Kevin Parker: Microsoft Dynamics faces up to the realities of manufacturing

For anyone who follows the enterprise resources planning (ERP) market, it's interesting in the extreme to see Microsoft's take on these large business systems—both how they're used and how they're bought and sold.

Microsoft entered the market some years ago with its direct or indirect acquisitions of Great Plains, Axapta, Navision, and Solomon, amidst rapid consolidation of ERP providers. In the aftermath, Microsoft slowly and steadily refined its approach. At end of day, the issue is how to lower ERP acquisition, implementation, and management costs so that a mass market arises.

But Microsoft is today acknowledging that for a manufacturing enterprise beyond a certain size and scale it might need to modify its partner-based approach, as was evident at this year's recent Microsoft Dynamics Convergence users conference.

At last year's Convergence, Bill Gates himself spoke on the subject of enterprise systems. He said the Microsoft Dynamics enterprise systems were influencing next steps for the Office system. Moreover, in a lab setting at the event, the high-tech equivalent of a time-motion study—particular to specific enterprise work roles—was being run.

The fruits of those efforts were on display at this year's Convergence, where the Microsoft Dynamics Client for Office and SharePoint was introduced. By means of such a client, access to the enterprise system is granted to a wider range of employees. The same idea is behind Duet, the SAP-Microsoft collaboration. Adobe Systems allows access to enterprise information by means of PDF-based forms. And other ERP vendors that make wide use of Microsoft technology while competing against Microsoft Dynamics will furnish similar capabilities. “That will be good for Office,” said one Microsoft executive.

Microsoft Dynamics Client for Microsoft Office and SharePoint is a low-cost package that includes up to 12 self-service applications built in Office and SharePoint, as well as an enterprise license for Microsoft Office SharePoint Server 2007 and access rights to all information and processes managed by a Microsoft Dynamics ERP system.

Microsoft has addressed the high costs associated with direct sales of ERP systems through sales channels of independent software vendors (ISV), integrators, and resellers. As with other Microsoft products, the company has encouraged ISVs to extend system functionality via their own products that address niche market needs. It says it has more than 3,000 such partners. But apparently it's finding that there are limits to this approach.

The company has inaugurated the Microsoft Dynamics Industry Solutions—a “deeper OEM program” and revamped its certification process. For the most part, small business users of Dynamics GP don't have a problem buying functionality for something like custom reports from an ISV. But a midsize manufacturer resident on Dynamics AX is much less likely to risk adding extensive vertical functionality for, say, process manufacturing, without further assurances of on-going viability.

Microsoft Dynamics will bring these type industry solutions into its own price list, assume control of development efforts, and synchronize upgrade releases. At the event, Microsoft announced acquisition of the code for the lean enterprise solution from eBECS Ltd. Other announcements, across a number of key verticals, including manufacturing, will follow.