Breaking Waves

Last year, all the talk at Convergence was about waves of integration for Dynamics. Now, it's all about how the suite fits into the Microsoft stack. But not everything that Microsoft is saying is clear, and some partners are confused about where Dynamics is going.

In 2006, when Microsoft held its Convergence conference in Dallas-about 300 miles from the Gulf of Mexico and 1,000 miles from the nearest ocean -- all that attendees and Microsoft officials alike could talk about was waves. This year, with the show taking place on the Pacific coast in San Diego, there was hardly a sea-faring reference to be heard.

That's because last year's version of the show, which Microsoft sponsors for partners and users of its Dynamics enterprise resource planning (ERP) and customer relationship management (CRM) applications, highlighted the integration of the company's four

ERP suites with each other (see "Getting Serious About ERP," June 2006). In 2007, however, Microsoft shifted the focus to Dynamics' -- and ERP's -- expanded role in the enterprise and their place in a broader Microsoft technology stack.

Partners have warmed to the updated pitch, which touts Microsoft's unique ability to tie its disparate Dynamics ERP suites -- AX, GP, NAV and SL -- into Microsoft Office, the world's most popular productivity application. Microsoft says that capability makes ERP back-end data and functionality more accessible to more employees in more offices than ever before. But for the channel, the waves of Dynamics integration that Microsoft talked about in 2006 haven't quite stopped crashing on the shore, and some partners wonder how much longer Microsoft will continue to attack the ERP market with four different suites.

A Crowded Field

Philippe Gaillard gets it. The president of Neocase Software Inc., a Gold Certified Partner and maker of customer service software based in Paris and San Francisco, explains succinctly why Dynamics ERP and CRM are getting so much attention from so many companies: "They look [at Dynamics] because they're sick of paying millions of dollars."

While there are many reasons that businesses of all sizes are considering Dynamics, one of the most compelling, Gaillard says, is the potential for getting serious enterprise functionality without paying the exorbitant prices often associated with enterprise software. Combine that potential with Microsoft's integration message, and what could go wrong for partners selling Microsoft's applications?

Channel congestion, that's what. Some partners feel as though the Dynamics channel has too many players -- and this at a time when Microsoft officials say that partner recruiting is going "very well." Partners say that having more competition for clients could mean tighter margins, dangerous implementations and maybe even more sales for SAP AG and Oracle Corp. -- especially when those larger rivals' direct sales forces approach customers befuddled by a flotilla of Microsoft partners.

Jeff Sampson, founder and CEO of Kineticsware Inc., was among the architects of Microsoft's industry builder initiative. He says that he's seen what can happen when Dynamics partners fight for a place at a customer's table.

"We would very frequently get involved in customer situations where you had sometimes eight VARs," Sampson says. "You're a buyer -- you have Oracle, SAP and eight Dynamics VARs, with three of them pitching one product, two pitching another and so on. The customers says, 'Microsoft, can you tell me which one to work with?' and Microsoft says, 'no.'"

Microsoft, of course, must say no. But what can Microsoft do about channel congestion? Stop recruiting new Dynamics VARs, some partners say. A more likely scenario, others contend, is for Microsoft to more carefully choose the partners it invites to bid at a customer's request.

"Why should you invite smaller partners to global accounts?" asks Aliona Geckler of Columbus IT, who calls the problem of competition within the channel "huge." "If the customer asks Microsoft, [Microsoft] shouldn't go with more one partner, more than two partners. It should be very clear by industry and by size."

Perhaps, Microsoft officials say, the best idea is for partners to police themselves and not get involved in deals they won't be able to handle. That's the message that Mark Jensen, general manager for Microsoft Dynamics market development, wants partners to get.

"Do some soul-searching to find out who you really are," Jensen says. "Are you really a VAR, are you really a full-service implementation partner, are you really an ISV? We see too many examples where partner organizations might be struggling because they're trying to be what they're not. Find out who you really are and then don't fight it."


Dynamics Comes to the Office
The big product news at Convergence 2007 was Microsoft Dynamics Client for Microsoft Office and SharePoint Server, a suite of self-service applications that ties Dynamics back-end functions into an Office front-end. The concept is not unlike what Microsoft and rival SAP AG have done in a more limited sense with the Duet application (see "Microsoft and SAP: Bittersweet Symphony," March 2007), but Dynamics Client offers native Microsoft integration with its own applications.

Microsoft officials see the Office interface as a critical tool for bringing ERP to greater numbers of employees within companies. They love to quote a report by Boston-based AMR Research Inc. that says only 15 percent of employees in companies with ERP installations have licensed ERP seats. "This new client is targeting the other 85 percent," explains James Utzschneider, general manager of Dynamics marketing for Microsoft Business Solutions.

And that's important, partners say. Howard Diamond, chairman and CEO of ePartners Inc., a Microsoft Business Solutions consultancy and Gold Certified Partner based in Irving, Texas, says that most end users of ERP systems need all the help they can get.

"We have an enormous problem with end users," Diamond says. "The normative end users are not rocket scientists. The more you can have everything look the same, the better. That's what people know. They know e-mail and Word and one or two other things."

Shopping for Code

Two words rang repeatedly through the halls of the San Diego Convention Center during Convergence 2007: "industry relevance."

That's Microsoft's term for what it wants Dynamics to be -- relevant and useful for the needs of companies in vertical industries. Redmond is targeting five broad verticals in particular: manufacturing, distribution, retail, services and the public sector.

The Industry Builder program that aimed to help Microsoft partners develop vertical competencies has morphed into Microsoft Dynamics Industry Solutions. With the name change comes a certification program for ISV-built applications -- including a "Certified for Microsoft Dynamics" logo -- as well as a new wrinkle that involves Microsoft buying code from its partners and incorporating it into its ERP suites.

That's what Microsoft did with eBECS Ltd., a Gold Certified Partner based in Chesterfield, England, that specializes in lean manufacturing technology. Microsoft is incorporating code from eBECS directly into Dynamics AX to offer Microsoft Dynamics Industry Solutions for Lean Enterprises. Earlier this year, Microsoft entered into a similar joint-development deal with Tyler Technologies Inc., a Dallas-based public-sector specialist and Gold Certified Partner.

Partners doing custom work in the area in which Microsoft bought code from eBECS still have plenty of room for consulting without having undertake development projects, says Jeff McKee, director of product management for Microsoft Dynamics AX.

As for partners looking to sell their code to Microsoft, company officials say that's possible. But Dynamics officials say that while Microsoft is proactively looking for code to buy or for co-development deals, contacting Microsoft with propositions might not be productive. It's best to let Microsoft do the approaching, they say.

"The dating, engagement and marriage-matchmaking process is more efficient than you might [think]," says Mark Jensen, general manager, Microsoft Dynamics Market Development. " We keep our eyes open -- we're looking for those particularly attractive marriage candidates, some of which we tap on the shoulder to get their attention, whether they come to us or not."


SharePoint: Foundation of the Microsoft Stack
Dynamics' integration with other Microsoft technologies, though, is about more than just providing users with a familiar interface through Office. In fact, the more critical element of the new Dynamics client is integration with SharePoint Server, a component that Microsoft CEO Steve Ballmer tagged as the technological centerpiece of Microsoft's enterprise strategy in his closing keynote at Convergence in March.

"It's the thing that brings the world of personal productivity and the world of line-of-business applications together," Ballmer told the crowd in San Diego. "Thinking about it as the definitive platform or operating system-cum-application for that kind of middle tier, that's probably a very reasonable way to think about it. And it's a very important part of our product set, consequently."

Microsoft officials see Dynamics blending into a Microsoft stack of Windows, Office, SharePoint, SQL Server and other key technologies to the point at which, someday, partners and users will no longer draw distinctions between those elements. Tami Reller's description is almost biblical: "The seams are evaporating and the walls are tumbling down," says Reller, corporate vice president for Microsoft Dynamics.

Reller now leads the Dynamics team after Satya Nadella, former corporate vice president of Microsoft Business Solutions Group, moved to another role within Microsoft in April.

Partners understand the value of that message. Richard Barnett, founder and chief marketing officer of Kirkland, Wash.-based Kineticsware Inc. says that Microsoft's integration story and focus on employee productivity are critical for his company and represent new trends in the ERP market. Kineticsware, a Registered Member, launched at Convergence and builds business-management extensions for Dynamics in the technology, consumer goods and apparel vertical markets.

"A shift has now come to really bringing together the personal productivity experience," says Barnett, a former director of product marketing for Dynamics AX at Microsoft. "It's a phase shift that's beginning to happen. Everything we've done is around understanding how to support and extend the Microsoft value proposition."

With SharePoint being a critical part of that proposition, Dynamics partners that don't have SharePoint competencies need to develop them soon, Reller contends. She says partners that aren't familiar with SharePoint need to be up to speed on it within a year.

"I still think we're in a zone where the line was drawn with the announcement of Dynamics Office Client," Reller says. "You've got to have a level of SharePoint competency and you're not going to be able to just partner."

Aliona Geckler, vice president of global marketing for Brondby, Denmark-based Columbus IT Partner A/S, says that her company is looking closely at SharePoint.

"We're looking into it seriously to build a competency," says Geckler, whose company is a Gold Certified Partner and was the Microsoft Business Solutions Global Partner of the Year in 2005. "We feel that the customers need the extra value. We feel they want it. They will buy it anyway, so why not buy it from us?"

Diamond, of ePartners, says he hates it when Reller tells other partners they need to have a SharePoint competency because he considers it a competitive advantage -- and then adds: "But she's right." He also buys into the vision of a Microsoft technology offering that's one big, integrated package, not a collection of application categories. "There's no question in anybody's mind that eventually there'll be a rationalization of all of those products," he says. "Years from now, there really won't be what's known [now] as enterprise software."

Movin' on Up

At Convergence 2006, Microsoft talked about aiming Dynamics primarily at the lucrative ERP market for small and midsize businesses (SMBs). But at Convergence 2007, while reiterating that SMBs would remain a primary area of focus, Microsoft showed signs of being ready to take Dynamics up-market.

"One of the questions I do get a lot in the context of Dynamics is, 'Are you enterprise-ready?'" Microsoft CEO Steve Ballmer said at this year's event. "And I think enterprise-readiness has a number of dimensions, but perhaps the most significant are, are you secure, are you reliable and are you scalable? And I would say on all of those dimensions, whether it's in Dynamics, in SQL Server, in Windows Server, we have really scaled to new heights. I can fairly say to you that I feel very enterprise-ready across our product line."

Analysts have speculated that Dynamics might eventually move up from being an SMB-oriented offering to competing with SAP and Oracle for larger implementations. But for an increasing number of partners looking to sell Dynamics to larger companies today, Ballmer's message is an important one.

"They're now saying it's for businesses of all sizes," says Michael Merfeld of Avanade Inc., the Microsoft and Accenture joint venture. "When the company's branding it as for small and medium businesses, it's hard to have an enterprise conversation. We're officially past that."


Changing Tide for Dynamics Integration
For now, though, Microsoft is still delivering on the Dynamics "waves" that officials started talking about at Convergence in March 2005. Back then, before the advent of the Dynamics name, there was "Project Green," an effort aimed at merging the four Dynamics suites into a single package.

Project Green promised two waves of integration. The first involved developing a common interface for each of the four ERP suites and tying the suites into a greater Microsoft technology offering involving Office and SharePoint, which is what Microsoft announced at this year's Convergence.

"We've done that," Reller says. "Wave 1 is a big checkmark."

Wave 2, however, remains a point of confusion for partners and customers. The idea behind Project Green was to take "best-of" functionality from each of the four suites and create an ERP mega-suite. In September 2005, when Microsoft first unveiled the Dynamics name, officials continued to talk about product convergence: "This is a natural next step as we move to a converged product line," Reller said in a question-and-answer document provided by Redmond in conjunction with the unveiling of the Dynamics name. "The 'best-of' features and functionality of Microsoft Axapta, Microsoft Great Plains, Microsoft Navision and Microsoft Solomon will show up in the second release wave of Microsoft Dynamics," she continued, referring to the suites by their original names, which were subsequently shortened. And for Convergence 2006, a Microsoft press release said that Dynamics "components will come together into one converged solution over time."

Scheduled in 2005 for a 2008 release, Wave 2 now won't happen until 2013 at the earliest, Microsoft officials told RCP earlier this year (see "Dynamic Destiny," March 2007). And just what Wave 2 will mean remains unclear to many partners and customers, as Microsoft appears now to have scrapped the mega-suite idea. Spokespeople repeated at Convergence that a merged suite wouldn't be in Dynamics' future, and Ballmer said that Microsoft is backing a four-suite strategy.

"I get asked, 'Are we committed to all four product lines?'" Ballmer said in his keynote address. "We are absolutely committed to all four product lines. We have invested to enhance all four product lines. We're sharing code now better and better across all four product lines, and the sharing of code means all of these releases will get new capabilities faster and better than ever before."

Still, officials say that the suites will share more and more code as new versions come out: "We are making sure that the data models of what we have in Dynamics CRM and what we have in Dynamics ERP are complementary," Nadella said at a Convergence press conference. "You will see us not just share user interface, but share business logic code as we move that forward."

Step by Step

ERP implementations are, by nature, long and complex. Microsoft is seeking not only to reduce the complexity of ERP with Dynamics, but also to ease the difficulty and expense that some partners and customers might experience in establishing best practices for implementations.

At Convergence, Microsoft announced Sure Step, a set of templates designed primarily to help smaller partners quickly and easily implement Dynamics for small and midsize business customers. Michael Merfeld, global solutions director for Microsoft Dynamics at Avanade Inc., a Seattle-based joint venture of Microsoft and consulting giant Accenture, says that Sure Step will be a boon for partners that haven't developed their own implementation methodologies.

Sure Step "was very smart for Microsoft to do because it helps the larger majority of smaller partners because they can't afford to make that investment," says Merfeld, whose company, a Gold Certified Partner, created the rapid configuration tool in Dynamics AX.

The key, though, is actually following the steps laid out in the program. Aliona Geckler of Columbus IT Partner A/S says that, too often, partners try to offer lower bids by cutting corners in the implementation process, thereby saving themselves time and money. Ultimately, that's a bad idea, says Geckler, who says that her company's own implementation templates look a lot like those of Sure Step.

"Partners want lower prices-they skip some stages," she says. "You need to take all the steps. It's a big deal for smaller partners."


Puzzled Partners, Confused Customers
The line between a single converged product and code sharing among four suites is fuzzy for some partners and customers. Joshua Greenbaum, principal at Enterprise Applications Consulting in Berkeley, Calif., says that Microsoft had to back off on talk of a mega-suite because it was "killing the channel" to have customers waiting for a converged product before buying into Dynamics. But partners are still finding that mixed Dynamics messaging and ambiguity about the difference between talk of code sharing and the prospect a single suite can make for a tough sell.

"I would love to come to one of these conferences and see [Microsoft] clear up [the suite integration strategy]," Diamond says. "I met with a customer today who said to me, 'Will the four separate suites evolve into one suite, or will they not? Am I going to make a bad choice here?' My honest response is, 'I don't believe you're going to make a bad choice here.' There's no question that we cause ourselves a lot of confusion because of that question. We can pretend there's no confusion or we can admit there's a ton of confusion. There's still a lot more confusion than there needs to be. The more Microsoft can eliminate that confusion, the better it is for all of us."

Other partners wonder how much longer Microsoft can continue to develop, support and market separate suites: "How can you continue to develop four separate product lines?" asks Tim Giehll, CEO of eEmpACT and StarSearcher, two Gold Certified Partners and Bloomington, Minn.-based divisions of Bond International Software that focus on human capital management applications. Giehll suspects that Microsoft is headed for a single-product strategy and will eventually remove the AX, GP, NAV and SL branding from Dynamics. "They're setting it up for that. They build brand awareness around Dynamics. It would be very nice to drop the trailers."


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