Dynamics at the Crossroads

Will an executive shuffle stifle or spur convergence in Microsoft's Business division?

• By Joshua Greenbaum
• March 01, 2008

Convergence 2008, which is scheduled for March 11-14 in Orlando, Fla., continues the trend, with the pending retirement of Microsoft Business Division President Jeff Raikes and the ascension of little-known replacement Stephen Elop completing a picture that began last year with the departure of Dynamics head Satya Nadella and the eventual appointment of Kirill Tatarinov to take his place. Suffice it to say that these management shifts -- remember that Nadella was only in his job a matter of months -- are a key part of why Dynamics' future is far from rosy at this juncture.

But management woes are only the beginning of the problem. Competitive pressures are converging -- pun intended -- on Dynamics as never before. SAP is turning into a major threat. Its Business ByDesign midmarket offering, based on a very innovative Software as a Service, model-driven architecture, is slated to make big problems for Dynamics in the SAP market and elsewhere, if SAP has its way.

Support for vertical industries is another ongoing competitive weak spot, one that Dynamics keeps trying hard to bridge through a continuously evolving vertical partner strategy. Meanwhile, Dynamics' biggest competitors -- SAP and even Oracle, which has much less of a midmarket focus -- continue to support vertical industries through acquisitions and emphasis on core technology. This allows Dynamics' big competitors to provide much more comprehensive, reliable and globally available vertical functionality than Dynamics, which must continue to push its vertical partners into a position where they can not only match the competition in feature/functionality, but also in global reach.

Finally, simplicity -- the great Microsoft advantage -- is also leaving the house, creating a wedge for competitors into what has been historically one of Dynamics' incontestable advantages. The most succinct evidence of this comes from the growing interest in Dynamics among the global systems integrators (SIs). Where there are global SIs, there are complex problems to solve, not to mention higher costs and longer time frames for realizing a return on investment.

Other problems are more internal: Tatarinov is, as was Nadella before him, a Microsoft insider, though with only a few years of tenure at Microsoft under his belt. Elop, formerly of Juniper Networks, is very much an outsider, and one whose resume doesn't show any apparent experience with enterprise software of the kind that Microsoft is selling with Dynamics.

This lack of an inside track may be a problem. One of Raikes' great accomplishments was to get Dynamics more engaged with the rest of Microsoft and vice-versa. But that work was far from complete when Raikes' departure was announced. It's still painfully obvious that key groups like business intelligence and platform strategy are not as well aligned with Dynamics as they could be. Indeed, there seem to be better opportunities for partnering with these groups as an outside vendor than are available to Microsoft's internal enterprise-software group.

This ability to move the internal levers at Microsoft -- or any large company -- is always easier for an insider than an outsider, which is why Tatarinov's appointment looked like a positive. That Tatarinov now reports to an outsider, and one who has to fill Raikes' enormous footprint, won't necessarily make his job any easier.

All of this makes 2008 the year of redemption for Dynamics, or the year of a massive strategic shift for Dynamics partners should redemption not be forthcoming. That's why this year's Convergence, as my perennial Dynamics columns are wont to say, is a make-or-break, do-or-die conference that had better spell out a clear and rosy future for Dynamics, its customers and its partners. Or else I'll be writing this column again next year, and the year after that, and the year after that ...