Microsoft Dynamics' Growing Pains

Just settling in at 35,000 feet after an exhausting two-day Microsoft Dynamics analyst conference, there’s more than a few highlights to try to distill in one lone blog. But the main theme is easy: Microsoft’s enterprise applications are challenging not just the top of the market – SAP and Oracle – but a slew of lesser competitors like Sage and Epicor.

Just settling in at 35,000 feet after an exhausting two-day Microsoft Dynamics analyst conference, there’s more than a few highlights to try to distill in one lone blog. But the main theme is easy: Microsoft’s enterprise applications are challenging not just the top of the market – SAP and Oracle – but a slew of lesser competitors like Sage and Epicor. There’s a couple of ways that’s happening – the raging success of Microsoft’s CRM being one. But the other is the blending of Office, the extensive collection of Microsoft’s back office technology, and the Dynamics applications themselves. And it’s this latter reason, which at a functional level promises to look very interesting to prospective customers worldwide, that is rife with prospect and problem.

The prospect is clear: when you take the ubiquity of Office – 450 million users – and tie it to the enterprise applications functionality of Dynamics, you’ve got a pretty potent competitive weapon. In addition to the straight-up deployment of a Dynamics AX, NAV, or GP system, running in a Sharepoint portal, you can build what Microsoft calls OBAs – Office Business Applications – that extend the use of Office into the enterprise apps layer. Or you can build SNAPs – little mini apps that extend  the functionality of the apps layer into Office. And you can leverage the growing family of technology – SQL Server, Sharepoint Server, Biztalk, to name a mere handful of what seems like dozens of servers and ancillary technologies – to build fabulously interesting and complex applications.

Which leads up to the problem: There were always two compelling reasons why customers bought into the Dynamics story. The “we’re Microsoft” angle – a pretty potent selling point in itself – and the simplicity angle: ease of use and ease of deployment are always very interesting to not only the target small and medium-sized business, but to the larger accounts that Dynamics is starting to tackle as well. But if you start to dissect the Office/Dynamics/Back Office triumvirate that Microsoft is now pushing, you quickly run into a mind-boggling level of complexity. Dynamic’s James Utzschneider, who calls himself Dynamic’s chief market-tect, blithely commented at one point during the day that there are 25 different servers and other moving parts that make up a fully-functional “triumvirate” environment. James may have been kidding, but my own count dropped off at about 14 during the course of the main day’s briefing. That’s 14 different individual servers, tools, technologies, and other things that are needed to pull the full dream of Dynamics into reality. Fourteen and counting.

Think that’s a lot? So do the global systems integrators who are suddenly flocking to Dynamics like …. global systems integrators. These guys – Accenture, CAP Gemini, Bearingpoint, Tata, etc. – know complexity when they see it, and the opportunity complexity provides in their eternal quest for billable hours. This is another of the good news/bad news stories in the ascendancy of Dynamics: The global SIs helped create the modern ERP market in the 1990s, taking a relatively obscure ERP company called SAP and turning it into the powerhouse that it is today. They could do something similar for Dynamics, and clearly seem willing to try.

But on the way the SIs also helped create the modern over-budget and underperforming ERP morass, with a consulting to license revenue of 5 or 8 to 1 and a lot of wasted time and effort. To this day, whenever a massive ERP failure hits my desk, 90-plus percent of the time it’s the fault of the integrator, who somehow manage to paid nonetheless.

The emergence of Dynamics into the realm of complexity is one of the main obstacles the company has created for itself, and it’s going to be hard for it to stop digging this hole. This is Microsoft, after all, techno-nerds non-pareil, for whom all these little servers and tools are a drug none can avoid. But they’ll have to figure out how to stop bragging about technology and get back to the functionality that their customers are much more interested in hearing about. Because complexity is something that their erstwhile competitors have wrestled with for a long time, and, at a minimum, they know how to avoid talking about. Until it learns how, Microsoft Dynamics will be in danger of marketing itself into a corner, a corner that isn’t exactly the place they want, or need, to be.

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