Dynamics and Global Systems Integrators: A Complex Dance

Lessons from ERP past pertain to Microsoft too.

The modern enterprise software era dates to 1992, when SAP unveiled its R/3 enterprise resource planning (ERP) system and the older world of mainframe-based financial and manufacturing software began its march toward oblivion. But, however seminal R/3's launch was, the real inflection point in its success came in later years, when a powerful set of partners signed on to make R/3 a calling card for their respective blends of design, implementation and maintenance services.

These partners were the global systems integrators (SIs) of the day-companies like Andersen Consulting, KPMG, Cap Gemini and Ernst & Young. No matter how functional R/3 might have been, it was these partners, more than SAP, which made a market out of the new ERP offering. And the rest, as they say, was history.

Now, 15 years later, a similar dynamic is at work, pun intended. Microsoft's Dynamics product suite-AX, NAV, GP and SL-was upgraded and re-branded in 2006, and, to many in Redmond, a new era in Microsoft's long march toward the enterprise software market began. But a more subtle and arguably more dramatic shift was also afoot: By the end of 2006, the current generation of global systems integrators-companies such as Tata, BearingPoint, Atos Origin, Wipro and Cap Gemini-were all lining up to become Dynamics partners.

This is a classic good news/bad news development, one that impacts everyone in the Dynamics food chain. The bad news falls hardest on existing Dynamics partners, who have a legitimate reason to feel threatened by the addition of these powerful competitors. The good news accrues mostly to Microsoft, which is hoping to reap the benefits of a new channel that has serious cachet in corporate boardrooms worldwide.

And in the middle are the customers: The good news for them is that they now have more choices, particularly when it comes to finding a partner that can manage a global roll-out and add significant industry expertise to the mix. But there's also some bad news for customers, news that's directly related to the reasons why the big SIs are so eager to be in the Dynamics market in the first place. The problem can be summed up in one word: complexity.

If you examine Dynamics as a key part of Microsoft's strategy, 2006 was a major inflection point for another reason: Dynamics is now deeply integrated into Microsoft's future plans for its desktop and systems software offerings. In fact, as Steve Ballmer told attendees at the Worldwide Partner Conference in July 2006, Dynamics is a great way to sell many other current and future Microsoft product offerings. Existing and forthcoming stalwarts like SharePoint, Vista, Office 2007, SQL Server, BizTalk, Exchange and "Longhorn," as well as new "concepts" such as Office Business Applications and SNAPs, all have strong roles to play in the future of Dynamics.

And here's where the complexity problem rears its ugly little head. If you look at this convergence of Dynamics and the rest of the product suite from the customer standpoint, Dynamics now includes a bewildering array of moving parts that don't necessarily come together easily or cheaply. It's not inconceivable that a big Dynamics AX implementation-one that would take advantage of the best of what Microsoft has to offer-would involve more than 20 individual servers or components in addition to AX. This is a far cry from the good old days when Microsoft and simplicity went hand in hand.

All of which is music to a global SI's ears. Complexity means large consulting engagements, lots of billable hours and long-term contracts. That's what attracted SIs to SAP way back when, and that is what's attracting them to Dynamics today.

Herein lies a warning for Microsoft: The flip side of SAP's dance with the SI elephants in the 1990s was a reputation for complexity that endures today, even as SAP strives mightily to simplify its offerings. It's doubtful that Microsoft can afford to squander its reputation for simplicity by bedding down with the global SIs.

Building great channels is always a good idea, unless it's at the expense of the customers. Because wrathful customers, like elephants, never forget.

About the Author

Joshua Greenbaum ([email protected]) is founder and principal of Berkeley, Calif.-based Enterprise Applications Consulting.