In-Depth

Microsoft's Dynamics Partners Weigh their Cloud Options

While waiting for Microsoft to put ERP cloud offerings online, some Dynamics partners have started padding their portfolios with SaaS-based ERP solutions from other vendors.

• By Barb Levisay
• January 23, 2012

As cloud solutions mature and businesses build their understanding of options, Dynamics VARs are faced with a growing dilemma. How to compete with Software as a Service (SaaS) ERP solutions when there's no clear equivalent for them in the Dynamics product line. In response, an increasing number of Dynamics ERP partners are looking to add competing SaaS ERP packages to their services offerings. Could this be a wakeup call for Microsoft?

"We had clients come to us looking for a cloud solution written in Azure which we couldn't offer through Dynamics," says Ava Idom, president of Dallas-based AIM Solutions Inc. "A hosted solution and cloud solution are not the same. I think we're on a tipping point and people are understanding the cloud. They don't have to put in all the hardware, all they need is a browser."

After Microsoft touted the Windows Azure cloud and how efficient it was going to be, Idom was anxious to deliver those benefits to her clients. Adding the Acumatica SaaS ERP, which was highlighted on the main stage at the Microsoft Worldwide Partner Conference as a Windows Azure solution, to the AIM Solutions product set seemed the natural choice. "Acumatica is built on the Azure platform, which was an important part of our decision," Idom says. "We are Microsoft-born-and-bred here. We're not doing Microsoft a disservice because we're still on the Microsoft platform."

Idom believes that the SaaS market is moving past just the early adopters and into the mainstream. "We have as many leads in the pipeline for Acumatica as we do for Dynamics, and this year we'll implement an equal number of projects for each product," Idom adds.

That's not to say that AIM will abandon the Dynamics on-premises product line. With almost 200 Dynamics clients, AIM's commitment to Dynamics will remain for some time to come.

What Is Microsoft's Message?
Microsoft Dynamics ERP products are currently available through a partner-hosted model, with some partners offering licensing models that mimic SaaS. While arguably a cloud solution for Dynamics ERP, it's not a true SaaS deployment. The next major versions of all four Microsoft Dynamics ERP solutions are promised to be available for cloud-based deployment using the Windows Azure platform.

Microsoft's public communication for customers interested in moving their ERP solutions to the cloud is a little foggy. The Cloud ERP Deployment page on the Microsoft Dynamics ERP main Web site refers to the partner-hosted deployment solution and includes the white paper, "The Future of Software-plus-Services for Microsoft Dynamics ERP." The document is dated Nov. 17, 2009.

An excerpt from the white paper reveals that Microsoft recognized the need for cloud ERP two years ago, "At Microsoft, we believe that acceptance of cloud-based ERP applications will begin to accelerate as the systems become more readily available and as organizations increasingly discover that security is no longer a barrier to the many benefits cloud-delivered ERP systems can provide. We believe that companies will soon begin to understand the efficiencies of cloud-based applications and will begin to demand that ever more robust ERP applications be delivered through the cloud."

With that 2009 forecast, it's not surprising that partners are impatient for Microsoft to deliver on the promise of true SaaS Dynamics ERP soon.

Customers looking for guidance on the Microsoft ERP cloud strategy on the Microsoft Dynamics Marketplace -- the partner profile site -- will be challenged to find many answers there. The Cloud Computing search delivers two results for partner applications, two for professional services and one for company. Not a strong showing for customers who come looking for a cloud ERP solution from Microsoft.

If partners are getting requests from their prospects, it seems likely that Microsoft customers and prospects are searching the Microsoft Dynamics Web sites for guidance. With no more current information on the Microsoft Web site to guide customers interested in a Dynamics SaaS solution, it's not surprising that partners are looking to other vendors to fill the void.

Partners React to Client Needs
Dynamics is the cornerstone of the Washington, D.C.-based Raffa Inc. technology group practice, led by Seth Zarny, a Raffa partner. "As a forward-looking professional consulting firm we always have to be evaluating our offerings and the markets that we're in," Zarny says. "The perception as a gold competent ERP partner is that we have a huge investment in ERP. We need reputable strong products that the vendor will stand behind. Dynamics absolutely fits that bill. We're always going to be supporting and actively promoting Dynamics."

"But, there is room in the market for other options. Adopting a pure SaaS solution is attractive to some smaller percentage of our client base. These solutions are younger than the traditional on-premises solutions and have certain strengths and weaknesses but it seemed appropriate to at least consider and adopt," Zarny says.

After researching its options, Raffa chose to add Intacct to the company's product line. "There was a maturity level that Intacct had achieved that made it worth consideration and that we were willing to adopt after full review. Keeping in line with powerful, dependable functionality, we felt that Intacct had gotten to the point where it had the capabilities that made it an appropriate selection for us to offer to our clients," Zarny says.

Product Diversity and the Dynamics Channel
During the 1990s it was unusual for an accounting systems VAR to represent only one product. Some combination of Macola, Great Plains, Solomon, Platinum, Sage and a few others were supported by each VAR. The intention was to provide the prospect with multiple choices as they were evaluating accounting packages, without forcing them to look to more than one VAR.

That multiple vendor model began to change in the late 1990s with vendor pressure to unload competing ERP products and focus marketing and consulting teams on a single solution. After Microsoft's acquisition of Great Plains/Solomon in 2000 and Axapta/Navision in 2001, Dynamics ERP partners agreed and were ready to embrace the promise of a full Microsoft stack.

In the past, Microsoft has made concerted efforts to deliver solutions to diversify the ERP solutions set for Dynamics partners. In 2002, Microsoft CRM v1.2 was promoted to Dynamics (Microsoft Business Solutions at the time) partners as an extension from the back office to the front, expanding the service footprint into customers. An immature product and a new market approach was challenging for all involved but over time, Dynamics CRM has become a valuable addition for many Dynamics ERP partners.

SharePoint was the next expansion product promoted to Dynamics partners. Because business process re-engineering is a big part of the ERP implementation process, the workflow and document management components of SharePoint seemed a perfect fit. While some partners -- generally larger ones -- have found SharePoint to be a tremendous business builder, the legacy Dynamics mom-and-pop shops don't have the technical resources to support SharePoint.

Now that the cloud has become a driving force in the business solutions marketplace, partners who have been waiting for Microsoft to lead them to the new frontier are getting anxious. They've bet the farm on Microsoft's ability to deliver the solutions that customers want to buy.

What Partners Want
Frederick, Md.-based KTL Solutions Inc.'s leadership team is currently evaluating adding a cloud-based ERP solution to its practice. KTL Solutions CEO Tim Lally says, "We're looking for a true cloud offering and a company that's more innovative."

Gary Francart, director of sales and marketing at KTL, adds, "We need to be able to serve the small business market instead of walking away from those deals. We're getting questions from the five and under customers and they want an ERP solution that fits in their budget. We need a SaaS solution to be competitive in that market."

As they evaluate the options in the SaaS market, Lally is looking primarily at functionality to deliver to the customer. But other factors weigh in on the decision as well. "We're a looking at factors like whether the vendor competes with the channel." Lally says. "Availability of good tech support is huge -- and the ability to customize the solution."

Of the leading ERP SaaS solutions, SAP Business byDesign, Intacct and Acumatica appear to be garnering the most interest from partners. NetSuite is often mentioned as a product that was considered, but discarded early in the process based on perceptions of direct channel conflict.

Brittenford Systems Inc., based in Reston, Va., evaluated multiple solutions -- including NetSuite -- when their customers started requesting a SaaS solution. Brittenford CEO Shereen Mahoney says, "Many of our prospects were interested in a cloud solution. We lost a deal that we'd been working for a long time to Intacct. We needed to provide a solution in addition to the hosted Dynamics solutions as an offering."

As a member of the Dynamics SL advisory board, Mahoney reached out to another member who had added Intacct to their solution set. With the positive feedback from an active partner and the endorsement from the American Institute of CPAs, Brittenford chose to add Intacct as their SaaS ERP solution.

"We're meeting a business need. We needed to offer a cloud solution in addition to hosted Dynamics. Now we offer Dynamics hosted, on-premises and Intacct," Mahoney says.

Brittenford continues to leverage the full Microsoft stack and offer additional services related to Dynamics, whether that's SharePoint or CRM or analytics. Intacct is a further complementary service for their client base. "As a trusted advisor for the client we provide full services for our Dynamics clients and all the systems that they touch," Mahoney says.

From the vendor perspective the Dynamics channel is a great fit. Doug Johnson, vice president of marketing for Bethesda, Md.-based Acumatica is pleased with the interest that Dynamics partners are showing in its product. "Acumatica is a great solution for partners looking to add a Web-based solution to their bag of tricks," Johnson says. "There's some confusion about the about cloud and Web. What customers are looking for is Web-based and not cloud-based."

Johnson says that the overriding theme his company hears from Dynamics partners contacting it about its partner program is that they have a customer who wants a Web-based solution. Because Acumatica is built on the Microsoft .NET Framework and optimized for Microsoft SQL Server, it's easier to support for the Microsoft channel.

Merging SaaS
Adding a new solution to a partner organization with limited resources is not a small undertaking. Consultants must learn functionality and fit of new solutions for specific client requirements, sales teams need to get up to speed and company messaging has to be updated.

In the early stages of adoption, partners are cross-training the consulting teams rather than hiring new solution specialists. The business process and accounting skills that Dynamics ERP consultants already possess can be applied across applications. The SaaS vendors compress training to minimize the interruption in productivity for functional training.

A benefit from SaaS solutions for both the customer and the service partner is the reduction of time that has to be spent on the supporting technology. At AIM Solutions, the company is finding that the ability to focus on function is an advantage. Idom says, "I'm now more of an advisor to the client instead of a fixer to the client. Clients are getting more involved in how their product works because of the economy. They have to make their software work for them because they're not hiring people. And, with the price point so much lower, clients are willing to spend more on services."

As for sales and marketing, partners are rolling the new application offerings into their current efforts as opposed to targeting new markets. Brittenford's Mahoney says, "Our goal has always been to help our customers find the best solution to meet their needs. So, we're marketing to prospects that are looking for a new system and then present them with their options."

That's a strategy that sounds very similar to where partners started in the 1990s.