Of all the news at Microsoft Dynamics' recent Convergence conference, it was, not surprisingly, its proposed cloud strategy that drew the most attention. Yet many questions remain as to exactly how the company plans to bring its products and partners with it to the cloud.
As more than 9,000 users and resellers convened here for the annual confab, keynote addresses by Microsoft chief executive Steve Ballmer and corporate vice president of Microsoft Business Solutions Kirill Tatarinov offered little in the way of specifics on the company's plan to bring its Dynamics products to the cloud.
Ballmer's enthusiasm for the hosted movement, however, blunted a lack of detailed information on the plan. "The cloud is the technological engine of change for the next 10 years, and every one of our products will be engineered to take advantage of the full benefits of the cloud," he said. "Our mission is to transform complexity into simplicity, give you agile solutions so you can be dynamic ... . The fact that we launched our online CRM before on-premise should show our commitment to the cloud. ERP and CRM should be for everyone, not just the privileged few with big budgets. Smaller companies want a competitive edge too, and many companies are tired of their current legacy systems."
Toward that end, Microsoft's funding commitment to the cloud was detailed in a recent report where Microsoft International president Jean-Philippe Courtois confirmed that the company will spend 90 percent of its annual $9.6 billion research and development budget on cloud strategy this year.
In a meeting with the press and analysts, Microsoft executives gave a brief preview of its Dynamics cloud strategy, as Tatarinov confirmed that the company is planning every future major ERP product release to be Software-as-a-Service, beginning with Dynamics NAV in 2012. Each will use the upcoming cloud-based operating system Windows Azure, as well as Office 365.
"We are being very careful in how we do this," explained Tatarinov. "We have found that in taking our CRM product to the cloud, there are still 50 percent of those who use it in the cloud, and 50 percent who do not. This is where people are. ERP is somewhat different. It is mission-critical workload, and it will one day be available in a way that doesn't disrupt them. But right now most [customers] do not want it for mission-critical work."
Tatarinov also said that he expected many companies would prefer to keep their core financial data in on-premise systems for some time, citing a lack of trust in the cloud.
THE PARTNERS WEIGH IN
As to the role of Dynamics partners in its forward-looking strategy, there were some lingering questions.
One Northeastern VAR claimed that selling Dynamics CRM in the cloud resulted in a boost in his firm's business, but was not certain exactly how Microsoft's SaaS-based ERP strategy would fare, or how the pricing models would ultimately benefit the channel.
Another midsized reseller claimed that he and other VARs in attendance were being courted by existing cloud ERP vendors NetSuite and Acumatica, and were unsure if Microsoft's strategy would be able to compare to the already-established companies in that space.
Microsoft's vice president of Dynamics partners, Doug Kennedy, acknowledged that he and the company have a strong role to play in educating and supporting the channel in their move to the cloud, and was well aware of the challenges. "Partners are looking to us for advice, and I think we learned best practices with CRM [going online]. The problem with our world is we have CRM partners only doing on-premise business, and shifting the big [financial] bang [firms get] from implementation to the cloud was dramatic; some didn't survive the change," said Kennedy.
As such, Microsoft issued a new partner guide to help them take advantage of the new pricing, marketing and strategy that will come with selling the soon-to-be-released SaaS-based Dynamics ERP line.
Another challenge Kennedy sees within the channel is its relatively new Gold Partner status requirements, which now require Dynamics partners to become recertified specifically as a Dynamics partner. According to the guidelines, the Microsoft Dynamics competency is designed "for partners with demonstrable experience in designing and/or implementing Microsoft Dynamics ERP and Microsoft Dynamics CRM solutions."
"At one time, 75 percent of our partners were Gold [status] and it didn't mean anything, but in the old program it wasn't about Dynamics," Kennedy said. "Gold was not product discipline. We are going to see the ecosystem flip and it is designed to shake things up, since we [now] have deeper qualifications and higher certification requirements. We will be able to say [to customers], 'This is the right partner for you.' This will make partners question their commitment to the business," he said, adding that as a result of the tougher requirements, there might be some VAR attrition. "We have raised the bar and we need to drive growth."
"Dynamics as a brand gets more at bats [than our competition], but our batting average is horrible," he continued. "The wrong partner often gets engaged and we are beat out by those that are more vertically focused. We want to help them to focus."
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