Strategy

INSIGHTS

Microsoft Convergence

ATLANTA — This might be remembered as the Convergence where Microsoft finally began to converge. More specifically, it is the convergence where accounting and CRM met in the cloud. The big news coming from Convergence is the announcement that Microsoft AX, one of the company’s three ERP systems, is moving to the cloud.

You could look at this as a logical extension of Steve Ballmer’s oft-repeated tag line, “we’re all in,” which he happily reiterated in his Keynote on Monday. I can just imagine how many CRM hearts are beating a bit faster knowing this — but hold on. Just how in is in?

Well, 90 percent of the R&D budget, or about US$8.6 billion going to cloud projects. That’s a lot of development, but it also points out how much work there is to do. This one number shows just how big an effort it is for a legacy company to make the switch.

I don’t know how much was spent in previous years or how much will be spent in the future, either. But I know this is not a one-year effort.

What might Microsoft get for this huge expenditure? Well, maybe not a lot right away. This does not mean that the ERP world is ready to move its applications and data wholesale to the Web.

Cloud Stampede Will Come

Kirill Tatarinov, Microsoft corporate vice president, told me in a breakout session that it’s Microsoft’s belief that we’ll see “mixed workload deployments for ERP with cloud computing — cloud for consulting services but manufacturing in the data center.”

In other words, expect hybrid situations for the foreseeable future. There are different degrees of cloud acceptance and trust, which is why they are supporting mixed deployment models.

This is no different from the strategies being applied by other vendors, and it encapsulates the difficulty of moving ERP to the cloud: Build it and some of them might come, eventually.

Still it’s the right move, and because none of us has a crystal ball worth a darn, it’s hard to see what future events might trigger the stampede to the cloud that ERP vendors need. As a believer in black swans, I know those triggers are out there in the future, and that’s enough.

ERP in the cloud is a good move, and there are enough scenarios involving ERP, analytics, mobility and CRM that point to a future where everything is cloud-based.

It is no surprise, then, that Microsoft’s approach to cloud ERP is similar to its approach to cloud CRM: a single code base with the ability to deploy in multiple ways, including private clouds, conventional hosting, and multitenant clouds. The approach future-proofs organizations that start with on-premises deployments, modify their systems, and later decide to take off for the wild blue.

Microsoft’s Renaissance

What’s interesting to me in all this is what I see as a Microsoft renaissance. After years of bumbling with a patchwork of applications, including a homegrown CRM package that took a long time to gel, Microsoft is beginning to line up its ducks with a consistent strategy for its applications and a vision of a similarly consistent cloud-oriented future.

Historically, Microsoft has had trouble with what G.H.W. Bush called “the vision thing.” Its best ideas have been held in a portfolio of similar ideas that were given almost enough resource to go all the way. The strategy was to deliver a product to market, see if it stuck, and then throw money at it to make it competitive. That approach gave us Windows and Office — but it often failed to produce the next big thing.

The company was not the first into the major innovations of business computing — CRM, social, cloud computing, for starters — and it has played the part of fast follower trying to catch up once a market was defined. That hasn’t worked so well, as companies like Oracle, Salesforce, NetSuite, RightNow, and a host of smaller but very viable companies have built the market.

At the moment, though, Microsoft is touting some impressive numbers, and the company is a player in business applications. According to the keynotes, Microsoft Dynamics has more than 350,000 customers and more than 5 million users — mostly in its ERP products but with a respectable 27,000 CRM customers.

Company representatives were vague about who the customers were, and could not provide much data about largest users or median deployment size, however. On balance, I attended a customer panel session where the customer representatives described how they were using Dynamics.

So, at this moment we have an interesting situation in which Microsoft is making some adroit moves in the marketplace and delivering much of the solution set that its customers will need in the future. Conspicuously absent though, is a coherent idea about marketing.

Wanted: Black Swan

Sales, service and ERP are good stories, but the show floor was almost devoid of marketing partners. I saw Dun & Bradstreet with Customer360 and InsideView, a sales intelligence company, but not much else on the show floor.

D&B and InsideView both started out on Salesforce’s AppExchange and probably get most of their revenue in that channel. Conspicuously absent were the likes of Marketo, Eloqua, Cloud 9 and any social media companies (Radian6, Lithium) that are contributing so much to the marketing and social media boom at Salesforce. Microsoft has not defined how it will incorporate the wisdom-of-crowds strategies either.

I think Microsoft has done a lot to position itself in the cloud, but it has more work to do to focus on marketing and to jump on the social bandwagon. Given Microsoft’s fast-follower approach, it might be a while before the social dust settles enough for it to do more than Twitter and Facebook integration.

Make no mistake about it, though — Microsoft is coming on strong. It’s dedicating significant resources to the cloud, and it’s got at least some of the religion. What it needs now is a good black swan.

Denis Pombriant

Denis Pombriant is the managing principal of the Beagle Research Group, a CRM market research firm and consultancy. Pombriant's research concentrates on evolving product ideas and emerging companies in the sales, marketing and call center disciplines. His research is freely distributed through a blog and Web site. He is the author of Hello, Ladies! Dispatches from the Social CRM Frontier and can be reached at [email protected].

Leave a Comment

Please sign in to post or reply to a comment. New users create a free account.

Related Stories

CRM Buyer Channels