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Microsoft rolls out cloud ERP roadmap at Convergence

With the next major release of each of its ERP products, Microsoft will offer a cloud-based option, the company announced today.

ATLANTA -- Ten years after buying its way into the ERP market with the acquisition of Great Plains, Microsoft today sketched a rough outline of its vision for the future of ERP. It says it will move decisively to the cloud and plans to release several Microsoft cloud ERP applications.

Speaking at the Convergence conference being held here this week, Microsoft CEO Steve Ballmer and Kirill Tatarinov, corporate vice president of Microsoft Business Solutions, said that the company will offer a cloud version of each of its ERP products with the next major release of each. First up is Dynamics NAV. Scheduled for 2012, it will also be the first to move as a complete offering on Microsoft SQL Azure, the company's cloud database platform. 

“It is hugely important for us to take the entire ERP ecosystem into the cloud,” Tatarinov said.

“No one else in the industry has taken this approach. The entire ecosystem, all those people who make those customizations and changes will work in the cloud when Microsoft Dynamics ERP is available in the cloud.”

Microsoft has plenty of experience with cloud-based applications. Its Dynamics CRM Online, a Software as a Service (SaaS) version of its CRM application, went into general availability today and has already seen 40,000 trials. For years, Microsoft has offered Dynamics CRM via SaaS deployment through its partners. Customers are split roughly fifty-fifty between cloud-based and premises-based CRM, according to Tatarinov.

“ERP is somewhat different," he said. “For most serious organizations, ERP is a mission-critical workload. Today, not many of them are ready or even interested in that mission-critical workload or mission-critical data in the cloud. What they want to hear is the things they do today will one day be available in the cloud, and it will be done in a way that doesn’t disrupt them, force them to change the system or the model that they’re using today.”

Will Microsoft cloud ERP be worth the wait?

Microsoft’s approach to cloud applications took a significant amount of time to develop but could pay off, according to some analysts.

“I think they’re moving with an appropriate cautiousness,” said Joshua Greenbaum, principal analyst with Berkeley, Calif.-based Enterprise Applications Consulting. “But I think that’s more about channel disruption than customer demand.”

Buyers are ready now for cloud ERP, Greenbaum said. “NetSuite and Business ByDesign has showed there is demand.”

But will Microsoft’s announcement change anyone's ERP buying decisions?

“Potentially; the question is how would the hybridization work,” Greenbaum said. “It’s an interesting idea to launch NAV today and then move to the cloud, but as an adviser to clients, I wouldn’t tell them to count on that.”

Among Microsoft’s competitors, SAP has had its own issues with cloud-based ERP running into delays and organizational challenges. SAP’s Business ByDesign application has been on the market for more than a year, and NetSuite’s ERP application has been around even longer. Yet both adhere to a strictly SaaS-based cloud model and are not available on-premises.

Tatarinov predicts companies will want a blend of ERP environments, moving some workloads to the cloud and keeping other areas, like tax data or core financials, on-premises.

Microsoft will offer cloud ERP on a subscription basis, and it will be multitenant, Tatarinov said, though he contended that customers care not about back-end architecture, but cost. He suggested advances in virtual machines could make arguments against multitenancy moot.

“There’s a race between virtualization and hypervisors, and plain multitenancy that creates an extra level of technology above the application,” he said. “They’re coming together rapidly as virtual machines come together. Multitenancy is still interesting but not as interesting as it was five years ago.”

Cloud ERP a mixed bag for some

Certainly for some customers, the cloud can wait. At the conference, Ballmer addressed Microsoft’s efforts to make ERP simpler with Dynamics AX 2012, which was released today, and integrations with Office 360 and other areas such as Microsoft SQL Server, Windows Mobile and even its consumer device businesses.

“We’re making ERP for everyone,” he said. “It looks like and works with Office. It’s tailored for individual roles in your company. It makes it simpler to model the organization.”

For Dean Doige, director of information services with Edmonton, Alberta-based Clark Builders, this simpler style of ERP rang true. Doige is attending Convergence to help determine whether his company will move off a legacy green-screen application.

“I liked [Ballmer's] point about a different look at ERP because I agree with him there," Doige said. "Sharepoint, CRM--even Exchange and Link--are all coming together. Our users would just melt [over a simpler, friendlier interface].”

Yet, a cloud-based implementation would be something for the distant future.

“A lot of our problem is we’re Canadian-based [so] there’s privacy issues, Patriot Act issues,” he said.

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