Channel Watch

Microsoft Rolls out Dynamic Incentives

Marketing: Will the new initiatives offset recent hits to Microsoft Business Solutions sales, both for Microsoft and its partners?

• By Kurt Mackie
• June 01, 2009

Microsoft announced three new marketing changes to help boost sales of its Dynamics business software and support its channel partners.

One such effort is a new financing plan for customers buying Microsoft Dynamics enterprise resource planning (ERP) and customer relationship management (CRM) solutions. The "Business-Ready Flexible Pay" plan, announced in late April, lets customers spread out their payments over three years in equal increments, rather than having to pay for the software all at once.

With the current down economy, this financing plan is "critical when folks are having trouble getting credit," explains Paul DeGroot, research vice president and channel licensing strategies analyst at Directions on Microsoft.

Additionally, some Microsoft partners will be able to offer 50 percent discounts on licensing costs to U.S. customers migrating to Microsoft Dynamics ERP. Microsoft will throw in a rebate of up to $25,000, or 25 percent of the suggested retail price for Dynamics licensing, on top of that discount. This offer is specific for customers migrating from Oracle's JD Edwards EnterpriseOne and Sage's MAS 90 or MAS 200 ERP products.

DeGroot notes that Dynamics products tend to address a long-term market of around 10 to 15 years of use, so any big discount offered now can take away business from Microsoft's competitors and pay off down the line.

"It's even more important to partners," DeGroot adds. "They want to keep their payroll and headcount intact, if at all possible. If Microsoft is willing to take a bath on the up-front licensing costs, it gives the partner more room to make money on the up-front planning, deployment, customization and maintenance revenue."

Microsoft also will let customers buy Dynamics CRM "as a standalone product" through its Business Ready Licensing, according to the company's announcement. Customers aren't required to purchase Dynamics ERP first under this licensing, explains Gayle Hoshino, general manager, MBS Pricing for Microsoft Business.

"Dynamics CRM has been available for purchase under the Dynamics Price list since 2007, but only for customers that already own or are purchasing a Dynamics ERP product," Hoshino says. "Due to demand from customers and partners, changes have been made on the Dynamics price list that allow customers to start with Dynamics CRM and then add ERP later, while allowing the Dynamics partner to promote and work under one transaction model with the customer as well as Microsoft."

Hoshino adds: "Microsoft Dynamics CRM continues to be available through Microsoft's broad range of Volume Licensing programs."

These three incentives come at a crucial time. Microsoft's Business Division, which produces Dynamics products, took an overall 5 percent revenue hit, quarter-over-quarter, according to Microsoft's third-quarter FY 2009 report. More specifically, there was "an 8 percent decrease in Microsoft Dynamics customer billings," for that quarter, according to Microsoft's 10-Q report.

DeGroot says that the 8 percent decline seems to be in line with current business spending trends, or maybe slightly better. "These days, a little down is a big up," he notes.

Microsoft's channel partners specializing in Dynamics products have been hit especially hard of late. Partners currently are facing capital shortages and layoffs.