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Microsoft-hosted ERP on tap at Convergence

A new Microsoft-hosted ERP offering will join on-premises and partner-hosted deployment options. Partners say the news will come at next week’s Convergence conference.

Microsoft-hosted ERP is finally on the way.

The news is expected to come at next week’s Microsoft Convergence 2011 conference in Atlanta, according to Microsoft partners that have been briefed. Microsoft-hosted ERP will fill in a remaining check box for the company’s cloud computing initiative, and it will be a big deal to Dynamics partners -- some of which host Microsoft ERP themselves.

Microsoft already offers self-hosted CRM Online, SharePoint, Business Productivity Online Suite (BPOS) and other applications. The company has been struggling to move to this cloud deployment model, which could cannibalize sales of its profitable on-premises applications.

Microsoft Dynamics NAV (aka Navision) will be the first of the three main Microsoft ERP products to get cloudy. It will be followed by Dynamics GP (Great Plains)and then Dynamics AX (Axapta), sources said. Dynamics SL (Solomon) is not slated to move to the new model. Microsoft hopes to have the first hosted ERP service available within a year of Convergence and preferably by the end of 2011, sources said.

CEO Steve Ballmer, who last year famously claimed that, when it comes to the cloud, Microsoft is “all in,” will speak at the show Monday.

Is Microsoft ERP cloud ready?

The hosted-ERP move is both inevitable and controversial. Microsoft execs have discussed hosting ERP for at least five years, putting it off because ERP applications tend to be highly customized. Microsoft did forge ahead with hosted CRM, however.

To assuage partner concerns, Microsoft is expected to say that all of its hosted ERP sales will flow via a Microsoft Dynamics partner and that the company will not sell the service direct.

“But no one knows how long that will last,” said one partner.

Microsoft still faces big hurdles moving ERP to the cloud. For one thing, none of its four ERP products are particularly Web-friendly, let alone cloud-ready in their current incarnations, partners said. For example, none of them offers a Web interface that gives the user an experience on par with that of the regular  fat-client ERP. 

“Most customers have to use terminal services or Citrix to run these programs remotely, and that is not a scalable model,” said one long-time Microsoft Dynamics partner on the West Coast.

The reason NAV won the first-to-market prize is that the current Nav 2009 R2 client is the most cloud-ready ERP version Microsoft has, this partner said.

Hosting hurdles remain

Technology issues and all the “all in” the cloud statements aside, many observers think Microsoft remains ambivalent about the cloud. It still seems “somewhat conflicted about how much it really wants people to be in the cloud versus on premises. This is still an on-premises software company,” said Judith Hurwitz, president of Hurwitz & Associates, a Needham, Mass., IT consultancy.

Microsoft has declined to comment for this article. Others noted that none of Microsoft’s ERP products as yet support  true multi-tenancy. Multi-tenancy, an important consideration for hosted applications, lets the hosting company put multiple instances of an application on shared hardware.

And Microsoft, as usual, has lots of product interdependencies and timeline conflicts to deal with. For one thing, the company would have loved to put all its hosted goodies on its much-hyped Windows Azure cloud development and deployment platform. But Azure was not ready in time for the Dynamics CRM Online launch and will not likely be the deployment vehicle for the first hosted ERP either, sources said.

Paul DeGroot, a longtime Microsoft watcher and principal consultant with Pica Communications LLC, said Microsoft has to tread a fine line with its cloud plans, given the huge army of partners that resell and host its products.

“If you’re a hosting partner, this is a big deal because now the people you are paying are also competing  with you,” DeGroot said. “But I’m reluctant to say this is a bad thing for Microsoft to do because, why shouldn’t they? Oracle does it. NetSuite does it.”

But Oracle has always led with a direct sales push and wasn’t considered particularly partner friendly. And NetSuite started out as a Software as a Service player that later fostered channel relationships.

DeGroot pointed out that news of this hosted ERP push comes almost exactly ten years after Microsoft purchased Great Plains Software and Navision as a way to break into the accounting software and ERP markets.

Let us know what you think about the story; email Barbara Darrow, Senior News Director at, or follow us on twitter.

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