Renewed confidence at Microsoft Convergence 2012

Microsoft is sounding confident as it continues to deliver on its Dynamics strategy. But making the transformation to cloud has not been so easy.
Written by Dennis Howlett, Contributor

Microsoft kicked off Convergence 2012 with a confident tone. The normally ponderous Kirill Tatarinov, president Microsoft Business Solutions sounded upbeat, using the opportunity to drop every conceivable buzzword and buzz phrase into his address. Some samples:

The emergence of social technology really provides an opportunity for us to essentially move the traditional legacy system of record into the system of engagement...

... We think of social collaboration in context of business, and these are the kind of things that we're focused on, and these are the kind of things that we're delivering...

... Cloud is perhaps one of the most significant, most important opportunities of our lives ...

... we're changing the game in the market of business applications ...

... this update will happen in a non-disruptive fashion ...

You get the picture. The crowd duly applauded on cue and laughed with Tatarinov when a live demo using the Metro interface went pear shaped. But it was in the analyst Q&A that Tatarinov sounded more assured.

Last year I said:

Two hours into Convergence 2011 and I was wondering why I’d come. The keynotes, while beautifully crafted and 100% buzzword compliant, were like one of those Chinese take away meals where you feel stuffed from overindulgence but ultimately unsatisfied.

It wasn’t helped by the fact Kirill Tatarinov, who leads the Dynamics team, got himself in a horrible pickle trying to convince a room full of hard nosed analysts that multi-tenancy doesn’t matter so much and that you can solve many cloud apps scaling issues with hyper virtualization. As I said to one Microsoft exec: “Whatever crack he was on, can I have some please?” It was a bizarre confrontation that left many of us taking sharp intakes of breath at the apparent cluelessness of the man.

Microsoft business transformation and hybrid landscapes

This year, Tatarinov talked candidly about the transformation occurring inside Microsoft. It has taken the company five years to transition off Siebel and onto its own CRM but according to the company the process is complete. "There is no Siebel left at Microsoft." It was the cultural challenge that interested some analysts. A major difficulty in moving to cloud architectures comes from keeping sales people happy working with a business model that is fundamentally different.

While Tatarinov skated around the point, referring to the company's successful transition to agile development - "Two releases a year is a big change from one every three years" - Christian Pedersen, GM Dynamics AX was more forthcoming. He told me the company is working on what is best understood as bundled solutions. This is really an extend and cross sell approach rather than looking for green field opportunities. This allows Microsoft to develop compensation plans that reflect the whole of what is delivered rather than having to focus on a series of single service deals. "Every company has Microsoft Office. Since we've already done some deep integrations [between Office and Dynamics] we are confident that we can offer customers what they need the way they want to consume business applications." This should mean (but has yet to be proven) that Microsoft can offer attractive compensation packages for those managing its larger accounts, typically those generating revenue in the $1-10 billion range.

Microsoft believes the core systems of record will remain on-premise for the foreseeable future. That drives an ongoing revenue stream the company believes is reasonably well protected. But what of the future and these hybrid landscapes? "Internally, we've got something like 290 applications surrounding core HR. Customers are coming to us for things like expense management. We have the same problem so we're productising for the public cloud because that's the way customers want to consume those classes of application," said Pedersen.

This is what Tatarinov referred to as mixed workloads during his keynote:

"But, as it relates to financial workloads, and business planning workloads, and some of the operational management workloads, we see that people want to run some of those workloads in private clouds, others in public cloud, others just in traditional on premises deployments. And that's precisely where we're uniquely positioned to deliver. We deliver cloud on your terms. So, you can take full advantage of elasticity. You can take full advantage of scale."

In a white paper entitled Dynamic Business: from Aspiration to Reality, (PDF download), the company says:

Increasingly, businesses look to evolve their applications into smaller chunks – addressing one operational workload at a time. Smaller chunks mean more rapid return on investment and more precise targeting of IT spend to areas which contain the most important opportunities or challenges for the business. The Gartner Group describes this as a “pace layering strategy,”recognizing that some parts of a business’s application landscape must evolve more quickly than others.

This will resonate well with medium sized businesses that are happy to consider Microsoft as their trusted partner of choice. If Microsoft is successful in executing against this strategy, which will require plenty of help from partners, then it will help solve the looming problem of application sprawl in hybrid environments.

Embracing consumer services

Staying with the keynote. Microsoft demonstrated a consumer application running on a tablet where business data was effectively mashed up with Facebook. The idea was to show how Facebook could be used to deliver offers while the Dynamics system made pairing product suggestions, offered bonus products and the like. It was compelling. However, the one thing that troubles me about this is wondering about the impact of Facebook's tarnished privacy reputation on this style of solution. I raised that with Pedersen: "You're asking a very good question," code for "We don't have a good answer right now."

He then went on to explain that the bigger problem is that businesses using these style of service don't have a good way to remove account access. "This is a problem with many of these services. We're going to provide the strong authentication and security available for our solutions to provide the method by which businesses establish these kinds of connection." This makes a lot of sense but as always, the devil will be in the detail. As Gartner analyst Nigel Montgomery said: "Governance is a big issue for these large customers. Microsoft has the technology but it isn't part of Dynamics. We need to see how this will work in practice."

The wrap

What did we have at the end of day one? A wide ranging story covering a lot of ground but which is being communicated in a readily understood way. It is easy to see how the typical medium sized Microsoft customer will not only understand the on-premises, public and private cloud story but will have access to solutions they need, delivered the way they want. The story is backed by steady but slow-ish development progress of which more will be said tomorrow.

On the show floor, it was good to see the company had no difficulty in attracting hundreds of ISVs offering every manner of solution you can imagine across many industries, including a good number showing their cloud duds. Even more gratifying came from seeing each of the booths packed with prospects. That's not bad in an economy that is far from healthy.

There's more detail on cloud topics plus a gut check with customers tomorrow. In the meantime, check out Constellation Research analyst Frank Scavo's take on video at the top of this post. The video also includes images from the show floor.

Image credit: Microsoft

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