Interview - Paul White, Director of Microsoft Dynamics (UK)

10th June 2007

Paul WhiteMicrosoft took the market by storm when it made the decision to enter the business applications space a few years ago. Snapping up some of the most prominent mid-market ERP vendors of the day, Microsoft has continued to build its presence based on its broader technology offerings and a willingness to challenge the way that ERP has developed. In this interview with Paul White, Direct or of Microsoft Dynamics (UK), Gary Simon , FSN\'s managing editor, discusses Microsoft\'s progress, the challenges and surprises it has faced.

Now several years down the line and with the benefit of hindsight, Paul White is pleased that the reasons Microsoft entered the market have come to fruition. "We came into this market for two main reasons. Firstly, we believed that customers were poorly served in terms of business applications, value for money and integration. Secondly, we considered that the market was very fragmented and long overdue for consolidation. In fact one of the problems underlying the market was that vendors lacked scale to make the changes the market needed. The opportunity looked compelling for Microsoft and its customers so we decided to take a position"

"Both reasons have come to pass," says White. "People are seeing the incremental value we can add to business applications through, for example, Office integration and other business oriented technologies and we still have gas in the tank! Secondly, the consolidation we predicted has happened in a big way. When we first reviewed the market there were 87 different vendors and code bases. This has now netted down to 15 of which probably only 5 matter, i.e. Oracle, Microsoft, Sage, Infor and SAP."

According to White there have not been any special challenges in executing on Microsoft's strategy although he acknowledges that the mid-market has special characteristics. "The differences tend to be in the way that mid-market companies want to be served rather than product issues. They don't have the same resources, appetite for risk or ability to invest in IT. The challenge for Microsoft is to deliver through partners in the way that the market wants to be served."

However, arguably one of the more surprising changes over the last few years is that the Microsoft Dynamics business has been increasingly drawn into the higher end of the mid-market, filling the vacuum left by larger and more traditional ERP vendors.

This development is fuelled partly by a drive for standardisation and partly because of the growing importance attached to compliance. "Large companies are increasingly willing to impose global standards for ERP systems in order to unify business processes, reduce compliance risk and the operational costs," says White.

This means that Microsoft can now be seen working on ERP implementations and more testing business transformations with the likes of Accenture and Logica as well as specialists in the traditional mid-market such as Touchstone, Advantage, JMC and TSG. "We are not cookie cutting or proposing that one size fits all," says White. "Our partners can offer a range of solutions but with the benefit that they are packaged so that we are not re-inventing the wheel."

Recognising the special characteristics of the mid-market, Microsoft has deliberately employed management and staff with a relevant background. White thinks this has been key to their success in business applications and notes that much of this 'imported' talent has gone on to make successful careers in other Microsoft divisions.

But without doubt one of the keys to Microsoft's competitive position has been the ability to leverage its formidable technology stack. "We have been able to out-engineer our competitors in terms of integration. The company is ambitious and although we are very large we are good at committing to an investment and driving it very hard," adds White.

"We are not promoting technology for its own sake but the reality is that lots of companies have very old systems which no longer meet their needs. So they solve their problems with a mix of manual processes and Excel only to find that costs start to creep in throughout the business, almost without anyone realising the real cost of transactions. With greater integration we can undo some those costs. It is surprising when one sees just how many times a business 'touches' a customer order – burning cash and damaging customer service on the way."

In recent months Microsoft has started to broaden its footprint in Business Intelligence (BI) through Microsoft PerformancePoint and White sees striking similarities with the ERP market. "It's the same problem all over again. Customers are under-served and the market is extremely fragmented. In reality BI solutions are a commodity in the same way as plumbing. Everyone needs it and customers expect strong reporting and scorecarding on top of their ERP systems and almost every vendor has an offering. SAP, Oracle and ourselves will be the key players but once again integration is the key issue."

One interesting consequence of Microsoft's spread of offerings is that partners are often competitors as well. "We have a collection of components from Vista , and SQL through to SharePoint , Scorecards and Dynamics. Our proposition to the sales channel is that there are compelling reasons to maximise the use of this capability and indeed organisations such as CODA use a lot of our technology. But they have to make an independent choice. Sometimes our partners believe they can get the best solution for a customer by leveraging our technology and on other occasions it's the other way around," says White.

It is an increasingly complex world and systems capability seems to grow daily. However, it's good to hear that one of the main vendors in the space is well grounded in reality. "The old terminology and labels such as CRM, ERP and BI are becoming redundant and being replaced by the term 'business systems'. Customers do not care what the box is called because fundamentally they want something to drive their business forward. Microsoft has put a full suite of solutions together from which customers and our partners can choose," says White.

It all sounds refreshingly simple but if Microsoft really can live up to the promise and provide the full range of capability, simply and easily through well trained partners then an appreciative market will almost certainly queue up to buy the goods.