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Microsoft Dynamics IP Acquisitions Help Redmond Swing New Vertical AX

Oh, this ERP business is complicated, and with Microsoft, it's really, really complicated. Sure, Microsoft Dynamics might be cheaper and easier to use and implement than most -- probably all -- of its competitors, but Redmond's insistence on offering four different ERP suites under the Dynamics name leads to a marketing alphabet soup that even the biggest enterprise software fan might have trouble keeping straight.

For the purpose of this post, though, forget about NAV, SL and GP. We're going to talk here about AX, the suite with by far the most violent name in the bunch and, if we're honest, the mothership of Dynamics that Microsoft hopes will lead the product line up market and into serious competition with SAP, Oracle and the other ERP titans.

Dynamics folks in Redmond classify AX as the suite for the "upper-midmarket," or companies with a few thousand employees and dozens or possibly hundreds of ERP users, said Crispin Read, general manager of Microsoft Dynamics ERP, on a recent trip to RCPU's sunlit headquarters in Framingham, Mass. Those kinds of companies tend to play in specific vertical industries (more so than, say, a huge, global corporation would), meaning they need a lot of customization to actually make their ERP systems work for them, their customers and their suppliers.

"Customers are looking to acquire vertical solutions," Read said. "Right now, what companies are looking for is apps that are designed for their verticals. There's little appetite for customization. It's difficult to keep up to date."

So, Microsoft's not going to try -- not on its own, at least -- to keep AX up to date. Redmond today announced three acquisitions of intellectual property aimed at creating vertical versions of AX and moving the suite into targeted industries. Buying vertical functionality and offering pre-customized versions of AX is an easier and more workable approach, said Kees Hertogh, director of product management for Microsoft Dynamics AX, than trying to bake a bunch of home-grown vertical capabilities into one giant AX pie.

"Try to capture too many verticals, you end up with spaghetti," Hertogh told RCPU in a brightly painted Framingham conference room. (By the way, is anybody else hungry?) "It's like concrete -- once it hardens, it's very hard to change."

So, in order to maintain a pasta-free diet, Microsoft is buying IP from Fullscope Inc. for process manufacturing, from Computer Generated Solutions Inc. for professional services, and from LS Retail EHF (talk about alphabet soup) and something called To-Increase Denmark A/S (your guess is as good as ours) for the retail industry.

It's worth noting that all four companies that are selling IP to Microsoft are Gold Certified Partners, and Read and Hertogh stressed during their visit with RCPU that Redmond will continue to rely on partners to customize AX for customers. The opportunities are immense, they say.

"Creating a vertical solution for an upper-midmarket company, there's a lot of work to do," Read said. "We don't want to provide all these vertical solutions. We want our partners to develop them, and it's a lot of work."

It's a lot of work that AX partners surely wouldn't mind having right now. Read said that Microsoft is focusing on selling AX into retail, distribution, manufacturing, professional services and the public sector, and today's announcements reflect the goals the company has for targeting some of those industries.

So, Dynamics partners, there you go -- you have your marching orders. Focus on AX for vertical industries, and the only way is up. Maybe next time, Microsoft will want to stir some of your IP into its Dynamics alphabet soup.

What's your take on how Microsoft is running its Dynamics business? Have you had success in specific verticals, and if so, which ones? Tell all at [email protected].

Posted by Lee Pender on September 22, 2009