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Microsoft #WPC 2013: State of the Dynamics Business

#WPC2013:  30,000 ft above the southeastern US heading to WPC 2013, I find myself pondering the state of the Dynamics partner channel ahead of drinking the Kool-Aid of keynotes and executive briefings.  Here are my areas of concerns and my thoughts on same:

Subject Good Bad
Cloud ERP GP and NAV are (allegedly) released in Azure as partner sold product offerings.  Both have had substantial enhancements to produce better cloud deployment. Although MS made a big announcement on this in mid-June, it really is marketing spin since this is just installing the same software onto a persistent Azure virtual machine.  This is really about the same approach as going to Watserv or DataResolutions and buying virtual server space on which to host ERP.  In essence, this is just a deployment option, no different than installing in a hosting center – it is not a true cloud based, multi-tenant ERP product.
Direct Sales MS seems to finally have got the AX and CRM EA pricing model refined and well thought out. MS continues to encroach on high end CRM and AX deals with a stealth direct sales model.  Yeah, I know they say a partner is always involved, but that comments is like one of Justin Bieber’s bed sheet’s – tired, stained and well used.  Between EA sales, Microsoft Consulting involvement in key deals, and comp plan changes rewarding field staff for integrating MS Consulting into a deal, we continue to see MS controlling key large deals.To compound the problem, MS does not have a very good sales force.  So these deals are often being lost to SAP and Oracle because they a) have read the playbook and are becoming more effective at competing against the TCO message and b) they are just better at high level enterprise selling.
Margins MS provided EA margins equivalent to, or close to, on premise margins for a period of time to encourage EA sales.  In addition, they comp’d the local MS sales teams without regard the sale being on-prem or EA.  This removes a big hurdle of AX on the EA. Overall pricing declines and continued pressure on membership costs for MPN are continuing to squeeze partner margins.  Although this doesn’t impact the larger partners, the continued escalation of CRM and AX salaries hits them in a completely different and more drastic way.
Competitive Hiring MS is providing an unprecedented level of assistance to partners in recruiting new professionals (college hires) through Sara Gjerdivig’s FastTrax program for Dynamics AX Many partners still need qualified GP and NAV staff – very few good ones exist on the market.  Everyone competes for the same small pool of senior AX talent continuing a salary escalation war that started immediately post recession.  Microsoft Consulting makes this problem more acute as they competitively recruit the same candidate pools and hire staff away from partners.Before anyone from MS calls bullshit on that, I have two examples from the last 6 months.
Support More resources are available in open forums AX 2012 (RTM and R2) was very bug ridden and overwhelmed the technical support team.  This problem was so massive that MS constantly missed Partner Advantage SLA’s for support response.  Further, the overall changes to support we saw two years ago continue to percolate into crappy systems and bad answers.The move to partner support through MPN remains a cluster fuck of offshore and outsourced crap that delivers no value to the partner.  I’ve had two really awful experiences with that team over certification tracking data being damaged at an organizational level.  They just suck.
Devices and Services What the fuck does this mean? I have no idea what this means to the channel.  My fear is a “app”-ization of Dynamics with a web services interconnected framework so that discrete pieces of the product can be sold independently.  For example, taking AX requisitions and making that Dynamics Requisition Workload on Azure.  I can see where some boundary services (EDI, Reqs, Recruiting, CC Processing, eCommerce) can all be developed this way, but core processes (Revenue Cycle, MRP, Fulfillment) are going to be much more difficult.  ERP is inherently interconnected, highly available and not batch driven in its inter-modular updates – moving to discrete apps with web services would put that at risk.  Further, the continued “Devices and Services” message doesn’t really resonate with ERP and CRM customers so it creates market uncertainty in the CIO and CFO buyers we hold dear.
Partner Concentration The Top 100 partners are still going strong According to Bob Scott’s Insights, Dynamics partners stratify as follows:
Top 6:  Above $40mm
Next 13:  From $20mm to $40mm
Next 22:  From $10mm to $20mm
Remaining 59:  Between $3.9mm and $9.5mm.The majority of the top 19 partners (full disclosure:  I work for number 19) have AX as their primary focus.  The majority of everyone else is NAV, GP and SL.  2 of the Top 5 are accounting firms with a long tradition of technology consulting.

I have to pull the old numbers, but it seems like the Top20 are getting bigger and everyone else is a bit static.

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