Announcer 1: This is ERP Advisor.
Announcer 2: The ERP Advisor's overview of Microsoft.
Juliette: Hello, everyone. Thank you for joining us for our webinar today. This summer, ERP Advisors Group is spotlighting the most prominent vendors in the ERP software market. Today we will be discussing Microsoft’s offerings and providing key insights into our experience working with them. One of the most well-known software platforms in the market; they were founded in 1975. Shawn, thanks for joining me today. I appreciate it.
Shawn: Good to see you, I'm excited to talk about our vendor.
Juliette: So, with that, can you tell us who is Microsoft?
Shawn: Oh, well.
Juliette: It’s a big question to ask.
Shawn: I know, right. That's like me telling you who somebody really big is, everybody knows Microsoft. So, most people know Microsoft from the office suite, right? You think about Word, you think about Excel or PowerPoint or Outlook, you know Internet Explorer used to be in existence, that was the web browser. So, most people know that side of it.
Then there were also people that were on the systems administration side within larger organizations, even smaller organizations. Of course, the Windows operating base, operating system, which your laptop runs, not ours because we use Macs but anyway, PCs and servers run it. So, in that operating system, especially in the server side, is, of course, focused on business and you have Office which is also sold to businesses. So, Microsoft’s been in the business of B2B software for a very, very, very long time.
But then as Rebekah helped me to find, in the early, early, early 2000s, Microsoft decided to go out and acquire a couple of ERP solutions. So that's how they got into the ERP market. They've been in the ERP market for multiple decades just through acquisition. And of course, when they bought these organizations, they became very solid Microsoft subsidiaries or business units, that then Microsoft has poured tons and tons, billions of dollars of research and development funds into these solutions to make them bigger and better and add new functionality as well as go into the cloud.
So, when we talk about Microsoft at ERP Advisors, that's the conversation we have of course it's around the ERP solutions not the operating system or something else. They've got a ton of other business tools but we're talking in ERP now, that's really when they started was about 2 decades ago.
Juliette: Well, so can you talk to us about what exactly do they sell, and are there certain industries that they focus on? And if so, why those particular industries?
Shawn: Oh boy. So traditionally, Microsoft basically made two major acquisitions, right? They bought Great Plains out of the Midwest part of the US. I think it also already purchased another ERP company called Solomon, and then Microsoft also purchased a company called Nivision out of Scandinavia. So Nivision was very focused on manufacturing and kind of manufacturing global businesses. Whereas Great Plains was very focused on sort of distribution of US-based, North American-based organizations. SL or Solomon was professional services.
Shawn: Now, you have the Great Plains organization, then you had the Nivision organization. Great Plains had Solomon and Great Plains, Nivision had Nivision, and they had a next-generation platform that they were creating called Axapta. That's how you pronounce that, Rebekah. It’s Axapta, with an x, it’s like a z. And so, they bought Nivision also, and so they got Nivision Axapta. Then they kind of bunched all these products together, I think in the twenty 10s, maybe a little earlier than that to create what they called the dynamics of a product category. So that had Dynamics SL, Dynamics GP, Dynamics NAV or NAV, and Dynamics AX. And then also Microsoft had written a platform for customer relationship management, so you also had dynamics CRM.
Shawn: They had these five solutions, and it was a little bit confusing to the market because “oh, I have dynamics,” “ok, well, that is good. But which one?” Because they're all different things, and they were separate codebases, completely and totally separate codebases. And each one was targeted a little bit differently. Solomon was for services like I said, GP was for distribution or general financials; that's where we see it a lot. And then Nivision was smaller manufacturers, and then the Axapta platform was really targeted towards bigger organizations, maybe not quite the Fortune 50 but definitely the larger organizations throughout the world that had more complex requirements and needed a bigger platform to run their business on. And then there was CRM.
So, then Microsoft, as the cloud was really coming into fruition and really forming in over the last 10 years, they did decide “ok we have these legacy solutions.” Anytime a software vendor has a lot of solutions, it's hard to maintain like we've talked about this summer with some of the other vendors. It's like having a bunch of children that you have to feed and put shoes on them and socks and maybe give them a bag.
Shawn: It's kind of the same with the software vendors, where the software solutions that you have to maintain each one of these code bases. So, Microsoft sort of made this strategic decision to say “look, we want to put all the solutions in the cloud.” And as you can imagine, they want to put it in their cloud solution that's called Azure. And we're only going to do 2 solutions going forward, one of them is going to be called, oh boy, it used to be called Finance and Operations. Then the other one was called Business Central, so Microsoft Dynamics 365. So, we added the 365-piece, Business Central, and Finance and Operations.
Now there are other solutions too, like field services and some other stuff and even supply chain management. So sometimes you hear finance and supply chain management, that's the old Axapta Business Central's the old math. So, what do you do if you have GP and SL? Well, you're probably going to move to Business Central, so we should talk about the pricing for these guys for sure. It's quite interesting; we'll get to that later. But that's just an overview, a pretty deep overview of those solutions.
Juliette: Right, so with that Shawn, and the different levels and the different tiers of offerings, what are the most prominent features that Microsoft has to offer?
Shawn: Yeah, so if you think about the Business Central solution, it's really solid in financials and in sort of inventory and kind of a core distributor manufacturer Environment; perfect. If we start adding things like planning or manufacturing execution systems or heavy warehouse management requirements, the interesting thing about Microsoft is its partner channel. There are a lot of partners that are called independent software vendors that have written solutions that work with Business Central. So, you can sort of plug them in, and oftentimes when we do selections, we'll have Business Central and then there will be three or four other solutions that also come in to meet the requirements for a little more advanced manufacturers say. But a core distributor or somebody who wants to use it for financial PCs, is fine.
On the upper end for the Finance and Operations, I'll just call it. The name’s changing; it went from Finance and Operations to Finance and Supply Chain Management, and now I think it's going back to Finance and Operations. Maybe, somebody who listens to this, we got a guy I think in the European area of the world that'll let Rebekah know for sure what we should call it. I want to know, let us know please, really.
Juliette: Right, right, right.
Shawn: But that solution, so this is the bigger one now, it's a little wonky in that its partners have taken that solution and they've built out intellectual property or IP on the F&O platform to target it towards micro verticals. So, we have a construction business right now that we're working with and there's a firm that wrote construction home builder-specific construction functionality on the F&O platform so we're working with them.
We have a client that is in the food ingredients and fragrance industry, and we're working with a Microsoft partner who has batch manufacturing capability, quality management for food and food safety sheets, data sheets, and all the rest of the stuff that goes with food. There's an architecture engineering and professional services partner we've worked with a bunch of times that's built some really nice solutions on the F&O platform for AEC, architecture engineering construction.
So, the BC world is more general and it's more targeted toward a little bit smaller firm. I don't know where I would put the demarcation point; 100 to 200 million under probably more PC. Above that you're going to go with the Finance and Operation based solution, knowing that that solution is more expensive to implement for sure because it's just bigger. And we can again talk more about pricing in a bit, but does that help? Does that segment out there?
Juliette: Yeah, no, it makes perfect sense. And with that, let me ask you, how customizable are the various Microsoft platforms to fit the needs of different industries and different verticals, different businesses, what have you?
Shawn: So, Business Center is pretty configurable for sure, the smaller one. Definitely extendable, you can build out your chart of accounts the way you want it, you can build out your workflows, or approval workflow and AP. You can do the core configuration with a little bit of customization, no problem. And then there are the upgrades that come later, does that kill all your customization? The answer is no. Business Central has been built so that your customizations stay intact, but you better test it still, for sure.
Now F&O, that's another story; that product was really built to be extended. I remember in 2004, we had just started working with Microsoft with the ERP solutions. We worked with GP and SL before Great Plains had Solomon, but we had a client, pretty good size, that we were looking at the old AX with, and as we got to know that product, it was very clear that it was built to be extended or meet the customers business processes.
A lot of out-of-the-box functionality, but the platform was one of the first that was built with this concept of upgrades where Microsoft would upgrade the core technology and it wouldn't touch the customizations that sat around that. I do think Microsoft has kept that that approach intact fairly well. The F&O product is the product that a lot of these partners that are global partners, I mean these are 100 million, $200 million businesses that have written solutions on that F&O platform, that they can then take to those micro vertical industries I told you about earlier.
It's very customizable but the tricky side of that is it's expensive to implement; it just takes more time to implement, but if you know it and it's the right solution, no problem.
Juliette: Then it works. For sure. So, from your experience of working with clients through the years and with Microsoft, why do they tend to win over their competitors?
Shawn: Good question. Microsoft has a unique qualifier in that the company that is looking at the Microsoft ERP is probably already a Microsoft customer.
Juliette: Ok, makes sense?
Shawn: Meaning they've got operating systems from Microsoft Windows, who doesn’t, but they also maybe have power BI. They have some data analytics tools that they’ve built. They've got other Microsoft Technologies and so you can have an IT group that really likes Microsoft. They like that background versus say Oracle or something else that they're not familiar with. So that's one reason why I think Microsoft has a little bit of a leg up over its competition.
I think another reason is they have a huge installation base, I mean if you think about the number of Great Plains, Solomon, NAV, and AX customers I don't know the exact numbers on that, but that's 20, 25, 30,000 businesses, if not more. I mean NAV is very pervasive around the world so there might be 20-30 thousand NAV customers. Then you've got all the GP customers and the SL, it might be closer to 50,000 customers. I don't know.
Microsoft is a little elusive with our numbers on the ERP side by the way. They don't really report that business line like Oracle does or other businesses. They kind of separate it out a little bit more, whereas Microsoft is not very clear on how much they sold in ERP last year. We don't know, but we do see their growth rates, which are going through the roof, especially for their cloud-based solutions.
Juliette: So, if a company is on NAV or Great Plains, is it a natural progression to go to Microsoft?
Shawn: Good question. Yeah, NAV and Great Plains would be or even SL, the natural progression to go to Business Central. And I would say the people that hire us, they don't normally do that. They would say, "I really want to see what's out there in the market.” But a lot of people that don't hire us, I do think that's what they do. Microsoft does have some incentives it's not big, but to move to the Business Central platform, which is nice, it does look a lot like the older solutions for sure. There’re some migration tools that some of the partners have that will take you from your old GP into NAV which is nice.
And we should definitely talk about partners too, later on, the Microsoft Channel because that's important also. So, the natural progression makes a lot of sense, and especially if you're coming off one of those three products now if you're AX, you will go to the F&O solution for sure it's a better deployment, it's in the cloud. You don't have to worry about all the blah, blah stuff with the cloud stuff that we talked about in another CPE earlier this summer.
You should check that out if you want to know more about the cloud stuff, for sure. It's good. It's not just blah blah, but that's sort of it.
Juliette: Yeah, well, you touched on pricing, a little earlier can you speak to what a client can expect from Microsoft's pricing structure?
Shawn: So, I'm just going to say you're welcome right now because this is good and it's important that you understand this. The software pricing is very cost-effective. We've got BC down here and we have F&O up here. BC pricing is based off a per-user per-month cost, that's it. There's no module cost; there are no other costs, just per user per month. It's like Office, basically.
Juliette: It's pretty simple.
Shawn: Pretty simple, that's right, and so is F&O. F&O is a per-user cost. I think there are maybe some charges for some other modules, but it's really mostly a per-user cost. The software cost of Microsoft Solutions is basically set up to put people like us out of business. It's like, “hey, it's cheap, go buy it, what's the problem?” “Go get the software. You're already on it, move it up.” The implementation cost is where it gets a little tricky, but F&O is a different story. F&O, even though the pricing for the software is very effective, we do see ratios of implementation of software to implementation costs of 1:5 and we are recently seeing 1:10 and maybe 1:15. This means for every dollar you spend in software, you're going to spend 10 on implementation.
Juliette: Oh, wow.
Shawn: Yes, it's a gig product to implement. It's a complex product. Now it can run complex business processes. It can work really well with your Microsoft ecosystem, even other technology ecosystems, but you just have got to know. Literally just yesterday, I had this conversation with a client. They're like, “wow, Microsoft, the software is really effectively cost. Am I missing something here? There aren’t other costs?” I said, “no, you're spot on.”
But I know from being through the F&O implementations that even on paper, the initial estimates are going to be more like a 1:5, 1:10 ratio. So, it is something to be aware of any of the F&O partners are listening to this, you guys challenge us, tell us if we're saying something wrong here, but in our experience, get ready for those big ratios. And because nobody, especially the F&O partners, wants to go into an implementation with a customer that doesn't know what they're about to get into.
Juliette: That's right.
Shawn: Nobody, because that is one thing, I'll use this time to say it right now, the partners on the Microsoft Ecosystem, I like him a lot I really, really do--there's one I don't--because we get a lot of calls from customers that say, "we were doing an implementation with blah,” I'm not going to say it though. I'm not going to cough and say it, I’m not going to say it! But anyway, these guys get really busy. They get super busy and that's what happens is that the client doesn't know what they're doing, the partner gets real busy, maybe they get some junior people and their billing, billing, billing, billing, billing, and then the client says “why are we doing this project?” Because you bought it! You were the one, but something changed they didn't manage expectations and then *blows a raspberry*. “Here ERP advisors, can you fix this?”
Anyway, we will, but the partners are really good because the Business Central partners, remember smaller product, they came from GP, they came from SL, they came from that. Those companies were working with a lot of small medium-sized businesses around the world, a lot of business owners, a lot of people that were out there pouring their hearts and souls into their business, risking everything, and they wanted partners that would do the same for them.
And a lot of those Microsoft partners are still doing that. The F&O partners, what happened several years ago, Microsoft had a lot of partners, tons and tons of partners in their partner channel, and they said, “this is really expensive and it's risky, so we want you partners to consolidate.” “Well, ok.” *Sing songy* So then the one partner bought the other partner, and then the bigger partner bought that little partner, and then the bigger partner bought that bigger partner, now we got the big partners; like literally that felt like global partners. It's like a child song maybe our analysts should sing that when they start with us.
Anyway, sorry analysts, but the key thing though is that you've got these global-based partners now, there are national partners too, especially on the F&O side. They just get busy.
Shawn: And you just have got to make sure, I can't say this enough--I beat the drum, I beat the table. That when you do an F&O implementation you have to manage the implementation partner. It's like a tier-one solution. You have to know what they're working on. You have got to know if they're stopped if they're waiting for some requirements. If they're waiting for requirements, give them their requirements and they'll build out.
We're in a client right now that's just been a hell of an implementation. We selected F&O for them; I knew it was the right solution, mostly because their IT infrastructure was Microsoft, but the tools were perfect. A lot of integrations and stuff and reporting and analytics they wanted to do; it was a beautiful solution for them. But our client got super busy and just didn't keep up with the partner, and the partner was doing a bunch of stuff. Often, they're billing, bill, bill, bill, bill, bill, bill, bill, and the clients like “I think this is what I want. I think that's what I want, I think,” and then boom six months in they’re like “this isn't what I want at all.”
It can happen with Oracle, it can happen with SAP, it happens. It can happen with NetSuite, it can happen with Acumatica, it can happen with any partner. But the thing is, is that the F&O partners are bigger, and that solution is bigger, it requires more people and they're smart people, so they're going to build stuff out. You just better make damn sure it's the right thing, and it's up to you to make that decision, it's not them.
So, if you're going to do an F&O solution, just know there's extra responsibility that you have to take into that implementation. It's not bad. It's not bad at all. It's just you have to drive them. You have to be aware of what they're doing, make sure they're doing the right thing, do your damn testing, sign off that your requirements are correct upfront, then do your testing, sign off on that, and then you'll go live successfully because they're great partners.
Juliette: That's right, have a dedicated person that is keeping track and keeping tabs on what needs to be done, otherwise it could go off the rails or fall into the cracks, and then who knows what, right?
Shawn: That's right. And that dedicated person has to know what they're doing. We just had that happen in another client where the dedicated person just hadn't been through this before, so she didn't know what she didn't know. She didn't know when to say “here, go sign off on these requirements.” “Oh, ok.” But they were wrong, they were the wrong requirements. So, it's tough. I mean we could make a whole living, frankly, helping our clients on F&O implementations, because there's so much need for it out there.
Just be aware if you're listening to this, chances are you're interested in Microsoft, you're probably a little freaked out, that's why you went and did the research to find us honestly. And you should be. You should just be aware of what you're getting into, just make sure you manage it.
Juliette: Well, Shawn, thank you so much for joining me today and sharing a wealth of knowledge with me I appreciate it.
Shawn: You're welcome. Thank you.
Juliette: And thank you everyone for joining us today. Continue to be on the lookout for our multi-part series this summer that will help advance your ERP knowledge and allow you to take advantage of over a century of combined ERP experience from our expert consultants here at EAG. Thank you again for joining us, bye, bye.
Announcer 3: This summer, ERP Advisors Group will be reviewing the most prominent ERP software vendors in the market. For more information about these vendors, please visit our website at erpadvisorsgroup.com. You can also find more EAG content by following us on social media or by subscribing to our podcast The ERP Advisor.