Microsoft Still Weighing Hosted ERP Move

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Microsoft plans to host customers on its own CRM Live infrastructure starting later this year. But it's still weighing whether to do likewise with ERP.

"If we feel that it would actually help customer confidence or accelerate customer adds to have a Microsoft hosted element, we've tried to signal with CRM and with ERP that we would consider that. But there will still be a partner in there," Doug Burgum, senior vice president of Microsoft Business Solutions told CRN in an interview Tuesday afternoon.

So the door is ajar, if not wide open, for Microsoft-hosted ERP, depending on the market and other factors.

Other company executives at Convergence 2007 in San Diego, say it is unclear whether ERP, with all of its complexity, is as good a fit for the hosted model as CRM or sales force automation (SFA). Note: The company has several hosting partners who already offer its ERP in a hosted model. Last year it refined its Service Provider Licensing Agreements (SPLAs) to ease that model for the partners.

Some MBS partners have long said Microsoft may have to host ERP on its own iron just to add a possible customer check list item. These partners say that option will bolster Microsoft ERP adoption vs. and NetSuite, which host their own business applications.

Still there are some inherent differences between ERP and CRM, they say.

"I believe in one truth: It's better to have choice," Satya Nadella, corporate vice president of Microsoft Business Solutions told CRN Wednesday. "But, to say all software will be directly hosted by Microsoft doesn't make sense in the biz apps where there is so much diversity by vertical, by geography etc."

"We will learn from what happens in CRM" and evaluate from there, Nadella said.

Over the past year, partners say they've heard unequivocal statements from Microsoft executives that the company will host its own technology whenever and wherever that makes sense.

Navisite, a partner that hosts Microsoft ERP and CRM implementations--as well as Oracle apps--does not appear worried about a Microsoft ERP hosting move.

"I think they've been very consistent in what they've said. We think if they end up doing this, it will be not a threat but a validation to our market," said Brian Ware, director of Microsoft programs for Andover, Mass.-based Navisite.

Microsoft has reacted strongly--some say belatedly--to the SaaS threat from, NetSuite and RightNow in business applications. On the consumer side, it is taking on Google's freebie, ad-supported Windows Live services.

In business applications, Microsoft's power structure clearly sees as an indicator that there's a market for vendor-hosted CRM or SFA. But they also seem to think that NetSuite's success in a hosted ERP suite is less spectacular.

Microsoft watches NetSuite carefully "and as far as we can tell they haven't added new customers in last three years," said James Utzchneider, Microsoft's general manager of Dynamics product marketing. "Their customers seem to move to new apps," he noted.

He echoed Nadella's thought. "We'll start with CRM Live, learn from that and probably will do some sort of hosted ERP but it's not in the short-term plan," Utzschneider said.

Microsoft Dynamics customers and partners converged this week in San Diego to hear about the company's ERP plans and to see demos of the company's evolving role-based ERP interfaces. As previously stated, the next ERP products out the chute will be Dynamics Nav 5.0, due later this month, and Dynamics GP 10.0 and Dynamics SL 7, due out in June. Dynamics AX 4 shipped last summer.

Contrary to reports coming out of the show, the company has not changed its ERP rollout strategy. It continues on the path of incremental ERP upgrades announced at Convergence 2005. At that time, also in San Diego, Microsoft said it was scaling back its ambitious "Project Green" roadmap instead opting for a more evolutionary approach.

This report was updated Tuesday night with partner comments.

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