Microsoft Corp. is effectively throwing down the gauntlet to U.S.-based NetSuite customers by offering midsized companies $850 for every user who switches to any Dynamics ERP product.

Zach Nelson

That includes Microsoft Dynamics GP, Microsoft Dynamics NAV or Microsoft Dynamics SL. The new promotion is available from now until June 25, 2010.

Microsoft claims that it received numerous requests from current Dynamics users, who had already made the switch from NetSuite, mainly because they felt Dynamics products were comparatively a “more flexible” offering, according to Guy Weismantel, director of Microsoft Dynamics ERP product marketing.

“It became very apparent that we were in a great position based on how [users] used ERP and we had to offer them a choice in how they implement ERP,” said Weismantel. “A lot of our [Dynamics] customers already came from NetSuite and they found some limitations there, so saw an opportunity to put a finer point on that end.”

Weismantel claims the main difference between the competing products is that Dynamics ERP products offer users the option to have an online or on-premise product, or even both.

“We are always keeping track of our competition, and more importantly we love our story,” said Weismantel. “We love what we can provide. In addition to our customers, our [channel] partners are a huge part of why we are seeing the switchover because our partners do give them a choice of on-premise or online. Ultimately this is a very customer-based move.”

Microsoft said its Dynamics ERP customers can also choose to deploy a collection of online services to help them quickly increase their business capabilities, from the more than 150 Microsoft Dynamics partners across the globe delivering subscription-based Microsoft Dynamics ERP solutions.

For its part, NetSuite has not been without its own recent competitive moves. Last week the company announced a bid to draw in more value-added resellers of its cloud-based accounting and business management software by offering VARs a 100 percent margin on first-year license subscriptions (see NetSuite Offers Channel Promotion Program). NetSuite believes this move, in addition to what the company offers its customers, will continue to take market share away from Microsoft.

“I look at the progress we’ve made and I feel great about this [Microsoft’s latest announcement] news,” said NetSuite CEO Zach Nelson. “The reality is, and what you don’t see in the Microsoft news, is that Microsoft has left its channel without a cloud [computing] option. All their others products are no more integrated with Dynamics GP than we are. In fact, the only innovation they’ve had in the past decade is calling [their product offers] by the same name.”

Nelson was also confident that Microsoft’s switchover incentive would have little impact on NetSuite’s overall business. “I guarantee you, for every one customer of ours they take, we will take 100 from [them],” he said.

The NetSuite SP 100 Program also offers 10 percent margins on renewals, creating a recurring revenue model for the vendor’s reselling partners, as well as the sales and technical training, sales cycle assistance and marketing support that it already offers its channel. NetSuite has about 200 VARs in its channel.

Microsoft Dynamics solutions are sold through an extensive network of more than 10,000 Microsoft Dynamics business partners.