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Microsoft GP 2010 to revive midmarket ERP push

Microsft Dynamics GP 2010 launch at Convergence 2010 will signal renewed assault on core midmarket ERP.

Microsoft hopes to jumpstart its midmarket ERP franchise with the launch of Dynamics GP 2010 later this month.

The new enterprise resource planning product will see its national debut at the Microsoft Convergence 2010 Conference kicking off April 24 in Atlanta.

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Most of the improvements are better tie-ins to the rest of Microsoft's latest gear. GP 2010 will, for example, work well with Office 2010 and Microsoft's unified communications. It will also offer role-based key performance indicators (KPIs) so that a given user can get statistics that make sense to him or her versus another user. The Office integration means that accountants, order processors and other ERP users can use Word to create invoices, purchase orders and quotes.

None of this is particularly surprising. Microsoft rolls out new versions of each of its four ERP lines every two years or so and telegraphs most improvements well in advance. What is new is that Dynamics GP 2010 gives the company and its 10,000 Microsoft Business Solutions (MBS) partners around the world something new to offer core midmarket companies (with 50 to 250 PCs and 100 to 500 employees) at an interesting time. These small and medium-sized businesses (SMBs), slammed by the recession, may be starting to come out of their coma and might be ready to buy.

Microsoft pushes Dynamics GP for construction, distribution, healthcare and some other verticals.

What may shift slightly is that Microsoft will heighten the focus on core midmarket ERP now that it has something new to sell there. For the past year or so, Dynamics AX has taken precedence in the upper midmarket where Microsoft must compete with SAP and Oracle for business. Microsoft defines upper midmarket companies as those with 250 to 500 PCs and 500 to 1,000 employees.

While the higher-end Dynamics AX has taken center stage for the past year or so, Dynamics GP (once known as Great Plains) is Microsoft's flagship ERP offering.

Given that ERP leader SAP will host its annualy Sapphire show next month, it's pretty clear that there will be a lot of noise around ERP in coming months.

Wanted: Bigger MBS partners to compete with SAP/Oracle

Microsoft isn't going to give up on the upper midmarket and is fine-tuning its channel strategy to better compete against the ERP giants. To that end, it is cultivating a small group of elite channel partners to better compete with large SAP and Oracle partners in larger accounts, sources said.

This effort, known by some as Project Tabasco, aims to build very strong, profitable partners to attack upper midmarket accounts and divisions and subsidiaries of enterprise accounts. The suspicion is that the effort might also weed out smaller, low-end partners. Microsoft's broader channel has complained long about how VARs compete with each other for business, driving margins down, and there is concern about similar margin pressures in the smaller authorized channel that is able to sell Dynamics ERP.

"Microsoft looked out at Oracle and SAP channel partners -- and they have some big partners in the $150 million range [and] there's nothing comparable to them in the Microsoft ERP channel," said one source close to the company.

The biggest Microsoft Dynamics ERP partners now are probably Tectura, ePartners and Columbus IT. At least two of those VARs went on big acquisition sprees and have suffered heartburn over the past year digesting those purchases.

ERP, which tends to be a slow, resource-intensive sale, has always been a stretch for Microsoft, which built its empire on very high-volume, low-cost software. And the authorized Dynamics resellers always worry that the company will try to force ERP into that high-volume, broad-distribution mold. So far, that has not happened.

An executive with one of Microsoft's larger ERP partners said he sees strong interest in Dynamics AX in companies that no longer want to pay the full freight of traditional bigger ERP vendors.

"AX projects tend to be longer term and there are a lot of prospects among global organizations looking to reduce what they're spending on financial systems from SAP and Oracle. For those accounts, AX and sometimes [Dynamics] NAV is a good solution for divisional needs," he said.

Altimeter Group analyst Ray Wang also sees evidence that AX is making headway against the other vendors in many accounts, but said that SAP and Oracle remain the leaders at the high end.

"The upper end of the market is pretty saturated with ERP already… for those companies, with 10,000 seats and up, there are only two solutions, SAP and Oracle. But, as we go into the subsidiaries, we see AX, we see Oracle with JD Edwards and we see Infor," Wang said.

Microsoft is expected to talk more about its partner-building push at its annual Worldwide Partner Conference in July.

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