Last summer’s reorganization at Microsoft didn’t look good for Microsoft Dynamics, at least on paper. The enterprise software group was barely mentioned in outgoing CEO Steve Ballmer’s letter to his staff, and the position of Dynamics head Kirill Tatarinov looked uncomfortably tenuous in a reorg that seemed to all but shout that Dynamics would be sold off to the highest bidder at the first opportunity.
Before I wrote this post, I had a chance to talk to Kirill, who told me I was 180 degrees off the mark. At last week’s Dynamics Analyst summit, Kirill and his team proved their case. And then some.
The “then some” came in the form of addresses from two of the top lieutenants in Ballmer’s reorg, Tami Reller, the uber-vp of marketing at Microsoft, and Satya Nadella, the uber-vp of cloud and infrastructure. In addition to their commentary and perspective, these very senior execs, by their very presence, along with that of Kirill himself, highlighted the high profile position that Dynamics now holds in the new devices and services-focused Microsoft.
And in case even further proof is needed that Dynamics is now in the cat-bird’s seat, it’s worth noting that Satya was head of Dynamics from for a few months in 2006 and 2007, and Tami, who came to Microsoft from the acquisition of Great Plains in 2001, served as interim head of Dynamics when Satya moved over to head up Microsoft’s Search efforts. And, while you’re filling out your scorecard, it’s also worth noting that the incoming devices guy, Stephen Elop, was also the head of Dynamics from 2008 to 2010.
So, Dynamics isn’t just front and center in the new Microsoft, a stint at running Dynamics can be seen as a key resume builder in the quest for the upper echelons at Microsoft. Who would have guessed?
Of course, there’s a very good reason for this, much of which has to do with the One Microsoft strategy and the role that Dynamics plays in realizing that strategy. That role boils down to this: Microsoft’s products are ubiquitous in the enterprise, and by extension in much of the consumer world too.
But being ubiquitous isn’t the same as being strategic. In too many ways, Microsoft’s traditional core products, Windows, Office, Sharepoint, and SQL Server, its new products like Azure, Bing, and even Xbox, and recent acquisitions like Yammer and Skype, are competing in markets that are already commoditized or rapidly commoditizing.
To be fair, Microsoft has a lot of great innovations around these core products that are intended to help them rise above the commodity layer and allow Microsoft to be highly differentiated against its competitors: A touch-based user experience that can span the mobile and desktop worlds, Xbox Kinect, which is poised to revolutionize the user experience in key parts of the enterprise, machine learning-based search, in-memory analytics, a cloud infrastructure, a cloud-based data mart, among many others.
So there’s no shortage of innovation, but individually, as standalone products, these innovations aren’t innovative enough to truly change the game for Microsoft, not at the scale that Microsoft needs in order to thrive. That’s where Dynamics comes in.
As I wrote here, Microsoft Dynamics has the ability to showcase the full depth and breadth of the product set at Microsoft, and, in particular, help reify an innovative “sum of the parts” strategy that is needed in order to emphasize the value underlying the new One Microsoft corporate vision. Dynamics in the enterprise is precisely the calling card Microsoft needs in order to tell an innovation story that can raise its enterprise presence from merely ubiquitous to genuinely strategic.
The parts are also innovating, particularly in the core of its two flagship products, AX and Dynamics CRM: a recent announcement of with InsideView will enhance CRM with context-specific information – provided in the CRM UX by InsideView – about the people and businesses that a rep or customer service person are in contact with. AX is getting improved warehouse and transportation management, new time and expense management capabilities, and additional project management features, among others.
And one of the geekier, but extremely important features coming to AX is an Azure-based application life-cycle management toolset that can be used to implement and manage cloud and on-premise AX systems. This is more important that it may look: ALM, particularly for on-premise, is usually either overly complex and expensive to implement and use (cf. SAP’s Solution Manager), or largely a limited-functionality afterthought (cf. Oracle). Giving on-premise customers, in particular, access to a fully-featured ALM tool running in the cloud solves a lot of problems for these customers and gives AX a competitive edge, particularly in an SAP market suffering from Solution Manager fatigue.
But it’s really the sum of the parts that makes the most sense in terms of moving Microsoft forward, and that means that whomever replaces Steve Ballmer will need to emphasize how Dynamics can define the new Microsoft. It’s getting easy all the time to imagine a confluence of strategic innovation and ubiquitous services that can redefine Microsoft’s position in the modern enterprise.
The possible scenarios are not that far-fetched: an integrated enterprise where warehouse workers use Windows embedded devices in the warehouse, shop floor workers use gesture-based Kinect devices to manage industrial equipment or clean room processes, and sales and service workers use Windows mobile devices in the field, with everything rolling up to AX and CRM in the front office and Window POS systems in the retail system.
Meanwhile, beneath that strategic layer are the infrastructure pieces that, while relatively ubiquitous today, would become more ubiquitous, and frankly, more valuable, by hitching their stars to Microsoft’s new strategic positioning. The above scenario needs a cloud that supports IaaS and PaaS, content management a la Sharepoint, lots of Windows and SQL Server functionality, desktop functionality a la Office 365, etc. etc.
Of course, Microsoft can sell these and other services as a bundle without Dynamics, but then they’ll be hard pressed to do more than maintain a ubiquity that’s won’t translate into the kind of growth that Microsoft’s investors – and partners – are looking for.
The only way this could be derailed is if the wrong person comes in to take over Ballmer’s seat. Despite all the criticism that has been levied against him over the years, Ballmer’s focus on One Microsoft is the right path, and the only one that will allow the company to realize its full potential, or at least have a fighting chance of doing so.
De-emphasizing the strategic position of enterprise software – something I could imagine some CEO-wannabe doing, one who focuses on appeasing an investment community that has never really understood enterprise software – would turn Microsoft into the next Hewlett-Packard: A failed tech giant that became too big to succeed, doomed to slowly smother under the weight of its own market and product inertia.
It doesn’t have to end that way, and, as things look today with Dynamics, it won’t. So far, so good.