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Microsoft to host ERP, so what?

Next week the world will hear more about plans for Microsoft-hosted ERP.

That move has long been weighed and even Microsoft ERP partners who sell and implement Dynamics AX, GP, NAV, or SL ERP products recognize the vendor must offer this choice given that competitors–Oracle, NetSuite, et. al–do so already.

What is surprising to many is that instead of doing a ground-up design of cloud-based ERP, Microsoft is forklifting three  of its four classic client-server-oriented ERP lines to the cloud. (Sorry, Dynamics SL, you’re SL outta luck.)

Once again, Microsoft appears hamstrung by competing jurisdictions and product/service delivery schedules within its own four walls. For example, none of its current hosted products–Microsoft Dynamics CRM Online, Business Productivity Office Suite etc.–run on Azure, the platform Microsoft wants the universe to develop and run  applications on. What’s that thing about eating your own dog food again? of course, those software services were ready before Azure, but Microsoft appears to be recreating the same sort of product interdependencies and bottlenecks in the cloud that hurt it in the on-premises software game. (It is true that Microsoft managed to generate billions of profit despite all those problems, but we’re entering a new era here people!)

Zach Nelson, CEO of ERP rival NetSuite, said Microsoft continues to put lipstick on a chicken. Actually his exact words were: “Hosting a client-server application is a recipe for failure in the cloud. An application must be Web native to deliver the benefits (reduced cost, no version lock, Internet-centricicy, etc.) of the cloud. If this is their approach to cloud-based ERP, I would call it a ‘not at all in’ strategy rather than an ‘all-in’ strategy.”

More objective observers also have a problem with Microsoft ERP’s route to the cloud. Many think it should start over fresh.

“Microsoft should just acquire Acumatica. Honestly, it’s built from the ground up on Azure. They should just say, ‘Hey, we’ll support all the current ERP customers in perpetuity but make a clean break and get someone with the right kind of solution for the future,” said Laurie McCabe, CEO and principal analyst with The SMB Group.

Others  were perplexed by the triple-headed NAV-AX-GP cloud plan, which will be officially unveiled at Convergence 2011 in Atlanta next week.

This strategy is “like racing in the America’s Cup while dragging a parachute,” Pica Communications analyst Paul DeGroot wrote via email. “For evertyhing that the competition comes up with, Microsoft gets to triplicate the effort.”

Before the game plan became clearer, DeGroot it would be shocking if Microsoft kept supporting “multiple overlapping ERP lines” in the cloud. Instead, Microsoft should have picked a winner–which most assumed would be AX–and run with it.

Ray Wang, CEO of Constellation Research, said Microsoft partners have to be ready to move regardless of what the vendor itself does.

The prevailing wisdom holds that the cloud model is here, and VARs/integrators just have to deal with it–even though Wang’s own survey last year of Dynamics customers showed that most intend to stay with on-premises ERP.

Right now with Microsoft ERP, its partners have control and it’s a completely indirect model. When the cloud hits, that changes, Wang said. “Microsoft will become less dependent on the partners and that changes the game. Partners will still drive a lot of sales, partners are the reason many people buy Microsoft,” he wrote in email.

The scary thing for partners is that turning customers over to Microsoft (or any vendor) could amount to ceding the customer relationship.  Said Wang: “By bringing a client to the cloud, will partners kill themselves?” 

For self-preservation, these ERP partners better start building up and polishing their own intellectual property and making it available via the cloud, Wang said.
That way these VARs can market and sell their good stuff to any customer, not just the Microsoft customer, he said.

Let us know what you think about the story; email Barbara Darrow, Senior News Director at [email protected].

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