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What Recent Acquisitions Signal about Microsoft's ERP Strategy

Microsoft extends Dynamics AX with acquisition of IP from three partners. Would Redmond do the same for NAV, GP and SL?

• By Herb Torrens
• October 23, 2009

An investment to develop vertical solutions in the Dynamics AX product indicates that Microsoft is committed to directing the expansion of that enterprise resource planning (ERP) product, an analyst said -- but don't expect the same hands-on approach for Microsoft's other three ERP lines.

Microsoft in September bolstered Dynamics AX with intellectual property (IP) purchases from three of its partners. The acquisitions include a process-manufacturing solution from Fullscope Inc., a professional service solution from Computer Generated Solutions Inc., and two retail solutions from LS Retail EHF and To-Increase Denmark A/S.

"Like some of its competitors, Microsoft will continue to have multiple ERP product lines, but Dynamics AX is the only one whose scope Microsoft will try to expand," predicts B. Robert Helm, vice president of research at Directions on Microsoft, a Kirkland, Wash.-based research consultancy. "With Dynamics NAV, GP and SL, the company appears ready to let partners lead."

Helm says that he sees Microsoft focusing its Dynamics AX strategy around specific industries in the near future in an effort to provide more vertical solutions for midmarket customers. Dynamics AX is Microsoft's highest-end ERP product, designed for customers with 200 to 7,500 seats, which still puts it on the low end compared to ERP products from Oracle Corp. and SAP AG, Helm notes.

Crispin Read, general manager for Microsoft Dynamics ERP, says Microsoft is committed to all its ERP lines. "We will continue to invest in all four Microsoft Dynamics ERP solutions and intend for each solution to grow and gain a competitive advantage in their respective markets," he explains.

Right now, Dynamics AX is getting most of the updates from Microsoft, according to Helm. It's also being sold worldwide, along with Microsoft Dynamics NAV, he adds.

In a high-end (for Microsoft) product like Dynamics AX, partners will continue to be key to the effort, according to analysts.

R "Ray" Wang, partner for enterprise strategy at Altimeter Group, says the IP acquisitions should help other partners. "By acquiring the IP for existing proven solutions, Microsoft has minimized the time-to-market for more robust modules within their existing AX suite," Wang says.

Helm notes that a simple metric will reveal the worth of the acquisitions: "By the time the next version of Dynamics AX ships late next year, Microsoft should be able to point to a lineup of partners with specific solutions on top of the Dynamics AX industry pieces, targeting even more specific niches."