Microsoft Dynamics AX: The Chosen One Among Microsoft Dynamics ERP Equals? - Part 1

I have no reason to doubt Kirill Tatarinov, thus far the longest-standing corporate VP of Microsoft Business Solutions, when he keeps reassuring the market by stating that “Microsoft equitably loves all of its children.” Indeed, the Microsoft Dynamics division and its staffers are careful not to reveal any individual enterprise resource planning (ERP) product results (growth, new licenses, etc.), as everything publicly reported is lumped under the overall Microsoft Dynamics and Microsoft Business Division results.

Still, there have been many indications and plausible reasons why Microsoft Dynamics AX [evaluate this product] might be the ace in the Microsoft Dynamics ERP rotation (to use a baseball analogy). Shortly after the 2002 acquisition of Navision (which also included former Damgaard’s Axapta product, the predecessor of Microsoft Dynamics AX) and the late-2000 acquisition of Great Plains (which also included Solomon, Microsoft Dynamics SL’s predecessor) there were some obvious demarcation lines between the four ERP products. 

Namely, Microsoft Dynamics GP (formerly Great Plains) is a broad-based and compact ERP system. The product features deep out-of-the-box financial/accounting, e-commerce, and light manufacturing functionality for a relatively low total cost of ownership (TCO), but is not as easily customizable as its brethren (role-based personalization is enabled, though). As another mixed-blessing trait, Dynamics GP is a predominant offering in North America and Latin America, with over 30,000 customers in that region. Its extensive list of partners (about 2,000) and third-party add-on solutions (and localizations) is also limited to several countries in the Americas region. Given my personal interest in sports, it is curious to note that a vast majority of North American major league sport teams are Dynamics GP customers.

For its part, Microsoft Dynamics SL (formerly Solomon) is a project management- and project accounting-oriented ERP product that is suitable for the service business. As is its Dynamics GP sibling, the product is predominantly sold in North America and Mexico (and in some other English-speaking regions). The product can be used in very simple manufacturing environments (e.g., final assembly and kitting) but with the emphasis on its distribution capabilities rather. For more information on this product, see TEC’s in-depth article series from 2003.

Global Capabilities

As for the products with a global reach, Microsoft Dynamics NAV (formerly Navision) has an extensive library of country localizations and languages (about 40, as described in my 2009 blog series on Microsoft Dynamics NAV 2009). Contrary to the compactness of Dynamics GP, Dynamics NAV has a highly flexible and granular product composition that fosters industry customizations on top of its solid manufacturing and distribution functionality. However, the product is not scalable for larger enterprises and was not designed with centralized corporate control and processes in mind. Rather, Microsoft Dynamics NAV is suitable for local single-site firms and autonomous divisions (sites) of larger enterprises. 

Thus, to revert to my baseball lingo, if Microsoft Dynamics GP, SL, and NAV are reliable utility (position) players, Microsoft Dynamics AX would be either a designated hitter or ace pitcher. Indeed, this upper-range product caters to large companies with more complex requirements in terms of multi-entity, multi-plant, multi-site, multi-language, multi-national, and multi-whatnot capabilities.

As its current sibling Microsoft Dynamics NAV (and former local Danish competitor, whereby only several miles divided the central offices of former Navision and Damgaard), Dynamics AX is highly customizable and adaptable, and also scalable (up to a few thousand users). The product was also built to make conducting centralized business processes across multiple locations and countries easy. For more information, see TEC’s previous article series “Managing Your Supply Chain Using Microsoft Axapta: A Book Excerpt.” 

Vertical Savvy Is in Vogue

In addition to centralized global management, Microsoft Dynamics AX can provide mid-to-large size companies end-to-end industry specific functionality. Furthermore, Microsoft has been urging all its ERP and customer relationship management (CRM) resellers and independent software vendors (ISVs) to specialize further in one or a few selected vertical sectors and help partners find the right defendable segment. Microsoft Dynamics has even been aligning its own organization to selected vertical areas and hiring specialists to bring more depth to its own industry knowledge.

Horizontal solutions are no longer compelling, since the market seems saturated with low-cost accounting products and such generic offerings have become highly commoditized. Microsoft strongly believes that the core mid-market represents a largely untapped opportunity for ERP solutions that provide not only vertical functionality but also rapid customization and implementation.

Over time, Microsoft  has observed that its most successful partners deliver repeatable, specialized ERP solutions integrated with the ISV’s vertical solution and leveraging Microsoft’s stack. Customers are reportedly demanding lower TCO, easy-to-use, and industry-specific ERP solutions.

Size appears to matter here, since the most profitable businesses for both the partner and Microsoft appear to be the shops with over 50 employees. Namely, these software developing and consulting companies have the ability to focus on Microsoft’s technology stack and their vertical solutions, thereby creating equity (via intellectual property and viable business).

Certainly, this increased level of Darwinism (survival of the fittest) will send many insecure partners to find a shelter within the ecosystems of vendors that preach “a wider tent” partnering approaches (e.g., Sage and SYSPRO), but Microsoft seems to be ready to take that chance. Since 2007, Microsoft has intensified its cooperation with selected partners to develop industry solutions for applications for service industries (architecture/engineering/construction [A/E/C], media & entertainment, and professional services), retail, process and discrete manufacturing, the public sector, and wholesale distribution.

Microsoft Dynamics AX: An Industry-enabling Layer

In addition, Microsoft Dynamics AX has a strategic position in Microsoft's ERP portfolio because its industry-specific extensions are designed and built not exclusively by the partners but in a joint effort (although these are part of the Dynamics AX roadmap and designed and built by Microsoft). Previous joint initiatives with rigorously selected partners were dubbed Industry Builder Initiative (IBI) and Microsoft Dynamics Industry Solutions (MDIS). As a result, the more recent releases of Microsoft Dynamics AX feature a core industry-enabling layer and content for the abovementioned six industries.

The parts of Dynamics AX' industry-enablement layer have been primarily built internally by Microsoft for discrete manufacturing and wholesale distribution. Certainly, some selected partnerships can extend this layer in certain deployments, e.g., Manhattan Associates' Integrated Logistics Solutions (ILS) for advanced warehouse management and TXT e-Solutions and ToolsGroup for advanced supply chain planning (SCP).

However, other targeted industry capabilities have been co-developed closely with the following partners:

  • Fullscope Inc., for a process manufacturing solution

  • Computer Generated Solutions (CGS) Inc., for professional services via the delivery of a single system to manage projects and resources, execute financial transactions and customer billing, and match resources with client assignments

  • LS Retail EHF and To-Increase Denmark A/S, a wholly owned subsidiary of Columbus IT Partner A/S, to enable Microsoft to provide a comprehensive retail solution including store management with Microsoft’s own point-of-sale (POS), retail merchandising and ERP capabilities

In second half of 2009, Microsoft went a step further by acquiring the intellectual property from these four ISVs, and those capabilities have meanwhile become part of the Microsoft Dynamics AX core. Partners can then build additional micro-vertical functionality. For more details, see my colleague Khudsiya Quadri’s related blog post.

Most of the abovementioned industry solutions are available in the current Microsoft Dynamics AX 2009 release, but at differing maturity levels and with regional availability. The solutions and their increasing adoption in the marketplace underline the strategic position of Microsoft Dynamics AX in the Microsoft Dynamics ERP portfolio, and provide a strong base for customers seeking industry-specific functionalities and partners seeking additional differentiation.

For example, a public sector functionality has been co-developed between Microsoft and Tyler Technologies (developed by Microsoft with subcontracted expertise and resources from Tyler, to be more precise), but only for the markets in the US, UK, Germany, Denmark, and France. There will be additional partner solutions for other geographies, because the public sector requirements differ more between countries (and states) than in many other commercial business sectors.

Conquering the Upper Mid-market Retail Space

The retail sector was the first that Microsoft vocally tackled via the newly bolstered Microsoft Dynamics AX product. Microsoft Dynamics AX for Retail was introduced on a preview basis in early 2010 at the 2010 National Retail Federation (NRF) Annual Convention and Expo for midsize specialty retail customers looking for an end-to-end ERP solution that could make a big impact on their business without necessarily draining their budgets. Since then, there have been several early adopters and Microsoft partners embracing Microsoft Dynamics AX for Retail.

The product was made generally available (GA) worldwide in early August 2010. As part of the retail initiative, Microsoft's channel partners were given the opportunity to deliver customer-specific configuration and implementation services, on a solid, scalable foundation designed for the retail environment.

Taking advantage of this, Microsoft and Aldata, a global retail specialist serving 15 of the world's 30 largest retailers, announced in June 2010 the signing of an agreement for Aldata to resell and develop new vertical applications integrated with Microsoft Dynamics AX for Retail. These applications will serve the specific needs of home electronics, do-it-yourself (DIY), and sports and fashion retailers with new capabilities, including a loyalty and digital marketing module. The new solutions will be initially offered in Finland (October 2010), followed by an international roll-out.

It is only logical to expect other industry solutions and vertically-oriented partners to follow suit. In 2007, Microsoft acquired lean manufacturing intellectual property from its partner eBECS and has recently released the Lean Manufacturing module for Microsoft Dynamics AX. For more information, see TEC’s previous article series entitled “A Primer on Lean Manufacturing Using Microsoft Dynamics AX: Case Studies.”

The next part of this blog series will analyze the product’s life pre-Microsoft and subsequently under Microsoft’s wing. In the meantime, your views and comments are welcome as usual. If you are existing users of Microsoft Dynamics AX or its former Axapta incarnations, what have been your experiences with these products and what is your take on the product’s future?
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