Microsoft Exec Says Cloud ERP Software Vendors Are Overrated

Microsoft has been unequivocal about embracing cloud computing in all areas of its business. But earlier this week, one of its top executives said most organizations prefer to keep enterprise resource planning software in-house.

"No one has done cloud ERP," Kirill Tatarinov, executive vice president of the Microsoft Business Solutions Group, said in an interview with Diginomica Tuesday. "Point me at a serious organization that runs end-to-end ERP in the cloud. NetSuite is not at scale; none of these guys are at scale."

Enterprise and midmarket organizations are shying away from cloud-based ERP software because they're concerned about privacy, availability and service-level agreements, Tatarinov told Diginomica. Small and midsize businesses are using cloud ERP, but mostly for accounting, he said.

[Related: NetSuite CEO: Nadella Appointment Is Good News For Microsoft ERP Competitors ]

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Microsoft will be the first to offer a true end-to-end cloud ERP offering next year with its next major update to Dynamics AX ERP, which will be sold as a service running on Windows Azure, Tatarinov said in the interview.

By taking a shot at NetSuite, Tatarinov may have been sticking up for his new boss and former peer Satya Nadella, who ran the Microsoft Business Solutions Group for six months in 2006 and 2007.

After Microsoft appointed Nadella as CEO, NetSuite CEO Zach Nelson told CRN he was pleased with the pick because Nadella showed no interest in developing Microsoft's ERP products, which NetSuite competes with.

In an interview with CRN Wednesday, Nelson called Tatarinov's assessment of the cloud ERP market "a joke" and said NetSuite has customers of all sizes running their businesses on its cloud.

"NetSuite has been delivering cloud ERP for a decade and has more than 20,000 organizations using it today. It is truly bizarre for Microsoft to state that they will introduce the world's first cloud ERP offering two years from now," Nelson told CRN.

Nelson said just because the next version of Dynamics AX will run on Windows Azure doesn’t make it a cloud-based ERP service. Such a service "has to be a Web-native application that's designed to be accessed with a browser," Nelson said. "What matters is, have you built the app from the ground up to run in the cloud?"

Nelson has made similar claims about Microsoft's Great Plains and Navision products for years and routinely clashes with SAP, NetSuite's biggest rival in the ERP space. But it's not often that Microsoft fires back.

Nelson told CRN he's happy to hear Tatarinov's assessment of the ERP market because it's evidence that Microsoft isn't really committed to cloud ERP.

"His statements are music to my ears," Nelson told CRN. "I've always said Microsoft has no intention of making this transition."