In-Depth

Can Microsoft Make Dynamics 365 Work?

Microsoft's high-volume cloud infrastructure partners and its business applications partners have distinct identities. For the new Dynamics 365 effort to succeed, those two partner types will need to cooperate.

• By Barb Levisay
• December 05, 2016

With the launch of Dynamics 365 last month, Microsoft is combining financial and customer management to cover the last mile with a cloud-based, end-to-end business platform. The channel, however, has long resisted delivering "the full stack" combination of infrastructure, productivity and business applications. To achieve the high volume that will spell success for Dynamics 365, Microsoft needs to find the secret sauce to enlist an army of partners.

Simply interpreting the name identifies the two groups of channel partners that Microsoft needs to round up to take Dynamics 365 to the business masses.

The first and capacity-critical group is obviously the Office 365 partners who have spent the past few years learning the ropes of the high-volume cloud world. According to sources within Microsoft, it's been much more of a challenge to convince Office 365 partners to add Dynamics CRM Online as a core part of the practice than was anticipated. While offering a tightly integrated module of the software to customers may seem like a no-brainer, there are practical -- and potentially show-stopping -- complications.

First is the limited relationships, rooted in the IT department, that Office 365 partners have with customers. Sales and marketing teams lead the search for a CRM solution and aren't likely to start with their IT team's opinion. The second challenge is the business-process aspect of implementing a CRM system. Most Office 365 partners were either born in the cloud or morphed from managed services providers (MSPs). They're unlikely to employ business analysts with the capability to evaluate the customer's sales and marketing processes and then advise them on how to configure and customize CRM.

The second group of the potential Dynamics 365 channel consists of the traditional Dynamics partners who have built their practices on the value of business-process improvement that accompanies an ERP or CRM implementation. But perhaps because they have the business analysts and functional consultants to support larger implementations, Dynamics partners have been hard-pressed to find the shortcuts that can enable them to scale for lower-cost, higher-volume CRM and ERP implementations. Though Microsoft is very tight-lipped with channel data, the field of partners with Dynamics capabilities appears to be limited.

Office 365 partners have the potential to support the volume -- they already have the customers. Dynamics partners have the expertise to implement a solution that requires an understanding of financial principles and sales processes. Though there are systems integrators (SIs) who are very adept in both areas, there's little overlap in the majority of the channel. Dynamics 365 needs some combination of partners that can deliver repeatable, profitable ERP and CRM implementations in a high-volume service model.

Too Many Spinning Plates
Forceworks Inc. has been on the front lines working with partner adoption of Dynamics CRM Online. Working closely with Microsoft, the ISV developed RapidStart, providing a framework to help partners quickly implement Dynamics CRM Online.

"That motion has been a huge struggle. I don't see this one being any easier," says Steve Mordue, CEO of Forceworks. "I don't think that a typical Office 365 infrastructure partner or MSP is any more apt to sell an ERP solution, even if it's simple, than they are CRM. I think Microsoft has tried with that partner for a long time around business solutions/business applications and has struggled."

The economy and the state of the channel might be one of the barriers to partners jumping on the Dynamics 365 bandwagon. "The biggest thing we're struggling with, with that partner right now, frankly, is bandwidth. They're busy. These shops are very busy with managed services, with Office 365 still, with EMS [Microsoft Enterprise Mobility + Security] rolling around, Skype coming into their purview, all the Azure stuff," adds Mordue. "Partners are spinning a lot of plates right now. It's not that they're not interested in CRM Online, but they can't spin that many plates at the same time. They'd have to drop a plate in order to spin up CRM or Dynamics 365 and, frankly, most don't have a plate they want to trade right now."

"I don't think that typical Office 365 infrastructure partner or MSP is any more apt to sell an ERP solution, even if it's simple, than they are CRM. I think Microsoft has tried with that partner for a long time around business solutions/business applications and has struggled."

Steve Mordue, CEO, Forceworks Inc.

That analogy appears to ring true for Office 365 partners. As with any business decision, they need to make the business case to add the Dynamics 365 solution set to their repertoire. There seems to be a wide disparity between the information that partners received from Microsoft before the Oct. 11 public announcement of the upcoming availability of Dynamics 365, likely dependent on the interest level of the partner and the knowledge of their partner manager.

"Currently, I don't think that I know enough yet to say that we should be all-in, or maybe just put our toe in. We need to understand how Dynamics 365 is going to affect the millions of seats that we have as a partner of record with our Office 365 customers," says Chris Pyle, CEO of Champion Solutions Group/MessageOps, a cloud provider with over 2,000 clients with more than 2.5 million Office 365 users. "Microsoft needs to provide more education on why partners should want to invest in it and how we're going to monetize this movement."

Based on previous experience with new product releases, partners know there are inherent risks with early adoption. Are the licensing models of the initial release going to hold, or be pressured by competitive vendor price wars? Will Microsoft decide to provide services that could undercut partner investments -- like the most recent episode with an evolving role of Microsoft's FastTrack migration services?

No right-minded partner approaches a new solution without trepidation. If you have never been involved in an ERP or CRM implementation, you simply don't know what you don't know. Any partner who has touched SharePoint knows how much trouble a well-meaning consultant can get into when they don't have enough experience with the solution.

As part of the planning for transitions of this magnitude, Microsoft works closely with a select group of early-adoption partners to anticipate and mitigate the challenges resellers will face. Tribridge -- a Microsoft National Solution Provider with deep experience in Dynamics, cloud and vertical specialization -- was involved in Dynamics 365 planning from the start. Through those partner advisory programs, Tribridge's Kevin Armstrong, VP of Sales for Microsoft, has heard the concerns of Office 365 partners.

"Our alliances group is playing a very specific role in that to make sure that we're partnering with the right firmsand that, in turn, we're being a good partner to them."

Kevin Armstrong, VP of Sales for Microsoft, Tribridge

"I think Microsoft's approach to readiness and their thoroughness in trying to present artifacts and a path to knowledge has been exceptional in this particular launch," Armstrong says. "But what struck me for the Office 365 partners is the gap in terms of how they can make the transition. They are asking, 'How do I take a customer that I've already been providing Office 365 services to, and then how do I extend that out? Do I build out the capabilities internally on my own team or do I partner with somebody for that?'"

Will Dynamics Partners Lead the Way?
Echoing the need to test out the potential fit of a new product before investing heavily, Bryan Guinn, a partner at ENTRUST Technology Consulting Services, explains, "Our typical approach is to work with a partner that has experience in that space for a period of evaluation. We engage with them, sharing revenue on projects, to see how it fits our model and if it makes sense for us."

"I think Microsoft is taking this very seriously and if you're a traditional Dynamics partner this is definitely something that you need to take look at. Honestly, a lot of Office 365 partners may not have the right resources."

Bryan Guinn, Partner, ENTRUST Technology Consulting Services

"For Dynamics 365, we're going to lean on some other partners that have more experience in Dynamics," Guinn continues. "We will utilize them initially to help us roll this out to our customers. That gives us some time to make sure licensing models are going to stay the same and what the solution is going to look like after several iterations."

There may be more than the usual amount of angst among non-Dynamics partners with this solution because it is so far out of their wheelhouse. Current Dynamics partners, particularly ERP partners, have been vocal in their concerns about how important it is for consultants with accounting expertise to be involved in any Dynamics 365 financials implementations. For example, establishing a chart of accounts for a business provides the backbone for the financial integrity, from compliance to reporting, for the organization. Dynamics partners argue that Microsoft has the responsibility to make sure its end customers are receiving educated guidance from qualified partners for such critical decisions.

To that end, Microsoft has announced that partners will sell the Dynamics 365 Business edition, which is intended for small and midsize businesses (SMBs), through the Cloud Solution Provider (CSP) model. Competency paths for Dynamics 365 haven't been announced, but are promised in the January time frame. In the meantime, the current Microsoft Partner Network ERP and Cloud CRM competencies validate performance, skills and compliance.

As a longtime Dynamics partner with a deep bench, Tribridge sees a bright opportunity to work with partners that have established the trusted relationships with customers, but don't have the functional expertise to support ERP and CRM. "The reality is you're going to find yourselves in conversations that go deeply into financial or operational topics and functional areas," Armstrong says. "You may be well positioned from a relationship perspective, but to truly hold that position of trusted advisor you need to put the right knowledge and the right subject matter expert in front of your customer. [That] lets you retain that customer by being the trusted advisor, but partner with firms that bring that expertise to the table."

"One of the interesting things is how Dynamics 365 will be licensed. As a Direct CSP, we see a lot of partners coming to us to help navigate those waters, as well. Just how do they license it, and how do they provide not only the services but the licensing within that world, as well," says Armstrong. "We are currently putting structure around how we partner with these firms so that it is a win-win, so that we both understand who has what responsibility. How are we all going to monetize these initiatives and keep each other whole? How do we provide a united front? Our alliances group is playing a very specific role in that to make sure that we're partnering with the right firms and that, in turn, we're being a good partner to them."

Even those Dynamics VARs without a history of partnering may find themselves courted by Office 365 providers. "I think Microsoft is taking this very seriously and if you're a traditional Dynamics partner this is definitely something that you need to take a look at. Honestly, a lot of Office 365 partners may not have the right resources," says Prism's Guinn. "Those Dynamics partners have real opportunity to create partner programs to deploy this solution. I expect Microsoft to push hard on the Dynamics 365 platform. It's going to be important for the channel as a whole that those more traditional Dynamics partners get on board."

To give partners additional tools to support Dynamics 365, Forceworks is working to expand its RapidStart accelerator to include financials. Currently, RapidStart assists partners with the implementation of Dynamics 365 Sales through wizards. "It's really in that SMB space where the customer and the partner need help," says Mordue. "We're trying to see what it is about a small ERP deployment like the Business edition financials that we could build wizards to add value."

"I'm working with a couple of ERP partners that really know that space. We are working on how and where a wizard can fit to streamline this process," continues Mordue. "Our whole goal is to try to create a layer between what Microsoft says is easy and what an end customer actually thinks is easy. That's a pretty big gap."

Time To Adjust
While Dynamics 365 was a hot topic at the Microsoft Worldwide Partner Conference (WPC) in July, the public announcements and release have progressed very quickly in comparison to product introductions of the past -- more quickly than most partners are willing or able to pivot. With the release of Dynamics 365, Microsoft and the channel will find out how much demand for Dynamics 365 exists and how quickly partners need to ramp up.

"I'm really interested to see what's going to happen as far as the demand. Are customers waiting for this? Is there pent-up demand or do we have to go out and really educate the market?" says Pyle of MessageOps. "I think that, particularly for the mid-market customers we serve, this will open up a tremendous opportunity for us, but we are going to need to educate them."

"The channel is going to be tasked with laying the foundation to educate the customer, providing the value proposition around why Dynamics 365 makes business sense," Pyle says. "During this time Microsoft really needs to lay down some good resources for the partner community. From the customers that we've been speaking to, the drumbeat is just beginning. We will need to execute with a consistent drumbeat."

There's no doubt that partners -- both Office 365 and Dynamics -- see opportunity. "I think Dynamics 365 will help drive adoption, and lower the barriers to entry into these types of platforms, which traditionally have been kind of expensive or disjointed. You have a lot of customers on the Microsoft Office 365 solution already and many are using CRM Online," says ENTRUST's Guinn. "The rest of the functionality becomes very attractive because a lot of the integration is done for them. They don't have to go through this large implementation of a solution and then integration of it. I do think over time it will gain a lot of traction. It's just going to come down to proving it in the marketplace."

For Dynamics partners, Dynamics 365 may be the trigger to finally unlock the potential everyone, including Microsoft CEO Satya Nadella, envisioned with the acquisition of Great Plains in 2001: the potential to extend mid-market financial management to an entire installed base of Microsoft's business customers. "I think it's a huge opportunity. I hear the concerns and risks from some partners, but I truly believe that the Office 365 partners are going to open a lot of doors," says Tribridge's Armstrong. "There's a bunch of new revenue streams that will be available to them, and I think that the classic Dynamics partners are going to have to learn to partner better with the Office 365 and traditional platform partners. We all need to learn from each other and have a more holistic conversation around the entire platform."

Delivering on a vision that was promised decades ago, Dynamics 365 may finally bridge the gap between the productivity and business operations for Microsoft customers. It also provides yet another transitional challenge for the heavily siloed Microsoft partner channel.

Whether they're too busy or reluctant to tread in unfamiliar business territory, few Office 365 partners have taken on the more complicated business process challenges of Dynamics CRM Online. On the flip side, traditional Dynamics ERP and CRM partners are used to delivering highly customized services through in-depth implementation projects staffed by highly qualified consultants.

Microsoft's support for partner-to-partner cooperation is likely to go into overdrive to make sure Dynamics 365 customers get the best that the channel has to offer. But for Dynamics 365 to work in a channel model, some group of partners will need to step up to deliver repeatable, profitable, high-volume implementations.