Yes, Microsoft is doubling down on business applications

Microsoft is back -- and in a pretty big way, too. After a significant reboot over the last several months, the company is demonstrating why it remains a force in the world of business applications.

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As you know, I (and others of my ilk) had a rocky 2017 when it came to Microsoft Business Applications. I couldn't get a handle on how to think about it because they hadn't been very forthcoming to me (or those others of my ilk) about what they were doing with their business applications practice.

Last November, I decided to to stop coverage of Microsoft until I had enough information to do more than speculate -- unlike those investing in cryptocurrency. That said, I am happy to report, the speculation is ended. Not only do I have what I need to give you what I hope is what you feel is a well-considered opinion, but at the same time, I know is enough information to do what all of us New Yorkers do at a DNA level -- pass judgment and opine whether you want to hear it or not.

In that post I wrote:

".... but until I hear or see otherwise, this is and will be my working hypothesis. Business applications for Microsoft are seemingly being reduced to a peripheral piece of their business despite their protestations -- and whether they intend that to be the case or not. I hope that I'm wrong."

Readers, I am happy to say that I was wrong. Not only do I think they are fully cognizant of the importance of their business applications for the true execution of their vision, but in fact, they are doubling down to effect the growth of the business applications division of the company -- and to tie it into the overall vision that Satya Nadella has been evangelizing for his entire tenure.

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To be entirely clear, what I define as Microsoft's vision which I think Microsoft would have no complaints about is:

Microsoft wants to be the mission critical infrastructure for all 21st century business. That includes from hardware to software to services and it includes the cloud and the apps and micro-services. Among other things.

More in the future on this.

Interestingly, I think they are one of the few companies on the planet that can make this claim and possibly legitimately achieve it. Though I don't think it would be easy nor do I think that they are, as constituted now, prepared to do so. But they have the opportunity. And I don't know a whole lot of other companies who can holistically make that claim.

What makes me say this? Why go from despair and edgy to sunny optimism?

I got back a couple of weeks ago from two days at a Microsoft Business Applications Analyst Forum -- the first one in four years. It was not only a valuable information gathering exercise but a truly well-run event, that pushed the right buttons, tripped the right switches, clicked the right... whatever someone clicks -- depending on which cliché you are most comfortable using.

I came out, as I think did most analysts, with the content I needed to really help me figure out what role Microsoft Business Apps plays in the Microsoft visionary scheme of things and also had a few surprises along the way. (For proof that I'm not the only one waxing enthusiastic here, read my bud and esteemed analyst Vinnie Mirchandani's event focused post.)

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Were there things they could have done better with? Sure. They omitted any discussion of the work they do that falls under "corporate social responsibility." I happen to know via other avenues that Microsoft does a significant amount of Good Works. They didn't bring that up. Since they didn't, let me give you a taste of just a couple of the things they did (sourced from Satya Nadella's letter in the 2017 Annual Report)

"We're partnering with telecommunications companies through our Rural Airband Initiative to bring broadband connectivity to 2 million people in rural America by 2022, hoping to serve as a catalyst to help eliminate the rural broadband gap for the 23.4 million Americans living in rural communities who lack access to the economic, educational, and health opportunities the internet provides."

"In January 2016 we announced that Microsoft would donate more than $1 billion in cloud technology to non-profits and university researchers. We've achieved that goal a year early, donating cloud services to more than 90,000 non-profits, and we aren't stopping there. We announced a plan to more than triple the number of non-profits we'll reach to 300,000 over the next three years."

Great stuff.

But, to be my buzz killing self, while I am totally satisfied as to the depth, scope, and fervor of Microsoft's commitment to their business applications and on the balance highly positive, I have some concerns -- one or two that are at least potentially dangerous to Microsoft's plans if they don't work them through.

So, let's start with:

The Business Apps Analyst Forum

The event was two days crammed with many of the Business Applications executive team e.g. James Philips and Alysa Taylor, Hayden Stafford, Param Kahlon, Kishan Chetan and Jeff York, among many others giving us loads of information on everything from the status (with demos) of the current specific products ranging from the sales, customer service, field service, talent, and new marketing applications to discussions about their pricing, the changes in their partner model, and the overall status of Business Applications within the confines of the greater Microsoft vision and strategy (I think they did the latter. That may be a bit of wishful thinking, though. Minimally, they provided the pieces and I mentally glued them together).

They held a lively customer panel with two of their customer companies -- two who in fact, couldn't be more disparate -- which of course goes to Dynamics product versatility, which I presume was one of the points. They brought in Chip Suttles who is the VP of IT for the Seattle Seahawks (sports is an industry that Microsoft Dynamics CRM dominates) and a trio of customers from MacDonald-Miller, a company that does mechanical contracting and facilities management.

I'm not going to dwell on the details of the event, since I reserve detailed event discussions for my user conference focused Event Scorecard which will be back this year (starting with Infor's Innovation Summit on March 19).

But what I will say is that Clare Henry who has overall responsibility as the GM of analyst relations at Microsoft, Fred Pullen, Umran Hassan, and The WE team (Waggoner Edstrom team) did a terrific job of managing the event, keeping the discussions lively, handling the analyst/whoever-was-on-stage interactions really well and managing time without getting anyone even vaguely upset, much less angry -- and minus a couple of things, (see above on the CSR omission) managed to provide the right content in the right mix to satisfy the usually insatiable hunger of a group of analysts who had disparate coverage areas.

Plus making sure that there were one on one meetings with executives and the analysts had a good time. A serious kudos and thank you to them for the quality and obvious effort that went into this.

But, sayeth I, that is not all.

Positioning and messaging

For a few years now, Microsoft has been ahead of the pack -- one of the first in fact -- in their messaging around customer engagement. They no longer call their Sales, Service, Marketing pillars CRM per se but instead complete the offering with the social integrations, analytics, mobile apps etc and call the whole thing Intelligent Customer Engagement. (ICE).

I've always applauded their getting ahead of the market -- they and SAP were the first two to broaden beyond CRM with their messaging -- and they managed to avoid the stupid "CRM is dead" declaration that many companies go with.

Instead they wisely -- intelligently in fact -- broadened their messaging and positioning to something that was more strategic and encompassing and despite some thinness here and there positioned their applications where they needed to be positioned.

When we got to the analyst forum, a new message was coincident with intelligent customer engagement. In other words, didn't replace it, but sat along side it or encompassed it. The theme was "digital feedback loop," which looks something like this.

dfl-microsoft.jpg

The Digital Feedback Loop

Courtesy of Microsoft


What of course makes it work is the front office, back office, underlying platform nature of Microsoft's Dynamics offerings in combination with PowerBI etc. So it kind of works though I have to say, I'm not as enamored of it as I am of ICE -- but then I would be more excited about ICE, given my area of coverage wouldn't I?

The products/platform

I'm not going to dwell on the details here because I don't need to. I'm going to point out what I found either interesting, surprising and outstanding.

Sales and Service: Mature, Solid, Trustworthy... Except for Sales Navigator

First, a brief comment on sales and service, two of the three pillar applications/solutions of CRM. Microsoft, under now Param Kahlon's engineering leadership. They are solid. They have what they need to keep a contemporary CRM sales and customer service organization functioning operationally, have communications tools built in and have the services that have to be there to make sure that the solutions continue to evolve with the company that acquired them. Period.

They are reasonably priced. The integration with Parature at the core of service seems to be completed and is now scalable which is honestly a big deal since Parature appealed to the lower end up to the middle of the midmarket and didn't scale on its own. Microsoft has taken care of scalability. Plus, despite all the pricing entanglement, they are reasonably priced and more than competitively so.

This is one of those instances where the good speaks for itself really. I'm just letting you know. Solid. Mature. Already battling in the marketplace. Is it perfect? No. Nothing is. But that's not what this post is about. You want a product analysis? Talk to me offline.

However, there is one thing that no matter how hard I try, I don't understand. Microsoft has a highly competent valuable Sales Force Automation application. No question. Yet, they spend an inordinate amount of time on talking up and selling Sales Navigator, which I have considered to be a TERRIBLE application since it was first developed and was the cause of one of the worst things that the then independent LinkedIn did -- closing the API which had been "almost" open up until that time.

Yet Microsoft with the most amazing asset LinkedIn persists in selling that ridiculous tool. The only value Sales Navigator has is as a faux middleware to get access to the LinkedIn data. It is nowhere nearly as good as Microsoft's native tool. Yet their offering is actually bundle selling Microsoft Sales 365 and Sales Navigator together, which unless Sales Navigator is the only access point to the LinkedIn data, makes no sense at all. Why sell two competing tools?

If Sales Navigator is only really there for access to LinkedIn data build the necessary connectors and other pieces and sell the connection. Sunset Sales Navigator as a sales tool. Microsoft's native sales offering competes well with anything on the market. No reason to create market confusion with something that doesn't hold a candle to it.

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Marketing

Kishan Chetan unveiled a new marketing automation application that, if I were assessing the target market from its current state of readiness -- meaning its still early in inception though not in conception as I found out, its upper end small business and lower end midmarket. That isn't the endgame, but what I think at this point the functionality and feature set can service most likely.

I have to admit I was somewhat surprised by the existence of this -- though not surprised that Microsoft wanted to do something about the hole they had had in marketing at all but the enterprise B2C space (more on that in a second). What I was THRILLED to find out is that Marketing Pilot had been sunset and that Kishan, who is a super talented leader and engineer and his team were building something from scratch.

What made it more interesting is that Microsoft has invested an enormous amount of time, money, effort, and public relations into what is arguably their deepest partnership, certainly the most interlocked I have ever seen -- their relationship with Adobe and their positioning of the Adobe Digital Marketing Suite as the cloud (Azure of course) based enterprise especially B2C marketing automation offering.

The sales teams are educated in how to sell it and told what their spiffs are, the architecture is intertwined at (at least metaphorically) the level of an object. Adobe made sure that Dave Welch who is in charge of the Microsoft relationship at Adobe attended not just the Business Forward Event in Chicago but the analyst forum I'm talking about here and sent their topnotch AR person, Laura Irwin to the event too.

To add to that, if I'm right about the marketing solutions -- meaning Dynamics Marketing 365 and Adobe, there are holes in the market that are usually filled by partners like Click Dimensions -- e.g. the middle of the midmarket to the upper end of the midmarket (even the lower end of the enterprise).

So there are, in effect, three areas that need messaging support, clear positioning so they don't step on each other's feet, and also go to market kind of inter-organizational efforts. That way Microsoft can cover the gamut of the market when it comes to marketing automation and have a narrative that explains why there are three different "groupings" that are doing so.

Otherwise, despite the fact, this is an entirely workable possibility, it might and probably will create some market confusion. But its one of those nice to have problems -- three more than capable marketing solutions that each cover a distinct piece of a market.

I probably shouldn't have been surprised since last August, Microsoft actually announced all of this -- sunsetting of Marketing Pilot, new marketing solution, and the elevation of the partnership here. I guess I missed that. My bad. But, regardless, all these surprises are good for Microsoft (and Adobe) over the long run, though will take some time to untangle when it comes to how multiple marketing solutions are presented to the market place.

PowerApps Citizen Development

For those of you who know me, you will know that not only am I one of the most insane Yankees fans you ever will meet, but I'm a strong proponent of ecosystems and platforms as the way that technology companies need to think, act, build, and focus if they are to be truly successful in the 21st century business environment.

With caveats, when it came to business applications Microsoft had for the most part (a bit on that shortly) had the ecosystems part down -- meaning they looked to see what a customer needed from them end to end, understood what they could provide, what they could build and thus provide in the future and what they needed partners to provide since they didn't have it to offer nor would they.

But I was always concerned about the platform side of the equation. I wasn't that impressed with XRM which to me was more of a concept than it was a legitimate platform. Even with Azure as the backbone -- which both greatly enhanced their existing platform and magnified the necessity for building it out even more -- I wasn't entirely sold.

But I had the opportunity to see the PowerApps platform/authoring tools and was actually blown away by what I saw. This was citizen coding. That means, as Charles Lamanna, Microsoft PowerApps GM showed us so effectively, that anyone including me could build applications that were accessing data sources from hundreds of options in a few minutes that were both usable on the desktop and even more importantly in multiple mobile environments.

I'm not going to get that descriptive. Once again Vinnie Mirchandani does an excellent job of doing that here on his always fascinating deal architect blog. His enthusiasm for what he saw echoes mine. Here's my tweet:

"PG Note: Watching a demo of PowerApps -- building an app from scratch. I have to say this is one of the most impressive demos I've seen in a long time. This tool is amazing. Easy to use, visually appealing, navigation/app creation nearly intuitive."

I am very much convinced that this is the best toolset for creating applications on the fly since the days of the underestimated Lotus Notes and that this is what will put the business applications platform on the map for Microsoft so that Ecosystems and Platforms isn't just marketing fluff but (with work yet to go) what they actually can provide to customers and potential customers. It is a hugely important piece placed in the puzzle.

Opening the Ecosystem, Closing the Gaps

A few months ago, I would not have said what I'm about to say. If I extrapolate from all that I've referenced in this post and other facets of what I saw and heard at the Analyst Forum when it comes from the "Greater Metropolitan Microsoft Ecosystem" (which includes Azure, Office 365 and even Windows, in addition to business apps), I would venture to say that Microsoft is putting together most of what it needs to successfully build on their vision.

What hasn't been a question was Microsoft had transitioned to a cloud company. You could see that in the simplest way by watching the transition of their customer focused commercials from an emphasis on the business apps to an emphasis on the "Microsoft Cloud." (see this Real Madrid commercial which is easily my favorite. I love the fan scenes in this).

Rock star analyst/influencer, Constellation Research CEO and great friend, Ray Wang says in his piece on the Analyst Forum, "In fact, Microsoft sees the business applications group as a critical pillar in helping organizations with their digital transformation efforts."

Where no more than three months ago, I was questioning the commitment of Microsoft to its business applications practice, I would absolutely endorse what Ray says here. As far as I'm concerned Microsoft is doubling down on business applications because they recognize it as an essential piece to the successful execution of their vision to be the mission critical centerpiece for 21st century business infrastructure.

It probably pays to understand the biggest pieces of this game plan. Azure as the core cloud infrastructure both host and development platform for business is the wrapper for it all. While AWS may have greater revenue and will do so for a long time to come, when it comes to the enterprise Azure's prospects are superior. According to literally every study I've ever seen on what IaaS platform is trusted most by the enterprise, Azure has been the winner.

Don't get me wrong. I don't pretend to have seen every single one -- I've probably seen about five or six all in all and there may be several out there that say AWS is the trusted one but I have yet to run across one that does and even if I did, the signal volume, the level of conversations and trust in Azure is great enough to generate the results that I have seen multiple times -- and that tells you a lot about the level of trust in Azure.

The layer encircling Azure is Office 365, but the new completely rethought, reorganized and re-engineered Office 365, which has gone from a productivity suite to what is now a unified communications hub. Don't get me wrong. It still does the productivity "things" that it always did -- Word, Excel, and PowerPoint are tools of choice when it comes to creating documents, spreadsheets and presentations.

But the core of Office 365 is a combination of its productivity tools, the embedded communications tools like Skype etc. and the interconnections and integration of Dynamics 365 that was recently announced so that you have a uniquely connected technology matrix that uses Azure as its overarching and underlying infrastructure, Office 365 as its central communications station and business applications as the operational core -- all in the service of achieving their vision.

That said, they are missing one major piece and they are missing the boat with another that keeps their vision from attainment sooner than later, to say it rather politely.

The missing piece? Ecommerce. The "missing the boat" piece -- customer journey orchestration.

Ecommerce

Let's start with ecommerce. Before SAP acquired Hybris in 2013 (and, in 2016, Salesforce acquired Demandware), it was easy to make the "we don't need ecommerce" competitive case since the only one of the Big 4 with ecommerce was Oracle who had acquired an on-premise (mostly) ATG back in 2010 and hadn't really done much with it -- at least done much that was apparent.

But things changed in the world and customer engagement starting in 2014 if I had to pick a time, became a C-suite discussion and created enough interest in the practitioner universe to start thousands of companies on the path to engagement strategies and programs which, they hoped would lead to overall fantastic customer experience -- meaning that customers would feel great about the companies that they were engaging with due to the customers' interactions being able to meet the demands of the customers be they utilitarian or something more -- over time.

Ecommerce because customer interaction is the core of its transactional being, became essential to that formulation. All of this led a number of technology companies to both reposition, as Microsoft did, from CRM to customer engagement or Marketo from Revenue Performance Management to Engagement Marketing.

But one of the things about focusing around engagement as Microsoft does with their messaging for Dynamics as Intelligent Customer Engagement -- your product/solution/services/platform have to reflect the messaging -- meaning the component parts have to be there.

Thus, the repositioning post Hybris acquisition by SAP around customer engagement and commerce. There were some lame linear attempts by both SAP and Salesforce to try to position ecommerce as the "fourth pillar" of CRM but neither of them could really show that they had a single piece of thought leadership or collateral pre-ecommerce vendor acquisition that said that, so it died quickly when it was called out.

With the growth of customer engagement as a legitimate candidate for strategic consideration and efforts by companies of all sizes and sorts, CRM has a position -- as the operational core of a customer engagement focused business. Ecommerce has a position -- as the transactional core of a customer engagement focused business. Both necessary, but different. Not a CRM fourth pillar and no need other than self-serving to call it that.

The only player of the Big Four without it is Microsoft. For competitive purposes, it's important that they consider how to remedy that.

The problem seemed to be that they lacked options that would compete with the enterprise grade players -- all of whom were acquired. When analysts discussed who Microsoft could acquire (and believe me, we had this particular discussion -- many that I know of having been part of them and I'm sure a myriad of others that I didn't know), the names Shopify and Magento didn't exactly thrill. Not that they are bad, but they don't really scale at the level that Microsoft needs.

Without any endorsement whatsoever, I did find one that on the surface of it, makes some sense to me. That's Episerver (aka Epi) -- a Microsoft partner that is a huge Azure user and has a more than capable feature function list of ecommerce functions. It is also strongly vested in the Microsoft ecosystem, though not solely. It also scales to the upper end of the midmarket and the lower end of the enterprise (from what I was told by a person I completely trust at the company) which is good place to start to scale ecommerce.

That said, I don't endorse it by any means at this juncture, because I haven't seen the actual solution in production and don't have much more than an initial handle on the company. While what I have learned is solid and trustworthy, it falls well short of my standard due diligence.

I'm bringing them up as an ecommerce option for Microsoft heretofore undiscovered by analysts like me. In that "me" I mean also anyone else I've had Microsoft ecommerce options discussions with, none of whom has ever mentioned them. At least they are worth investigating if not by me (though I will) then by Microsoft at a lot deeper a level than they have.

Customer Journey Orchestration

This may be ironic more than anything else. For the last three or four years, Microsoft has had a go to market relationship with Thunderhead, a company (to be forthcoming) that I have been an adviser to for even longer than that. In fact, I introduced them to Microsoft back when Bob Stutz and Jujhar Singh were doing their usual great work at Microsoft. The specialty of Thunderhead is customer journey orchestration.

Microsoft and Thunderhead closed several significant deals jointly and they were marquee deals -- important enough for Microsoft to use them in the past as significant case studies -- though (another thing that Microsoft needs to fix generally) without Thunderhead attribution. Park that thought for a minute.

If you are claiming Intelligent Customer Engagement (ICE, ICE baby) and on an even bigger scale, Digital Feedback Loop as the messaging and positioning of Business Applications, customer journey orchestration technology is ESSENTIAL for meeting the business requirements that are suggested by those two "phrases." ESSENTIAL.

Customer engagement is DRIVEN by where you meet the customer and then your ability to not only identify the choices the customer is making at that location but your ability to give them the appropriate choices they need to make decisions on how they want to deal with your company.

Being able to track the customer's journey in real time and seeing what they are doing at the level of one customer up to millions of customers (digital and physical feedback) and being able to then communicate the options that the business wants to provide based on their feedback (customer engagement) makes customer journey orchestration a must-have.

In the course of the analyst forum, Microsoft didn't indicate that they were doing anything in that realm. They already have the agreement in place with Thunderhead. Like ecommerce, there is no need to build the solution. In this case, just take advantage of what has already been signed, sealed and delivered.

If not, then find a way to incorporate customer journey orchestration from somewhere into the offering. Its that important at this juncture. Five years ago, nice to have. This year and going forward for a while, need to have.

The Rest of the Mischegas

For those of you not familiar with Yiddish, mischegas means craziness. I use it sort of affectionately here to describe the hodgepodge remainder of things I want to cover quickly to get to a conclusion.

Briefly each:

Partners: I heard about the ISVs a LOT. While I applaud what James Phillips said about how they are educating partners: "We are trying to coach our partners to not sell in silos. Go from let us talk to you about our products to let us talk to you about those things that will help your business transform;" I didn't hear anything about strategic ecosystem go to market partners (beyond Adobe of course) or the systems integrators.

It was heavily ISV focused to the point of obscuring all else. I did like that they have merged the horizontal and vertical partner organizations into a single organization. AND that they are doing some great work together with their ISVs. Their partner case studies were very good and proved that point. Plus, I acknowledge that there is only so much you can do in 20-30 minutes as part of two days.

That said, if ecosystems truly matter to Microsoft, they need to make that clear everywhere in everything they do -- especially to analysts -- which means cover the full gamut of partners and the strategy behind them.

Pricing: One thing I will say, the actual prices of Microsoft Business Applications are very competitive --- in fact very good for what you get. However, too many options, bundles, mixes, mashups. Simplification would be good, because the prices themselves are all ready very good.

Finally: When I first left the analyst forum and headed home, I characterized it as a course correction -- meaning Microsoft had publicly gotten itself back on the radar and more in the public eye of the analysts once again.

I've rethought that a bit. They've done a lot more than just course correct -- though they did do that. Given how much I saw that they've managed to do over the last few months with the platform and the applications and the way that they've defined their approach, products, leadership team, messaging etc going forward, this is more than a course correction.

This reboot as they called it (Windows veterans one and all) is a leap forward that propels Microsoft back onto the stage. What they showed us at the analyst forum was a well thought out, scalable, somewhat integrated (marketing and a couple of other things not so much yet) set of applications for the front office, the back office, along with systems of record, engagement and "systems of intelligence" (I use the term under protest).

This was all in combination with their fantastic apps development platform which can handle deep customization needs and create highly flexible apps -- and do it enjoyably and with some real ease and elegance. Additionally, Dynamics 365 is largely integrated now with Office 365, something needed for the achievement of the grander vision. And, finally they had a game plan and at least what I would call cohesive messaging for the apps.

But they still have things to do. If they:

1. Fill the two gaps within their business applications platforms and solutions, they will be incredibly well positioned to take the battle competitively and for the completion of their vision to a new level. But that's up to them, not me.

2. Develop an overarching corporate narrative that explains (obviously among other things) where Microsoft's view of business applications fits in. But that's up to them not me.

3. Next time they speak to a larger group of analysts, make sure that they cover what they covered already, but thrown what they are doing to make this a better planet in whatever way that is. I know they are doing a lot. But the analysts must hear it. Up to them, not me.

4. Build out the ecosystem partner plan and the go to market strategies associated with that -- and, to the extent they can, make that public to the partners in a way that the partners get excited, they will assuage partner concerns and align in a more visible way to their ecosystems and platforms thinking. Once again....fill in the not so blank.

All in all, Microsoft is back on the public stage. It would be stupid of me to say they weren't an actor on the stage the last several months, since, after all, whether I know it or any other analyst knows it, they are Microsoft and are going to have some impact whether we are upset with them or not. But let's just say the acting was bad. Not, say, Gigli or The Last Airbender bad, but bad. Now we are talking at least maybe not Black Panther good, but good nonetheless.

I'm glad that I was wrong.