There is something energizing about being part of the ‘next big thing’. Microsoft Dynamics 365 Business Central has the potential to be the next big thing in the mid-market cloud ERP space. The stars appear to be aligning. I have often lamented that not a lot has changed in ERP software in the last few decades, as accounting is a rather static science, and no new players have emerged. I think in Microsoft Dynamics 365 Business Central we have a new player.
The Vibe
The vibe is the most intangible but also the most important of all the stars that must align. Energy and enthusiasm is infectious and I saw this in action during the Directions North America Conference in San Diego this week. There was an overall great vibe. Could I measure it, no. Can I truly explain it, no.
There was a buzz about the potential of the Microsoft D365 Business Central that started with the energy and tone of the Microsoft team members. Marko and Toby led with the energy which seemed to flow down to all of the Microsoft team who were presenting an educating. There was a confidence and excitement coming from the 75 Microsoft employees who were at the event – and the fact that Microsoft has sent that many people was a clear sign that Microsoft are ‘All In’ in – making Business Central a raging success.
While all the attendees are passionate about delivering ERP solutions, that passion is driven by the need to generate revenue and make a dollar to put our kids through college. A positive vibe suggests that Partners see the potential for D365 Business Central to be a solution that they can sell and implement.
The Product
Dynamics 365 Business Central is a strong offering into the mid-market Cloud ERP space. It offers all the key things a customer is looking for: Accounting and Compliance, Reporting, Configurable Functionality and Business Process management, which is critical for an ERP, but none of these are major differentiators.
A major differentiator is Microsoft’s commitment to enhancing ERP and all the functionality surrounding the core functionality. Microsoft’s Azure cloud offering is an attractive proposition. Microsoft’s energy around owning the BI space with Power BI adds to the appeal. The convergence of Office, SharePoint and ERP with a personal workflow tools like Flow is encouraging. Much of this energy is going into tools that are not ERP specific but rather are a set of Microsoft tools that work well with Business Central.
Now please note that I say the Microsoft suite has potential. Many of these products are still in their infancy and it will take some time before they are fulfilling much of their potential. (Consider them a talented Rookie – with the right nurture they could become All Stars). The vibe I described above suggests that partners are ready to overlook the shortcomings in the products because they see that everything is aggressively heading in the right direction.
The Partners
Partners are pumped. Partners are the most important part of the mid-market ERP ecosystem. Mid-Market ERP is complex and ERP implementations require a significant consulting exercise. You do not sell an ERP deal by having a long list of functionality listed on a website. You would not buy an ERP system without knowing and trusting the delivery team behind it. Microsoft could release the greatest ERP solution imaginable but if their reselling partners are not on board then it will be a total flop.
Microsoft sees partners as an essential part of their success or they would not have 75 staff at an event like Directions North America. For a while there it felt like Microsoft took some steps to distance themselves from partners, but it seems to me that partners are once again front and center for Microsoft. There remain some grumblings about software margins but there always has been and likely always will be!
At Directions 2017, I left thinking that D365 was going to fail because partners were not behind it. I heard partners say that they would not touch this cloud offering and were staying with on-premise only. Those same partners a year later were on board with Business Central. I was also excited to see some partner crossover with many Dynamics GP partners attending Direction. This means that the Dynamics GP partner channel is preparing to add Business Central to their offering. This is a positive move as it broadens the number of partners going to market and adds a huge amount of experience into the channel.
The Target Market
I had someone from Microsoft ask me this week “why I thought that Business Central had landed so well”. After some thought I answered that, the main reason, was that the product was now aimed squarely at the mid-market. Attempts to take the solution down market to compete with Xero and QuickBooks were always doomed.
The Microsoft Partner channel has been selling into the mid-market successfully for 20+ years. The partners understand this market. Partners know the need of the mid-market. Partners have business models that work well selling into the mid-market. If the partners are not on board then it is not going to work.
So rather than dumbing the product down as they did with BE, Microsoft are focusing on the core needs of mid-sized companies. Dynamics NAV was built for the mid-market and has mid-market bones and that is exactly where any solution based upon its core functionality must be targeted.
The ISV Community
The ISV (developers of add on products) are aligning behind Business Central. This is essential as it exponentially increases the available functionality of Business Central. This mean vertical markets are opening for partners. This means the functionality gaps in Business Central are being filled. Microsoft are further developing their AppSource app store to support these ISV’s.
One thing I do caution about (which will be another blog coming soon) is the encouragement of Solution Provider partners (I still call them VAR’s) to write IP and list it in AppSource. Owning IP is difficult. Building customized software and productizing software are very, very different. Most VAR’s are unable to be a professional services company and own IP. ISV’s must be committed to their products for the long haul. If a VAR puts out a new solution and gets 5 customers over a year, but remain unprofitable, are they really going to stay with that solution for the long haul? I fear that some bad experiences of customers with these addons could give AppSource a bad name.
Challenges
There remain some challenges ahead and speed bumps that will occur. One of the things partners will be calling for, especially at Directions EMEA in a few weeks, is the need to build more and faster localization to support global roll out.
I believe Microsoft need to direct immediate development efforts into core functionality rather expanding the breadth of the product for the next few releases.
I missed the licensing session at Directions but there appeared to be confusion over how licensing across multiple cross product offerings worked. There were questions over attempts to license API use which needs to be settled in the short term.
Conclusion
Microsoft should be excited. Marko and his teams should be proud that Business Central has a world of potential to take the Mid-Market ERP space by storm. If over the next few years all the involved parties keep doing more of the same, then there is no reason why Business Central does not become the next best thing in mid-market ERP.
Tell us about your experience at Directions 2018. Leave a comment below.
