Microsoft Suddenly Wants To Host Dynamics ERP

Microsoft's Convergence conference is taking place this week in Atlanta, but don't feel bad if you've forgotten all about it. Convergence has been a pretty forgettable event over the last couple of years, with news being relatively light and keynotes a tad on the drab side.

Not this year, though. While your editor is not actually in Atlanta, the peachy state of Georgia is nevertheless on his mind, at least in a virtual sense. And we at RPCU were surprised to hear that Microsoft decided to make a little news down south this year at its annual ERP get-together.

We were really surprised, though, by what the news turned out to be: Microsoft is going to host Dynamics ERP. That shouldn't seem strange, should it, what with Microsoft "all in" for the cloud and all that? It's just another cloud announcement, right? Actually, no -- this is strange.

Here's why: As recently as two years ago, Microsoft officials were telling your editor that Microsoft might just think about hosting Dynamics, oh, maybe half-a-decade down the road, maybe longer. (The exact quote was "five to 10 years," which is tech-industry diplomacy for, "We're really just not planning on doing this, so stop asking.") There was certainly no rush, and there really wasn't even very much interest in getting Dynamics into Microsoft's datacenters and out to customers via the cloud. Partners were hosting the ERP suites without all that much interest from customers, and Microsoft's attitude toward doing its own hosting floated somewhere between being cavalier and being utterly indifferent, borderline contemptuous. That was the party line, anyway. And that was that.

Until it wasn't. In the last two years, something changed -- quickly. Microsoft this week unveiled its vague plans to do its own hosting of the Dynamics suites after all. Steve Ballmer -- who, as far as we can tell, hasn't spoken at Convergence since finishing the show in front of a mostly empty convention hall in San Diego in 2008 -- actually showed up to give part of the keynote in Atlanta. Convergence made news. Convergence was a big deal. Microsoft was giving Dynamics some primetime treatment.

All of that kind of came out of the blue. Unless Microsoft was sandbagging big time -- and over a period of years, given that the whole no-hosting thing was also the company's stance at Convergence back in 2008 -- somebody in Redmond had a change of heart about hosting Dynamics sometime in the last 24 months or so. We're guessing that the conversion happened even more recently than that, probably in the last year. Given the lack of specificity in the announcement itself, this whole idea could be no more than six or eight months old.

So, why? Why now? Why the change of heart? Who knows. Maybe cloud ERP players NetSuite and Plex started bumping Dynamics out of smaller businesses. (Actually, Plex has been doing that for years.) Maybe Oracle, which has also mostly shrugged at a hosted ERP model, or SAP, which totally bombed trying to create one a few years back, has plans of its own brewing. Maybe Dynamics CRM Online -- just released in January -- is taking off like a rocket. Or maybe this is a move tinged with a bit of desperation, possibly even panic. Is Dynamics not raking in the revenue Microsoft expected it to? Are the suites the company bought to create the product line not looking like good investments anymore? We don't know because Microsoft doesn't really break out Dynamics revenue, so we have to engage in a bit of conjecture.

One thing is for certain, though: "Five to 10 years" sure did pass quickly. Microsoft's 180-degree turn on hosted ERP has been swift and stunning, like a teenager hitting puberty. All of a sudden, things that weren't interesting at all not long ago are now really interesting and must be addressed with urgency -- if not with a lot of knowledge of details or specifics of how this sort of thing is supposed to work.

For Microsoft, hosted ERP will probably be a good thing, an attractive option for companies that aren't quite ready to sign on to the full Dynamics experience yet. For hosting partners, Microsoft's move is likely bad news. But for the bulk of Dynamics partners, depending on how Microsoft compensates the channel for bringing in cloud customers and how much customization work there is left to be done in the cloud model, hosted Dynamics could pose an excellent revenue opportunity. If nothing else, it'll raise a few eyebrows, and it managed to get Ballmer back to Convergence and make the show interesting again. So, that's something.

What's your take on Microsoft hosing Dynamics? What do you think caused such a quick turnaround? Send your thoughts to lpender@rcpmag.com.

Posted by Lee Pender on April 12, 2011