News

Microsoft Exec: Dynamics Business Is Worth 'Over a Billion Dollars'

• By Kurt Mackie
• May 17, 2012

Microsoft executives shined a spotlight on the Dynamics product line during a recent financial analyst event focusing on Microsoft Business Solutions (MBS).

Kirill Tatarinov, president of MBS business, and Bill Koefoed, general manager of investor relations, fielded questions on Wednesday's JP Morgan Technology, Media & Telecom Conference.

MBS concentrates on Microsoft's Dynamics enterprise resource planning (ERP) and customer relationship management (CRM) solutions as part of the Microsoft Business Division. The Microsoft Business Division also includes Microsoft Office, SharePoint, Exchange, Lync and hosted solutions in Office 365, which together generated more than 90 percent of the division's revenue, according to Microsoft's latest 10Q report (.DOC).

At the event, Bill Koefoed, general manager of investor relations, quantified the Microsoft Dynamics part of the business, stating that "the latest statistic that we've given on Microsoft Dynamics is that it's over a billion dollars," according to a Microsoft transcript (.DOC). He contrasted that figure with the near $70 billion in revenue Microsoft reported last year.

While Microsoft CEO Steve Ballmer has said that all Dynamics products eventually will move to the cloud, most of Microsoft's customers using Dynamics have deployed the on-premises products. That's even true with Dynamics CRM, which was the first of the Dynamics product line to be offered as a service by Microsoft.

"Of course, we've been in the market with Dynamics CRM for over seven years now and we have approximately 40,000 customers and most of them have on premises deployment," Tatarinov explained. However, when it comes to new customer sign-ups, Microsoft has found that 60 percent elect the cloud-based version. Tatarinov described Dynamics CRM as "one of the fastest growing products in Microsoft's history," with "31 quarters of double-digit growth." He called it "the poster child of cloud computing."

Microsoft's next planned service update to Dynamics CRM Online is scheduled for sometime in the second quarter of this year. Microsoft plans to enable CRM access on the road for mobile workers with this service update, which will add a "cross-platform native mobile client for Windows Phone 7.5, iPad, iPhone, Android, and Blackberry devices called Microsoft Dynamics CRM Mobile," according to Microsoft's description.

Dynamics CRM
Tatarinov was dismissive of the CRM competition, citing only Oracle's Siebel and Salesforce.com as competitors to Dynamics CRM. Overall CRM market analysis by Gartner mostly bears out his assertion. A 2012 Gartner report on CRM for customer service contact centers lists Salesforce.com, Oracle Siebel, Oracle RightNow Technologies, Dynamics CRM and Pegasystems all in the leaders' quadrant. A 2011 Gartner report on sales force automation lists Salesforce.com, Dynamics CRM, Oracle CRM On Demand and Oracle Siebel as leaders. A 2010 Forrester Research report described Oracle Siebel CRM and SAP CRM as offering "the most complete solutions."

Still, in terms of revenue, Microsoft is behind the leaders, according to IDC. In a report looking at 2010 revenues, Microsoft's CRM business pulled in $214 million in revenue, while Microsoft's rivals pulled in more than a billion.

Microsoft is targeting 4,800 Siebel customers since "we've not seen a single happy Siebel customer and we view it as a huge opportunity for us," Tatarinov said. He revealed that Microsoft's own sales force had used Siebel "years ago," but they were not happy with it.

"Eighteen months ago we turned Siebel off and replaced it with Dynamics CRM, and today the entire 60,000 people that are all things field-related in Microsoft run Dynamics CRM and satisfaction is high," Tatarinov said.

Dynamics ERP
On the ERP side, Tatarinov recounted the four solutions, which are targeted at midmarket organizations: Dynamics AX, Dynamics GP, Dynamics NAV and Dynamics SL. He said that Microsoft made an effort about five years ago to "segment those products" and that Microsoft's channel partners are "comfortable" with the products. He claimed that "there's complete clarity in our channel." Of 10,000 partners, 2,000 are independent software vendors creating solutions to address specific industries using Dynamics products.

Microsoft's partners, it seems, need to have some staying power in the ERP space to survive. Tatarinov characterized the ERP refresh cycle as happening "every 12 to 15 years."

This week, Microsoft announced the release of a beta version of Dynamics NAV 2013 for its partners. Paul White, senior director for Microsoft Dynamics ERP product management, characterized this release as an important milestone in Microsoft's march to the cloud with ERP.

"This beta release is also significant because Microsoft Dynamics NAV 2013 will be the first Microsoft Dynamics ERP solution for Windows Azure giving customers the choice to move to the cloud on their own terms," White stated in the announcement.

Microsoft has associated its ERP systems with its familiar Excel user interface, while its CRM application uses an Office-based UI. Tatarinov claimed that "Dynamics CRM is built inside Outlook" rather than just being integrated with it. He also claimed Dynamics synergy with other Microsoft products, such as Windows Azure, SQL Server and Kinect. On the Kinect side, he said that multitouch is "playing a huge part in manufacturing environments and things like warehouse management."

The May 16 talk is available for listening on demand at Microsoft's investor relations Web site here.