FSN: Microsoft pushes mid-market ERP further into the networked economy

Microsoft pushes mid-market ERP further into the networked economy

20th November 2006
Microsoft made a flurry on announcements earlier this month offering a range of hosted options for its Microsoft Dynamics solutions and pushing the envelope of mid-market ERP more deeply into the networked economy, with eBay and Yahoo integration. Speaking to FSN, Paul White, Head of the Microsoft Dynamics business in the UK , confirmed that the latest developments are a continuation of Microsoft's push on process efficiency and changing business practices.

As part of the package of changes, Microsoft is to offer a hosted subscription model for Microsoft Dynamics GP, Microsoft Dynamics NAV, Microsoft Dynamics SL and Microsoft Dynamics AX. The new licensing model, part of Microsoft's Service Provider License Agreement programme, will enable Microsoft customers to subscribe to a partner-hosted version of Microsoft Dynamics enterprise resource planning (ERP) solutions on a monthly basis, helping reduce deployment time for businesses that need a new solution immediately and manage working capital.

It will be remembered that hosted solutions, so called, “Software as a Service” have been tried before but never really achieved the traction in the market place that software vendors were hoping for. But Paul White believes that conditions are different this time around. He told FSN, “It's a little too early to say whether the interest will come primarily from the SME market or the mid-market, but both have good reasons to consider a hosted solution. Smaller companies need to focus on other matters and don't always have the resources to run an application in house whereas larger companies may be stretched with fast growth, acquisitions and organisational change – so delegating some of the responsibility to a third party may be attractive.”

Gadi Shamia, Senior Vice President Solution Management Small Business Solutions at SAP agrees. He told FSN, “SAP believes that hosted solutions are becoming one of the options customers are seeking. In the future, our mid-market product portfolio will give customers the choice between on-premise, hosted and on-demand deployments. This is in keeping with SAP's overall on-demand strategy, introduced with our CRM offerings and now extended to a broader set of business applications for the midsize enterprises. SAP offers customers the bi-directional ability to migrate from on-demand deployment options to others, including hosted and on-premise implementation.”

White believes that a fundamental difference this time around is the quality of the names behind the solution. “The last big push on hosted solutions was during the dot com era, but many of the companies offering solutions were pretty fluffy and unsubstantial organisations. People will feel more secure with a big brand like Microsoft behind the offerings.”

In practice the hosting will be offered by Microsoft's partners who will be carefully vetted. “The partner is critical to the hosting model because companies will still need hand-holding through the implementation as well as training, support and even vertical market functionality”, says White.

Microsoft already has a number of customers using Dynamics AX on a partially hosted arrangement. White told FSN, “They don't want to take responsibility for operating and maintaining server farms. Where the servers are situated is irrelevant. These customers have purchased the software licences but some may move to a rental style of licence agreement. For smaller businesses it reduces the cost of entry allowing them to take advantage of software that they wouldn't otherwise be able to afford.”

SAP too plans to give mid-market customers a choice of full hosting and hybrid solutions. Gadi Shamia told FSN, “Our customers in the mid-market who are typically using mySAP All-in-One could always choose hosting their solution as an option. In the small space - which we are addressing with SAP Business One - we offer a hybrid solution option that allows customers to work on their CRM data online or using MS-Outlook and work on the logistics and financial data on their premises.”

But it is perhaps the promise of direct integration with Ebay, Yahoo!, Google and Microsoft adCenter that is the most novel and interesting element of Microsoft's announcement. eBay integration, for example, will allow on-premise Microsoft Dynamics AX customers to use eBay as an online sales channel, enabling easy placement of inventory and downloading of financial details for sold items. Over time Microsoft and its partners plan to add additional online processes in other functional areas.

One area of focus for Microsoft Dynamics is analytics, which will benchmark a business' performance against similar companies, enabling them to focus on continuous improvement of business processes.

White told FSN, “Work has already started on benchmarking which will allow companies to compare the cost of their processes on an anonymous basis with their contemporaries. This will enable them to identify best practice processes and to drive down transaction costs.”

The integration with Microsoft adCenter offers fascinating possibilities around improving the effectiveness of advertising campaign. “Suppose you have a pipeline of opportunities in your CRM system and need to mount a campaign to convert them to sales. AdCenter can offer key words for the campaign based on an analysis of your website, track the costs and tell you which leads have been generated from the campaign and calculate a return on investment. Also based on previous campaigns and known metrics it could predict what return you might expect to get on a particular campaign,” added White.

SAP also is extending the reach of its mid-market solutions. Shamia told FSN, “We absolutely believe in extending the functionality of solutions for customers. This is why we are closely working with a network of partners who are developing integrated add-on solutions for SAP Business One to cover specific industry needs or additional functionality. One example would be an interface to eBay. Worldwide our partners developed 300 add-on solutions for SAP Business One. Our development philosophy for SAP Business One is to keep the core product from SAP simple and flexible and provide a platform for our partners on top of which they can build their own solutions.”

Whether hosted ERP solutions take off remains to be seen, but the mounting list of options that Microsoft and SAP are offering in the mid-market is formidable. With the power of the technology stack in its favour Microsoft is clearly in a strong position but SAP is also in the frame. While these two software giants vie for market share the customer is benefiting from a glittering array of possibilities that will help them improve their business fortunes.

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