Microsoft expands Dynamics - the elephant grows

(By Philip Carnelley, 24 Sep 09, 18:30) Microsoft has moved to extend its Dynamics AX product by buying the rights to four different packages developed by its partners in the US and Europe – in process manufacturing, professional services and retail. (For details, see here). The products, which already run on the Dynamics platform, will now be offered by Microsoft itself. The new functionality allows more industry-specific solutions to be offered, for instance store management, point of sale and merchandising capability in the retail sector.

Microsoft has multiple offerings (four ERPs and a CRM). It appears to be taking the view that AX is the product that it must extend the most – dare we say, the most strategic – while allowing partners to take more of the strain with the other products aimed at smaller organisations. Microsoft’s partners are an essential part of its business model for Dynamics: see Microsoft aims for 1m partners. So it has to tread a fine line between allowing partners space to develop competitive and innovative extensions to the core products, while ensuring the core is competitive against specialists in one or more vertical sectors. It will perhaps have upset the plans one or more of its partners with this move – those who offer competing functionality to the packages Microsoft is now offering. But in the interests of the whole ecosystem, not just its own self-interest, it must keep improving and developing the offering.

Partnering with Microsoft can be a very sound business move, leveraging those huge software investments. But you always have to be prepared to see it extend its own domain. The trick for partners, for example K3 Business Technology, is to leverage Microsoft’s own products but to continue to provide value-add around that core. As the core expands, so the value-added part must change. Many years ago a Microsoft partner told me: “It’s like being in bed with an elephant. It’s OK until it decides to roll over!”