C'mon Microsoft, don't be shy

Last quarter's results from Microsoft were surprisingly good for Dynamics but is it all rosy in the garden or are we missing something?

I disagree with my colleague Josh Greenbaum on several aspects of his analysis of the SAP/Oracle/Microsoft position and specifically around Microsoft. Relegating Microsoft to an also ran position doesn't fit with how I perceive Microsoft Dynamics. Josh asserts:

Two data points versus the plethora of filings and comprehensive analyses that Oracle and SAP shower us with means that Microsoft is really harming its own standings in the market. And that does matter to customers: By keeping its position in the race purposely obscure, Microsoft makes no case for real market momentum, and begs the question about how well its strategy is really working in the marketplace.

Josh's position is predicated on the need to know two things: product strategy and roadmap (we know that reasonably well) and a take on the financials. What was obscure about a 24% increase in customer billings for the Dynamics division or the addition of 85,000 CRM seats in the last quarter? Like Josh, I could not pry any real additional information out of Microsoft, although the heavy hints are that CRM is leading the charge. According to Klaus Holse Anderson, corporate VP of sales and operations for Dynamics: "We now have 11,000 customers on CRM at a total of 475,000 seats." And as I've said before, Microsoft is doing well in replacement markets, especially against Sage.

I disagree that the lack of detail hurts Microsoft because the channel only has to shout one number $50 billion. If it needs to go further than the mention of $30+ billion in cash and equivalents is one heck of a cushion. What customer is going to ask for more when they can see the fruits of Microsoft's investments in the Dynamics range?

It also puzzles me that Josh's analysis seems to run counter to his earlier poke in the eye to Salesforce.com:

With a range of offerings priced from $44 per user per month to $59 per user per month for a “professional” version, Microsoft has set the bar significantly lower for its CRM on-demand package than market-leader Salesforce.com, which “starts” its professional pricing at $65 per user per month. Do the math, that’s a lot of Benioff-bucks that Microsoft expects to head to Redmond instead.

If Josh is right (and I suspect he has a strong point), then Microsoft is unlikely to have too many problems picking up new business from what he sees as a Siebel look-alike. Consider also recent announcements. Test marketing of the Dynamics Entrepreneur Edition (based on a cut down version of Navision) has gone well enough for Microsoft to launch in the Netherlands, UK, Germany and Spain during September. Each of those markets should do well at the $1,000 price point, especially Spain and Germany. Spain is a market playing catch up because until recently, it has been a technology laggard. I certainly don't see significant price resistance in that territory. Germany is Microsoft's largest EMEA sales market for the Dynamics division. That's playing in SAP's back yard.

Each time I've met with Dynamics executives over the last year, there are plenty of smiling faces. I know they are winning more $1 million and up deals than ever before. Chump change for the SAPs and Oracle's of this world but significant in an SMB market that is seeing increased activity. At this year's Convergence, I was hard pressed to find a single customer critical of Microsoft's progress in delivering new functionality. Channel sources say that despite the recent change in divisional leadership, the moaning minnies largely stayed away from this year's partner conference.

In conversation with Klaus Holse Anderson, the plan is to add 6,000 Microsoft certified on Dynamics people into the channel this year - the same as last year with around twice that number uncertified. Klaus says: "At present the problem is adding capacity in the channel. Adding 8,000 certified would be good."

Microsoft's integrations between Office, Sharepoint and Dynamics are taking real shape. For those customers who are thinking strategically, this positions Microsoft as a long term strategic partner rather than a technology play that happens to have a business applications suite.

Regardless of financial obfuscation, Microsoft can afford to pour money into this development, taking its time to get it right and not having to look over its shoulder at competitors who cannot compete on R&D and marketing spend.

It could be that Microsoft is taking advantage of a trending market. Niche oriented players like Lawson Software grew license sales 20% in its last reported quarter. Preliminary figures for Lawson's latest quarter don't look shabby either. Sweden based Unit 4 Agresso, not so well known in the US but carving out a name for itself in public sector recently reported that it:

...has experienced a 40% increase of its high-end deals in 2007 and exceeds last years’ number of + €1 million deals already in the first 5 months of this year.

Returning to Microsoft, I agree with Josh that more financial disclosure about progress around Dynamics would be welcome but I can also imagine the corporate communications people at Redmond resisting anything other than vague hints, nods and winks. To do so would open the floodgates for other disclosures that might not look so rosy.

Whichever way you slice it, Microsoft Dynamics is on a roll but without the taint that goes with Vista, Xbox and Zune, so to suggest it is in a losing position doesn't parse with what I'm seeing.

What might explain Microsoft's reticence to disclose more financial information? They're emerging from a period when most commentators would have been hard pressed to put a positive spin on project Green and the company's earlier misguided integration efforts. As a company, it is not confident going public although internally, the team is effusing confidence. Recent marquee product releases like Vista and Zune have been duds (in Microsoft terms) and its predatory past lurks in the background. I suspect the company is being overly cautious in public. Paradoxically, it could improve its perceptual positioning if it allowed commentators access to more information. That way, folk like Josh and I get to pick over more meatier entrails and so provide richer analysis. As things stand, we're kind of guessing which isn't good for Microsoft, the channel or customers.

The one gray cloud on the horizon is SAPs forthcoming A1S release. Many of us in enterprise land are waiting with baited breath to see exactly what impact A1S will have on the SMB market. Sadly, that story must wait for another day.


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