How Microsoft's latest reorg will affect Dynamics CRM and ERP

Microsoft is bringing its Dynamics CRM and ERP businesses out of their silo and into the company's Cloud and Enterprise unit.

For the past few years, Microsoft's Dynamics CRM and ERP business has been in dotted-line no-man's land, organizationally.

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When Microsoft unveiled its "One Microsoft" reorg in 2013, the Dynamics business unit was kind of odd business unit out. Kirill Tatarinov continued to run Dynamics as a separate entity, but some of his direct reports also reported via dotted lines to Applications and Services chief Qi Lu; his marketing chief to the head of central marketing; and his sales leader to Chief Operating Officer Kevin Turner's group.

In this week's company-wide reorg, Dynamics was carved up a bit again, but this time the business was moved under Cloud & Enterprise chief Scott Guthrie. (Dynamics education and marketing goes to marketing and sales still reside with Turner's office.) And Tatarinov -- who became head of Microsoft Business Solutions, a k a, the Dynamics business, in 2007 -- is one of several Microsoft veterans leaving the company.

Why is Dynamics moving to Cloud and Enterprise (C+E), rather than the Applications and Services Group (ASG)? After all, Microsoft increasingly is pushing its CRM Online offering as a complement to Office 365, which is part of ASG.

Here's the "official" answer, courtesy of a company spokesperson:

"Moving Dynamics to the Cloud and Enterprise team enables Microsoft to accelerate its ERP and CRM work even further and mainstream those efforts as part of its core engineering and innovation efforts. C+E will work closely with ASG to ensure the end-to-end experience is cohesive across communications, collaboration and business processes."

From a financial reporting standpoint, Dynamics CRM Online is part of Microsoft's "Commercial Cloud" businesses. Commercial Cloud includes Azure, Office 365 business and Power BI. Microsoft officials have said they expect Commercial Cloud to reach an $20 billion annual run rate in fiscal 2018.

Even though Dynamics CRM Online still isn't hosted on Azure, Microsoft is hosting its ERP products (Dynamics GP, Dynamics NAV and Dynamics AX) on Azure in virtual machines. I'm curious if the reorg will result in CRM Online finally moving to Azure.

When/whether Microsoft ends up moving CRM Online to Azure, the company already is integrating Dynamics CRM with Power BI, its business-intelligence software/service, and Power BI already is part of the C+E team. The Dynamics team also has taken steps to use Azure-powered Office 365 authentication technology. A couple of years ago, Dynamics was piloting some work around bringing together the company's ERP assets with machine-learning and Hadoop, two more C+E technologies.

MSDynamicsWorld.com reported that, despite Tatarinov's departure, some of the familiar Dynamics management faces will remain. Technical Fellow Mike Ehrenberg will continue to oversee the Dynamics ERP organization. Bob Stutz will remain the head of Dynamics CRM. Both will report directly to C+E chief Guthrie, according to an email that Tatarinov sent to its reseller partners, MSDynamicsWorld said. (A Microsoft spokesperson confirmed to me that this information is correct.)

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"This alignment will help further accelerate our Dynamics ERP and CRM work, provide greater collaboration on the significant work and integration we are doing with the Azure platform, and will mainstream these Dynamics teams into Microsoft," said Tatarinov in his note.

Microsoft officials signaled earlier this year that the Dynamics business was coming out of its silo by changing up significantly the content the company delivered at its Convergence conference in March. Usually, Convergence is an event that's all about Dynamics CRM and ERP; this year, Convergence was more of a business decision-maker-focused show that included some Dynamics content, but just as much Office and other Microsoft product news.

It's not a stretch to see how Dynamics CRM and ERP fit into CEO's software and services-focused Microsoft. But it will be interesting to watch how Microsoft balances its newfound love for partnering with CRM and ERP rivals (hello, Salesforce) with its stepped-up focus on its own enterprise applications business.

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