Microsoft recently unveiled the latest versions of its various ERP and CRM applications under the Dynamics banner and announced that the best features of Microsoft Axapta, Microsoft Great Plains, Microsoft Navision and Microsoft Solomon will be converged in 2008.

Windows IT Pro News UK caught up with Paul White, director of Microsoft Business Solutions in the UK to discuss the Redmond giant’s Dynamics strategy and its place within the ERP market.

Windows IT Pro News UK (WITPNUK): Why wasn’t Microsoft always in the high-level ERP business?

Paul White (PW): Actually, the question might be why did it take so long to get into it at all. We bought Great Plains in 2001, we bought Navision in 2002, so I guess some people might challenge us as to why it took us until 2001 to get into it. But it was then that we saw business application functionality getting much closer to an infrastructure kind of thing, i.e. application services that lots of different parts of the business would use, that we saw things like ERP and CRM as being much closer to our core competence than we’d ever done previously.

If you can think about the world of web services and the world of service-oriented architecture, components that tell you what the balance is of the debtor account are just going to be part of a corporate’s infrastructure, not narrow siloed specific business applications only used by a particular group of people. That functionality is going to be deployed to everyone in an organisation through fifteen different applications and when we recognised that’s where life was going, Microsoft realised that it needed to take an ownership position in the space to integrate that capability with all the other infrastructure stuff that we already do.

WITPNUK: It seemed like Microsoft was previously like IBM in that it was quite happy to let ISVs port their applications to its platform whereas now you can see a market opportunity that is now coming together with a lot of your recent technology announcements.

PW: Yes, I think that the last year and the next year will be really very fundamental in the company’s history in terms of the progress that has been made and you are right, a lot of that is about product releases but actually a lot of it is about insight and ambition. So, in the eighties and the nineties the company was very focused on desktop productivity. You know, what was it that individuals or corporates could deploy on to a desktop machine that made that individual more effective? And actually now the agenda is very much around “how do we help corporates make their organisations much more effective?”.

And some of that story involves the same tools that Microsoft has been known and loved for a very long time but actually some of it is about new stuff that we do whether it be some of the communications stuff that we are now into, like Live Meeting and some of it is around MBS \[Microsoft Business Solutions\] and the use of the Dynamics product range to deploy business content into the desktop environments of decision makers across an organisation.

I guess that the perspective from an ISV point of view is that whereas before we asked people to develop applications to meet customer needs -- effectively from the operating system up -- their opportunity is now to develop applications to meet customer needs from a core platform of application functionality that MBS provides. Because there might be fifty ISVs in the world developing solution for a particular niche market but 60 or 70 per cent of their development spend each year is spent developing code that the customer actually doesn’t put a strong value on because it’s generic.

If we can provide that 60 or 70 per cent of generic code, those ISVs can focus on what really makes a difference for the customer. We hope that by adopting the position that we have we add value to our ISV community and the customer community as well.

WITPNUK: What sort of market share do you think that what are now the various Dynamics brands have between them in the ERP market as a whole?

PW: This is one of those beautifully simply but impossibly complicated questions to answer because fundamentally it depends on your definition of the market place. So, if you looked at the UK market and swept in everything from, say, Sage Line 50 up, we’ve got a very small share, maybe six per cent or something. If actually you talk about mid- market and up then the number just gets bigger because you have excluded the very large rump of small businesses that there are in the UK.

If you look at our new business performance, of systems that have been purchased in the last 12 months, how many of those were Microsoft-based and how many of them were purchased from the competition, then, again, the number is very different because we are accelerating very fast. I suspect that there are some constraints on what numbers I can share with you. But as a benchmark I reckon generally 6 per cent if you include absolutely everything, but the reality is, especially in the audience that you are addressing, the number is much higher than that. And if you look particularly at the last twelve months, we are doing better still.

WITPNUK: How do you think that you will stack up against Oracle, SAP, the leaders of the ERP pack, in terms of market share by, say, 2009?

PW: That’s a difficult shot and, again, I think that there’s an apple and pears issue here because if you look at what SAP are up to, they are redefining themselves pretty aggressively as a kind of “applistructure” company. They are moving away from narrowly defining themselves in terms of ERP into much more middleware. That’s their future.

Now, conversely, if you look at ourselves, we’re coming out of an infrastructure environment and now delivering application functionality and I don’t think that people will measure the market in “how many units of ERP?” terms for too much longer because the things we have already talked about, about how ERP functionality is becoming an infrastructure issue for clients. And you also need to reflect on the difference of propositions between SAP and Microsoft. Our proposition is very much about integration with things like Office, Share Point, SQL Server for reporting services, BizTalk, all the infrastructure that most of your readers are already licensed for and are already familiar with are embedded within our ERP proposition or, indeed, our ERP proposition is embedded within those products.

So users will be looking at an Office interface, not a classic ERP menu structure, users will be looking at reports on SharePoint, using reporting services to get the management information that they need. And we think that’s got a number of strong benefits for people. The first is, as I have already mentioned, that they are often already licensed for them and rather than having to buy a specific reporting tool for an ERP application or a specific web portal for an ERP application, they are using the tools that they have already got in their shop.

And there is also a skills issue in there as well. Because skills around SharePoint are increasingly widely available, whereas lots of other ERP applications have their own web portal technology around which skills are pretty scarce.

WITPNUK: Obviously, Microsoft is a ubiquitous brand rather than just being a famous one, but how aware do you think enterprise users are of the Dynamics brand at this point?

PW: I think that brand awareness is pretty low. I think that you can expect to see that change dramatically within the next 60 to 90 days because you will see quite a lot of activity in the market from Microsoft on that subject. You are right to challenge us on that issue, but you will see us solve it pretty quickly.

WITPNUK: Do you think that the Microsoft brand will be enough to simply win new users over to Dynamics without much hesitation?

PW: No. I think that the strength of the Microsoft proposition will be very compelling and competitive in the market place. I don’t see any FD or sales director saying “I want Dynamics ERP or Dynamics CRM” just because it’s Microsoft. I can see people saying that Dynamics ERP is so tightly integrated into Office, SharePoint, BizTalk, all the rest of that story, that is a really compelling offer. And the reason that it is compelling is that it makes the best of my existing investment in technology, the best in my existing investment in people and great functionality and great value for money. – we’ll go that route, thanks. It’s the proposition, the combination of our portfolio that is exciting people, not the brand alone.

WITPNUK: Is Microsoft Snap part of this strategy?

PW: Yes. Snap is the beginning of a series of add-ons, plug-ins -- snap-ins, I guess -- that demonstrate exactly what is possible when products like Office are integrated very tightly with ERP and CRM applications. Lots of new things become possible and I see Snap developing into a really significant library of components that organisations can use to complete, if you like, the last ten per cent of their implementations. So, they’ve done all the heavy lifting and then they think “how do we get the salespeople to submit their expenses?” or that kind of stuff, they will have a library that delivers that.

WITPNUK: Happy users of an ERP-type system are resistant to change, they just want further development of what they are used to. So are users of Navision, Great Plains and so on resistant to the converged Dynamics in the same way that, say, some users of Oracle’s many ERP suites are?

PW: Let me put this into a broad context. The market has consolidated, is consolidating, for some pretty fundamental reasons associated with the costs of developing this kind of software. So, it may well be that some customers wish that that consolidation wasn’t happening and that they wouldn’t have some choices to make. There are choices being forced upon them by consolidation in the market, but the forces that are driving that consolidation are so great that it’s going to happen. And I’m sure that there is still a lot more to come. There are still a lot of relatively small ERP vendors in this market place who can’t afford to take their applications forward in the same way that the market demands.

Specifically, I think that the challenge for organisations like us – and Oracle – is that you have to demonstrate to the existing user of Great Plains that the new version that we are offering them offers significant, competitive, commercial advantages to them as an individual business and part of doing that will be to make the migration easy for them. And we’ve got lots of very good brains, we’ve got lots of very good resources focused on making sure that that is the case. So I am pretty comfortable about our commitment to taking our existing customer base with us.

WITPNUK: What are you doing to keep them on board?

PW: Well, if you look at Navision 4 that came out at the back end of last year and included SharePoint integration, we’ve had lots of great feedback from the market place. Customers are really interested in that. And Great Plains has equally come out with SharePoint integration and also we’ve got lots of new user interface, perhaps the best indication of what Office interface will look like in time, and people say “We love that, great.”

Business application implementations often fail or are less productive because users don’t like using the systems. And, at the end of the day, integration with Office changes a lot of those challenges because it feels familiar, people are comfortable with it, it’s an environment to which they relate. We’ve had lots of users of the new, if you like, Outlook interface of Great Plains that say “Yes, please” because its about user adoption and if you can improve your user adoption you get better data, improved productivity, all that kind of stuff.

And that’s a large part of the success of Microsoft CRM. CRM systems are absolutely legendary for being despised by the sales people that are supposed to use them and Microsoft CRM looks like Outlook, it feels like Outlook, because it is Outlook to all intents and purposes, so sales people like using it.

WITPNUK: What about confusion within Microsoft itself, isn’t there some crossover and doubling up of efforts by developers and so on as you approach the convergence of the various Dynamics brands in 2008?

PW: I think that when we got over the immediate challenges of acquisition, we were clearly in that position in 2003 and 2004 but the Project Green plan that we laid out in terms of project development ironed all of that out for us. It set out what the end game was in terms of a converged application. It set out how we were going to get there in terms in embedding Office, BizTalk, SharePoint and SQL Server 2005. And we essentially invited all of the product groups to follow that roadmap in their own time, because depending on where they started from, it was going to take them different times to get there.

They are busy independently engineering out the things that make them different. And they will arrive with three ERP applications and one CRM application that looks the same, feels the same, integrates the same, deploys over the web the same, at which point we have a converged application.

Microsoft recently unveiled the latest versions of its various ERP and CRM applications under the Dynamics banner and announced that the best features of Microsoft Axapta, Microsoft Great Plains, Microsoft Navision and Microsoft Solomon will be converged in 2008.

Windows IT Pro News UK caught up with Paul White, director of Microsoft Business Solutions in the UK to discuss the Redmond giant’s Dynamics strategy and its place within the ERP market.

Windows IT Pro News UK (WITPNUK): Why wasn’t Microsoft always in the high-level ERP business?

Paul White (PW): Actually, the question might be why did it take so long to get into it at all. We bought Great Plains in 2001, we bought Navision in 2002, so I guess some people might challenge us as to why it took us until 2001 to get into it. But it was then that we saw business application functionality getting much closer to an infrastructure kind of thing, ie application services that lots of different parts of the business would use, that we saw things like ERP and CRM as being much closer to our core competence than we’d ever done previously.

If you can think about the world of web services and the world of service-oriented architecture, components that tell you what the balance is of the debtor account are just going to be part of a corporate’s infrastructure, not narrow siloed specific business applications only used by a particular group of people. That functionality is going to be deployed to everyone in an organisation through fifteen different applications and when we recognised that’s where life was going, Microsoft realised that it needed to take an ownership position in the space to integrate that capability with all the other infrastructure stuff that we already do.

WITPNUK: It seemed like Microsoft was previously like IBM in that it was quite happy to let ISVs port their applications to its platform whereas now you can see a market opportunity that is now coming together with a lot of your recent technology announcements.

PW: Yes, I think that the last year and the next year will be really very fundamental in the company’s history in terms of the progress that has been made and you are right, a lot of that is about product releases but actually a lot of it is about insight and ambition. So, in the eighties and the nineties the company was very focused on desktop productivity. You know, what was it that individuals or corporates could deploy on to a desktop machine that made that individual more effective? And actually now the agenda is very much around “how do we help corporates make their organisations much more effective?”.

And some of that story involves the same tools that Microsoft has been known and loved for for a very long time but actually some of it is about new stuff that we do whether it be some of the communications stuff that we are now into, like Live Meeting and some of it is around MBS \[Microsoft Business Solutions\] and the use of the Dynamics product range to deploy business content into the desktop environments of decision makers across an organisation.

I guess that the perspective from an ISV point of view is that whereas before we asked people to develop applications to meet customer needs -- effectively from the operating system up -- their opportunity is now to develop applications to meet customer needs from a core platform of application functionality that MBS provides. Because there might be fifty ISVs in the world developing solution for a particular niche market but 60 or 70 per cent of their development spend each year is spent developing code that the customer actually doesn’t put a strong value on because it’s generic.

If we can provide that 60 or 70 per cent of generic code, those ISVs can focus on what really makes a difference for the customer. We hope that by adopting the position that we have we add value to our ISV community and the customer community as well.

WITPNUK: What sort of market share do you think that what are now the various Dynamics brands have between them in the ERP market as a whole?

PW: This is one of those beautifully simply but impossibly complicated questions to answer because fundamentally it depends on your definition of the market place. So, if you looked at the UK market and swept in everything from, say, Sage Line 50 up, we’ve got a very small share, maybe six per cent or something. If actually you talk about mid- market and up then the number just gets bigger because you have excluded the very large rump of small businesses that there are in the UK.

If you look at our new business performance, of systems that have been purchased in the last 12 months, how many of those were Microsoft-based and how many of them were purchased from the competition, then, again, the number is very different because we are accelerating very fast. I suspect that there are some constraints on what numbers I can share with you. But as a benchmark I reckon generally 6 per cent if you include absolutely everything, but the reality is, especially in the audience that you are addressing, the number is much higher than that. And if you look particularly at the last twelve months, we are doing better still.

WITPNUK: How do you think that you will stack up against Oracle, SAP, the leaders of the ERP pack, in terms of market share by, say, 2009.

PW: That’s a difficult shot and, again, I think that there’s an apple and pears issue here because if you look at what SAP are up to, they are redefining themselves pretty aggressively as a kind of “applistructure” company. They are moving away from narrowly defining themselves in terms of ERP into much more middleware. That’s their future.

Now, conversely, if you look at ourselves, we’re coming out of an infrastructure environment and now delivering application functionality and I don’t think that people will measure the market in “how many units of ERP?” terms for too much longer because the things we have already talked about, about how ERP functionality is becoming an infrastructure issue for clients. And you also need to reflect on the difference of propositions between SAP and Microsoft. Our proposition is very much about integration with things like Office, Share Point, SQL Server for reporting services, BizTalk, all the infrastructure that most of your readers are already licensed for and are already familiar with are embedded within our ERP proposition or, indeed, our ERP proposition is embedded within those products.

So users will be looking at an Office interface, not a classic ERP menu structure, users will be looking at reports on SharePoint, using reporting services to get the management information that they need. And we think that’s got a number of strong benefits for people. The first is, as I have already mentioned, that they are often already licensed for them and rather than having to buy a specific reporting tool for an ERP application or a specific web portal for an ERP application, they are using the tools that they have already got in their shop.

And there is also a skills issue in there as well. Because skills around SharePoint are increasingly widely available, whereas lots of other ERP applications have their own web portal technology around which skills are pretty scarce.

WITPNUK: Obviously, Microsoft is a ubiquitous brand rather than just being a famous one, but how aware do you think enterprise users are of the Dynamics brand at this point?

PW: I think that brand awareness is pretty low. I think that you can expect to see that change dramatically within the next 60 to 90 days because you will see quite a lot of activity in the market from Microsoft on that subject. You are right to challenge us on that issue, but you will see us solve it pretty quickly.

WITPNUK: Do you think that the Microsoft brand will be enough to simply win new users over to Dynamics without much hesitation?

PW: No. I think that the strength of the Microsoft proposition will be very compelling and competitive in the market place. I don’t see any FD or sales director saying “I want Dynamics ERP or Dynamics CRM” just because it’s Microsoft. I can see people saying that Dynamics ERP is so tightly integrated into Office, SharePoint, BizTalk, all the rest of that story, that is a really compelling offer. And the reason that it is compelling is that it makes the best of my existing investment in technology, the best in my existing investment in people and great functionality and great value for money. – we’ll go that route, thanks. It’s the proposition, the combination of our portfolio that is exciting people, not the brand alone.

WITPNUK: Is Microsoft Snap part of this strategy?

PW: Yes. Snap is the beginning of a series of add-ons, plug-ins -- snap-ins, I guess -- that demonstrate exactly what is possible when products like Office are integrated very tightly with ERP and CRM applications. Lots of new things become possible and I see Snap developing into a really significant library of components that organisations can use to complete, if you like, the last ten per cent of their implementations. So, they’ve done all the heavy lifting and then they think “how do we get the salespeople to submit their expenses?” or that kind of stuff, they will have a library that delivers that.

WITPNUK: Happy users of an ERP-type system are resistant to change, they just want further development of what they are used to. So are users of Navision, Great Plains and so on resistant to the converged Dynamics in the same way that, say, some users of Oracle’s many ERP suites are?

PW: Let me put this into a broad context. The market has consolidated, is consolidating, for some pretty fundamental reasons associated with the costs of developing this kind of software. So, it may well be that some customers wish that that consolidation wasn’t happening and that they wouldn’t have some choices to make. There are choices being forced upon them by consolidation in the market, but the forces that are driving that consolidation are so great that it’s going to happen. And I’m sure that there is still a lot more to come. There are still a lot of relatively small ERP vendors in this market place who can’t afford to take their applications forward in the same way that the market demands.

Specifically, I think that the challenge for organisations like us – and Oracle – is that you have to demonstrate to the existing user of Great Plains that the new version that we are offering them offers significant, competitive, commercial advantages to them as an individual business and part of doing that will be to make the migration easy for them. And we’ve got lots of very good brains, we’ve got lots of very good resources focused on making sure that that is the case. So I am pretty comfortable about our commitment to taking our existing customer base with us.

WITPNUK: What are you doing to keep them on board?

PW: Well, if you look at Navision 4 that came out at the back end of last year and included SharePoint integration, we’ve had lots of great feedback from the market place. Customers are really interested in that. And Great Plains has equally come out with SharePoint integration and also we’ve got lots of new user interface, perhaps the best indication of what Office interface will look like in time, and people say “We love that, great.”

Business application implementations often fail or are less productive because users don’t like using the systems. And, at the end of the day, integration with Office changes a lot of those challenges because it feels familiar, people are comfortable with it, it’s an environment to which they relate. We’ve had lots of users of the new, if you like, Outlook interface of Great Plains that say “Yes, please” because its about user adoption and if you can improve your user adoption you get better data, improved productivity, all that kind of stuff.

And that’s a large part of the success of Microsoft CRM. CRM systems are absolutely legendary for being despised by the sales people that are supposed to use them and Microsoft CRM looks like Outlook, it feels like Outlook, because it is Outlook to all intents and purposes, so sales people like using it.

WITPNUK: What about confusion within Microsoft itself, isn’t there some crossover and doubling up of efforts by developers and so on as you approach the convergence of the various Dynamics brands in 2008?

PW: I think that when we got over the immediate challenges of acquisition, we were clearly in that position in 2003 and 2004 but the Project Green plan that we laid out in terms of project development ironed all of that out for us. It set out what the end game was in terms of a converged application. It set out how we were going to get there in terms in embedding Office, BizTalk, SharePoint and SQL Server 2005. And we essentially invited all of the product groups to follow that roadmap in their own time, because depending on where they started from, it was going to take them different times to get there.

They are busy independently engineering out the things that make them different. And they will arrive with three ERP applications and one CRM application that looks the same, feels the same, integrates the same, deploys over the web the same, at which point we have a converged application.