News

Microsoft Extends Dynamics AX With Acquisitions

• By Herb Torrens
• September 23, 2009

Microsoft bolstered its Dynamics AX enterprise resource planning (ERP) product by acquiring intellectual properties (IP) from three of its partners.

The acquisitions, announced on Tuesday, are intended to extend the core capabilities of Microsoft Dynamics AX. They include a process manufacturing solution from Fullscope Inc., a professional service solution from Computer Generated Solutions Inc., and two retail solutions from LS Retail EHF and To-Increase Denmark A/S.

Dynamics AX is one of four offerings in the rather complex Microsoft Dynamics ERP product line.

"Dynamics AX is targeted at upper midmarket customers that require a common infrastructure at the code level, but also need deeper extensions for their specific vertical market," explained R. "Ray" Wang, partner for enterprise strategy at Altimeter Group, in a telephone interview. "By acquiring the IP for existing proven solutions, Microsoft has minimized the time-to-market for more robust modules within their existing AX suite."

Microsoft Dynamics AX focuses on five key industries, according to Microsoft, including manufacturing, retail, professional services, distribution and the public sector.

Wang noted in his blog that "creating a broader set of common industry capabilities that sit on top of core Microsoft Dynamics AX accelerates both Microsoft and its partner's ability to extend vertical capabilities." The bottom line, according to Wang, is that customers will have greater customization capabilities. Microsoft benefits from the acquisition of industry-proven technologies and an embedded customer base.

"It's the right move for Microsoft," said Wang. "And, it's the right move for its partners and customers who look to Microsoft for leadership in facilitating common industry capabilities while providing a stable platform for core application [Dynamics AX] capabilities."

Dynamics AX is designed for companies with 200 to about 7,500 employees, as well as for divisions in larger companies, according to B. Robert Helm, vice president of research at Directions on Microsoft, a research consultancy.

"Microsoft calls this 'the upper midmarket,' which means the low end for Oracle and SAP," explained Helm in an e-mail. "Microsoft is well behind those incumbents, but Dynamics AX was adding customers at a rate of something like 34 percent annually before the downturn hit."

Microsoft had been working on an effort to unify its ERP offerings in a project code-named "Project Green." The project was concluded in 2008 without any major changes except for more common features and functionality among the four products, according to Crispin Read, general manager for Microsoft Dynamics ERP.

"Based on customer and partner feedback, we determined it was more effective to invest in our current products and help them adopt new innovation in an incremental, evolutionary way, thereby relieving any perceived pain or disruption associated with moving to a completely new product," noted Read in an e-mail.

"We will continue to invest in all four Microsoft Dynamics ERP solutions and intend for each solution to grow and gain a competitive advantage in their respective markets."

Right now, Dynamics AX is getting most of the updates from Microsoft, according to Helm. It's also being sold worldwide, along with Microsoft Dynamics NAV, he added.

"Like some of its competitors, Microsoft will continue to have multiple ERP product lines, but Dynamics AX is the only one whose scope Microsoft will try to expand," Helm predicted. "With Dynamics NAV, GP, and SL, the company appears ready to let partners lead."

Helm said that he sees Microsoft focusing its Dynamics AX ERP strategy around specific industries in the near future in an effort to provide more vertical solutions for midmarket customers. In addition, Microsoft will be lining up software vendors to build on top of the latest set of industry-specific capabilities acquired today.

"By the time the next version of Dynamics AX ships late next year, Microsoft should be able to point to a lineup of partners with specific solutions on top of the Dynamics AX industry pieces, targeting even more specific niches (e.g., U.S. municipal governments and clothing retail)," Helm said. "That's how we will be able to tell whether these acquisitions paid off."