoft CRM). The product, which Microsoft first announced in February 2002 and had hoped to deliver by the fourth quarter of that year, was the first Microsoft business application built on the .NET infrastructure.
Microsoft Launches Microsoft Partner Program
With the acquisitions of Great Plains and Navision, Microsoft inherited about 4,600 new partners, and nearly all of them were fundamentally different from the traditional infrastructure partners that Microsoft had previously attracted. In many ways, the major overhaul of the Microsoft Partner Program from 2002 into 2004 was precipitated by the influx of new partners and the need to standardize Microsoft's multiple channels.
Sept. 6, 2005
Dynamics Rebrand Launches
Microsoft relaunched the Microsoft Business Solutions products under the Dynamics brand on Sept. 6, 2005. The new brand changed the product names:
- Microsoft CRM became Microsoft Dynamics CRM,
- Microsoft Business Solutions-Great Plains became Microsoft Dynamics GP,
- Microsoft Business Solutions-Axapta became Microsoft Dynamics AX,
- Microsoft Business Solutions-Navision became Microsoft Dynamics NAV and
- Microsoft Business Solutions-Solomon becomes Microsoft Dynamics SL.
According to Tami Reller, then corporate vice president of the Microsoft Business Solutions Group, a lot of effort went into the new naming conventions.
"We undertook and completed a significant research project that was amongst the most extensive naming research projects Microsoft has ever done. We conducted hundreds of interviews with business decision makers and IT decision makers in the U.S. and international markets. These interviews yielded a number of findings, including that our customers and partners strongly prefer a brand that is suggestive rather than merely descriptive or fanciful. Participants responded positively to Microsoft Dynamics because it suggests the energy and motion that helps move a business forward," Reller said in a Q&A posted on Microsoft's site at the time.
"Additionally, it suggests the idea of flexibility and adaptability of the product because something that is dynamic is always changing and reflects the environment they are asked to perform in. Lastly, Microsoft Dynamics is consistent and aligns with Microsoft's naming convention, thus strengthening the entire portfolio of Microsoft brands," Reller said.
The naming was supposed to be a significant first step in the process of converging the company's four ERP products, called "Project Green." But eventually the technological part fell by the wayside, at least as a public talking point, and the four ERP products have continued to launch in four different SKUs, each with its own roadmap.
Nov. 17, 2005
Public Search for Doug Burgum's Replacement Begins
In late 2005, Microsoft publicly announced plans to seek a replacement for Burgum, beginning a tumultuous process that wasn't fully resolved for more than a year and a half.
On Nov. 17, 2005, Microsoft announced that Burgum would become chairman of Microsoft Business Solutions, a newly created role. He would continue to report to Raikes and would help Raikes seek a replacement.
Almost a year later in September 2006, the job of running Microsoft Business Solutions went to Satya Nadella, who had previously run worldwide R&D for Microsoft Business Solutions.
Nadella, however, who has taken on something of a "fixer" role inside Microsoft, was quickly drafted to run the search and advertising platform group in March 2007, a very public job at a time when Microsoft was under a lot of pressure to respond to Google's search and advertising juggernaut. (Nadella subsequently took over the Server and Tools Business, previously run by Bob Muglia.)
Reller, a former Great Plains employee who had been corporate vice president of the Microsoft Business Solutions Group, took over MBS on an interim basis and was a popular choice among partners to take the job permanently.
A search team run by Reller and Raikes settled in June 2007 on Kirill Tatarinov, who had been running Microsoft's Management and Solutions Division. Tatarinov, a corporate vice president, came to Microsoft in 2002 from BMC Software, where he was senior vice president and chief technology officer. He had co-founded and served as chief architect and head of R&D for Patrol Software Pty. Ltd., which was the source of BMC's PATROL family of products.
Tatarinov has run Microsoft's Dynamics business for nearly four years.
April 22, 2008
Dynamics CRM Online Launch
It took Microsoft until early 2010 to declare itself "all in" when it comes to cloud computing, but the Microsoft Dynamics business led the way with Dynamics CRM Online.
The online CRM product was Microsoft's first substantive offering under the cloud computing model when it came out on April 22, 2008, and the partner delivery mechanisms proved to be a model that Microsoft would follow later with the release of the Business Productivity Online Suite.
While it was early in the cloud for Microsoft, Dynamics CRM Online was clearly a response to Salesforce.com, which had built its business on cloud computing.
Nov. 1, 2010
Microsoft Partner Network Overhaul
Microsoft changed requirements for partners across the board in introducing the fully formed Microsoft Partner Network in November 2010, but the changes were most dramatic for Microsoft Dynamics partners.
Many partners say they expect that the changes, which roll out over the 12 months leading up to Nov. 1, 2011, will benefit larger Dynamics partners at the expense of smaller partners. Specifically, partners expect that only larger organizations will be able to qualify for the gold competency branding, which they anticipate customers will view as similar to the relatively ubiquitous Microsoft Gold Certified Partner status that many Dynamics partners relied upon for their marketing.
The two Dynamics competencies, Dynamics ERP and Dynamics CRM, are available at the silver and gold level. Microsoft says the silver competency is as hard or harder than the old Gold Certified Partner status across the MPN.
A silver competency in ERP or CRM requires that three MCPs pass exams, rather than the two required for non-Dynamics competencies in the MPN. The partners must also have two employees pass an implementation methodology exam, one employee pass a sales exam and one employee pass a pre-sales exam.
For gold, the ERP/CRM requirement is for six MCPs unique to the competency, three employees who pass the implementation methodology exam, two who pass the sales exam and one who passes the pre-sales exam.
Dynamics partners also face a revenue requirement for the silver competencies. The rest of the MPN only has revenue requirements for gold competencies. Meanwhile, deeper changes to the partner compensation model are planned for 2012 that will probably further benefit the largest partners.
In one way, though, the new competencies bring about programmatically one of the seemingly abandoned technical goals of the 2005 Dynamics rebranding. Partners either have a competency in Dynamics CRM or in Dynamics ERP, but not in a specific ERP application, such as GP, AX, NAV or SL.
April 11, 2011
Dynamics ERP Applications Will Hit the Cloud Next
This week at Convergence, Microsoft committed to taking the Dynamics Enterprise Resource Planning applications to the cloud in the next versions of the products, following in Dynamics CRM Online's footsteps and representing an acceleration of previous plans for taking ERP to the cloud.
Microsoft CEO Steve Ballmer told attendees that future releases of Dynamics ERP products will ship in tandem with online releases that have identical functionality. The ERP products will be hosted on the Windows Azure platform and ISV partners will be able to post compatible ERP applications on the Microsoft Dynamics Marketplace, which Microsoft created for Dynamics CRM Online.