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What’s Microsoft’s Retail Play?

Written By: Predrag Jakovljevic
Published On: February 20 2012

This article is not about the currently available 15 retail locations for Microsoft Stores in the United States (US), but rather about what Microsoft Corp. has already been offering (or is soon to offer) to retailers as software, and, to a lesser degree, hardware (e.g., Microsoft Surface tablets) solutions. To be fair, Microsoft uses most of the solutions that will be discussed here in its aforementioned stores.

At the recently held Fall Analyst Event (FAE) 2011 by Microsoft Dynamics, we all learned what we either knew or were merely suspecting: Microsoft Dynamics AX is the company’s chosen global enterprise resource planning (ERP) platform. It will not only be the foundation for selected and vetted independent software vendor (ISV) partners to build their industry-specific solutions, but also Microsoft’s offering to the so-called strategic accounts (larger global corporations). In other words, Microsoft Dynamics AX will continue to be sold via partners, but much more often by the mightier partners with global reach and scale, and sometimes helped jointly by Microsoft’s direct sales force and co-implemented by Microsoft Services.

TEC’s 2010 three-part blog post series analyzed the Microsoft Dynamics AX 2009 release. Late 2011 saw the release of Microsoft Dynamics AX 2012, with major new capabilities and themes. See the official press release.

For now, it is worthwhile pointing out the ongoing delivery of the so-called Role Centers and key performance indicators (KPIs) for particular personas. Role Centers have been enhanced to show specific dashboard data based on role, with the availability of additional out-of-the-box industry-specific (e.g., retail or manufacturing) reports (see figure 1). The ease of use and scale are other ongoing themes. To that end, the release introduced many new pivots, views, and filters to easily manage inventory and other system entities. Finally, there is an enhanced accessibility for partners to extend the solution.


Figure 1

 

Microsoft Dynamics AX 2012 for Retail
The Microsoft Dynamics team has since worked diligently to develop retail-specific capabilities on top of the Microsoft Dynamics AX 2012 architectural enhancements. The end-to-end retail solution was officially launched on February 1, 2012, in more than 25 countries. Significant enhancements have been made with Microsoft Dynamics AX 2012 for Retail, as the vendor has accelerated its roadmap to build on the global momentum and growing customer base in more than 30 countries. Functionality falls into a few categories, starting with the Microsoft Dynamics AX 2012 architecture. Microsoft Dynamics AX 2012 for Retail benefits from many of the significant enhancements made to the core Microsoft Dynamics AX 2012. The two most important capabilities to point out here are as follows:

  1. Organization model—The ability to visually represent a retail organization, including various store formats and distribution centers (DCs). Users can add new formats, new channels, and/or points of distribution without writing a line of code and have changes applied automatically in the system (see figure 2).
  2. Hierarchies and category management—Unlimited n-level deep item hierarchies allow for merchandising flexibility. Retailers can create one hierarchy for assortments (e.g., by store format) but use a completely different item hierarchy for assortment management (e.g., by seasonality).


Figure 2

For the new point-of-sale (POS) capabilities, there is special order and quotation functionality in the POS module, which is fully integrated with Microsoft Dynamics AX. This means that store associates at customers, such as Mattress Firm or Ashley Furniture Industries, never have to leave the customer’s side to take orders for goods that are not displayed in the showroom.

 

Multi-channel and Social Commerce
The ability to seamlessly accommodate multi-channel (a.k.a., cross-channel, omni-channel, every-channel, etc.) has been a major theme in retail of late. Microsoft Dynamics AX 2012 for Retail supports the following:

  • Centralized multi-channel management—including marketplaces and online stores, whereby attributes and catalogs can be managed centrally with Microsoft Dynamics AX across channels (see figure 3).
  • Cross-channel workflows—the ability to buy online, pick up in-store (or have it delivered); returns and other scenarios are also supported, whereby the sales order is visible with transparency, regardless of the channel.


Figure 3

Moreover, through the commerce services, Web pages can be easily created with a few clicks; coupons, promotions, and discounts can then be applied to the page, and the page can in turn be posted to a retail Web site, social network, or elsewhere. The customer can capture that incentive via the Web or mobile device, with the POS system in the store recognizing it for redemption—blurring the line between online and off-line experiences.

 

Native Microsoft Dynamics Retail Functionality
Out of the box, Microsoft Dynamics AX 2012 for Retail provides the following capabilities: POS, store management, multi-channel management, order management, supply chain management (SCM), financials, inventory management, replenishment, and basic loyalty management. Many customers use Microsoft Dynamics AX for Retail and/or Microsoft Dynamics CRM out of the box. The aforementioned Microsoft stores run Microsoft Dynamics AX for Retail alongside Microsoft Dynamics CRM.

Microsoft Dynamics AX for Retail does all of the above, with Microsoft Dynamics CRM acting as the customer master. Microsoft Dynamics CRM provides cross-channel customer care and a deeper level of customer history and detail than does the standard customer relationship management (CRM) capability in Microsoft Dynamics AX. An example would be shared document repositories to maintain a comprehensive history of the customer, from initial contact through subsequent interactions, and to make it available throughout the organization, from the back office right through as far as the sales associate.

 

Partner Opportunity
Partners will often develop very specific segment functionality to extend the strong starting point provided by Microsoft Dynamics AX for Retail. Examples would be solutions for pharmacies, grocers, home electronics, do-it-yourself (DIY), and sports and fashion retailers (e.g., by Sunrise Technologies and CGS), etc. Junction Solutions provides an interactive multi-channel (including call center) solution for specialty retailers (e.g., for wedding registries).

Partners might also offer more horizontal capabilities that Microsoft Dynamics AX for Retail doesn’t address out of the box, such as in the following realms:

  • Planning and forecast optimization by JustEnough Software
  • E-commerce by Keyora
  • Advanced client-telling (customer history-based analytics) for CRM by 3Cinteractive (3Ci)

In a recent press release by Microsoft describing the ongoing investment in Microsoft Dynamics AX for Retail, Accenture (co-owner of Avanade with Microsoft) was quoted as recognizing Microsoft Dynamics AX 2012 for Retail as a key player in system integration (SI) for Accenture’s enterprise customers.

 

Microsoft’s NRF 2012 Presence
At the recently held Retail’s BIG Show 2012 in New York City, which is traditionally organized by the National Retail Federation (NRF), Microsoft had its customary sizeable expo floor space. According to the vendor, it was its largest presence ever, with Microsoft Dynamics hosting 23 demo stations for POS, multi-channel, merchandising, mobile tablet, social commerce, Microsoft services, and CRM. A number of ISV partners demo stations, including Dassault Systèmes and Descartes Systems Group, were also present.

Significant demonstration areas expressed Microsoft’s vision and what it means to become a “Dynamic Retailer.” There was also a significant meeting space, whereby three of Microsoft’s ‘Dynamic Retailers’—DAVIDsTEA, Mattress Firm, and Simon Pearce—had their executives on-site in support of Microsoft. In addition, Kimberly Greenberger, managing director at Morgan Stanley and a well-known and highly respected retail industry analyst, spoke to industry trends together with Microsoft’s experts in their session entitled “Microsoft for Retail — The Solution for Tomorrow’s Dynamic Retailer … Delivered Today.”

 

FAE 2011 and NRF 2012 Follow-up with Microsoft’s Retail Evangelist
During my one-on-one meetings at FAE 2011 and NRF 2012, I asked a number of in-depth questions on Microsoft Dynamics AX for Retail, and what follows are the answers provided by Michael Griffiths, global industry product director for retail and distribution at Microsoft. Griffiths is a proven retail industry executive with a solid track record in driving both product management and marketing for technology industry leaders. He has extensive experience in public speaking and strategic customer engagement. Griffiths brings more than 13 years of industry technology experience and has spent his entire career in retail joining Microsoft in 2006 to drive the Microsoft Dynamics retail strategy and go-to-market initiatives. He has successfully managed the launch of multiple Microsoft Dynamics retail products and landed two key acquisitions fueling the global launch of Microsoft Dynamics AX for Retail in more than 50 countries. Griffiths is responsible for the MBS global retail and distribution business, including strategy, product management, and product marketing.


Michael Griffiths, Global Director,
Retail and Distribution, MBS

Before working at Microsoft, Griffiths worked for NCR Corporation, running global product management for the integrated retail hardware platforms business. In that role, he defined and launched strategic platforms to serve retail leaders such as Wal-Mart, The Home Depot, 7-Eleven, Disney, Rite Aid, and Verizon Wireless. Griffiths holds a Master of Business Administration and Information Technology—graduating with honors from Virginia Polytechnic Institute and State University. In his spare time, he enjoys camping, hiking, mountain biking, and participating in virtually any competitive sport.

 

The Microsoft Retail Difference
TEC:
What differentiates the Microsoft Dynamics AX for Retail offering in the marketplace, given the fierce competition and touted end-to-end offerings by, say, SAP, Oracle, JDA Software, Epicor Software, RedPrairie, SAS Institute, etc.?
MG: It is Microsoft Dynamics AX for Retail’s unique differentiation that is driving the significant growth and adoption in more than 30 countries in just under two years—driving large retailers such as Mattress Firm, Ralph Lauren in Asia, and others to bet their business on the solution. Many competitors talk about end-to-end retail capabilities, but they simply don’t offer what customers need and expect. These aforementioned vendors have acquired separate bits and pieces, which were never meant to work together. Thus, there are data flow limitations, resulting in inaccuracies and delays. Furthermore, these vendors don’t offer cross-channel and multi-channel control natively. They also don’t offer the level of control, multi-channel management, or long-term extensibility to take advantage of new opportunities at a reasonable total cost of ownership (TCO).

Separate from functionality, Microsoft Dynamics AX for Retail is the most widely available global end-to-end retail solution on the market. While SAP and Oracle continue pull back from certain markets such as Brazil and India with their POS solutions—due to the challenges in localization and lack of adoption—Microsoft continues to expand its presence end-to-end. This gives multinational companies the chance to have consistency and drive more value from their existing IT investments when entering new markets. In fact, Microsoft Dynamics AX for Retail is the only solution with a consistent data model and business rules allowing for complete control over the core foundation of a retailer business out of the box. Think of the following:

  • The Store Connect feature allows you to determine the time and frequency of any data flow between headquarters (HQ) and the stores—i.e., price updates, store configuration, and more.
  • The Transaction Services capability offers real-time visibility to customer data and loyalty transactions immediately, as they happen, across all stores in the chain.
  • The POS user interface (UI) can be created or modified centrally with changes pushed to the stores how/when you choose.
  • Hardware Profiles—a big part of any retail organization—can be controlled from within Microsoft Dynamics AX.
  • Centralized Multi-Channel Management allows you to easily apply tax rules, item detail, and entity metadata as well as consistent and simultaneous marketing and promotions rollout across channels and location, from within Microsoft Dynamics AX.

In addition, role-based interfaces mean that each individual logging on to the system can have the look and feel, security, and functionality to be most productive. The interfaces dynamically change at log-on. Integration of key workflows, i.e., customer order and special order at the POS, keep the associate at the customer’s side and automatically trigger related workflows in Microsoft Dynamics AX. Finally, there is product extensibility to take advantage of new opportunities. In other words, the plug-in modules and frameworks allow customers to optimize for new opportunities, while the model-driven layered architecture of AX minimizes impact to customer configuration when Microsoft updates the product.

TEC: Can you please elaborate on the POS tablet capabilities (that were shown to us briefly at the Microsoft Store in Bellevue, Washington)? What differentiates that device and its embedded Dynamics AX functionality?
MG: While some POS software can be put on a tablet, very few are touch optimized and developed to make the most of a tablet. You must give the store associate the ability to stay with the customer and take full advantage of transaction processing (e.g., real-time inventory lookup across the chain, customer data capture, special order capture, etc.) while remaining mobile in the store.

Because of the native integration between Microsoft Dynamics AX and POS, we are putting much of the power of Microsoft Dynamics AX on the showroom floor—via pertinent dashboards, reports, etc. The key here is understanding how to develop a UI and experience that increases the speed of service, reduces training time, and increases customer satisfaction with the tablet (see figure 4). In contrast, most of older architectures and POS systems in the market don’t allow for this native integration.


Figure 4

TEC: What about the ability to cater to the needs of both retailers and their suppliers, i.e., consumer packaged goods (CPG) manufacturers, with your offering?
MG: A key differentiator of Microsoft Dynamics AX 2012 is that we offer “industry co-existence” out of the box. Unlike other vendors that charge for modules, and more, by industry, Dynamics AX 2012 offers retail, distribution, manufacturing, services, and public sector capabilities out of the box with the core license. We have architected the industry capability to work together and are offering the manufacturer that also does retail and/or distribution a number of potential advantages and leverage. The concept of items, financials, and more to be natively consistent across various aspects of an organization reduces cost and simplifies operations.

 

Who Uses Microsoft Retail?
TEC:
Can you please provide some details and figures on Microsoft’s retail customers, not necessarily only those using Dynamics AX, but also those using Microsoft POS and Retail Merchandizing System (RMS) products (from former QuickSell Commerce), and any other Microsoft products that retailers use?
MG: Microsoft’s small to medium business (SMB)-based solutions, such as RMS, historically have more than 40,000 customers across 40 countries. As I said earlier, Microsoft Dynamics AX for Retail has already been adopted in more than 30 countries in just under two years—including all of the emerging markets, such as China, Russia, India, and Brazil. We have customers ranging from 100 stores to more than 1,200 stores and are seeing great traction in the enterprise. We allow customers to deploy the “workload” products such as POS/Merchandising in a manner that makes the most sense to them—even alongside those of SAP, Oracle, or others. You can get tremendous leverage from Microsoft Dynamics based on today’s needs without having to replace everything—all the while knowing that the other end-to-end retail pieces are there.

TEC: What is your ideal profile (sweet spot) customer in the retail space?
MG: Our sweet spot customers are midsize and enterprise-size specialty retailers. The flexibility of our solution means that we can work with customers looking to replace everything from POS through the supply chain (such as Mattress Firm), or a company that will use SAP for financials but will use Microsoft Dynamics AX for Retail for all operational execution (inventory, merchandising, POS etc.).

We look very closely at market trends and see significant changes such as the empowered consumer, omni-channel, and social commerce. Our focus is helping retailers become dynamic, i.e., connected, empowered, and proactive. We work well with prospective customers that are looking to differentiate themselves and invest in a technology platform that is targeted at key market trends and challenges. Many of our customers want innovation and customer focus—and believe that Microsoft is the vendor best positioned to offer that.

TEC: What are you already offering (or will soon offer) in social, mobile, and high-volume (in-memory) analytics for retailers?
MG: The release at the NRF show this year—Microsoft Dynamics AX 2012 for Retail—offers social commerce through centralized channel management and commerce services with the ability to leverage marketplaces, Web sites, and social networks as new opportunities to reach customers with promotions, coupons, and more. Needless to say, Microsoft is making significant investments across the company and Microsoft Dynamics is where they will light up. For example, Microsoft Dynamics products will have in-memory business intelligence (BI) working within Microsoft SQL Server.

Exciting collaboration across Microsoft will result in Microsoft Dynamics offering more compelling capabilities for multi-channel and e-commerce later this year. Look for more retail mobility capabilities on Windows Phone and other popular mobile devices. Microsoft is looking to capitalize on its unique position in the market as being concurrently a retailer (Microsoft Stores), CPG provider, and enterprise business applications provider.

TEC: What are the evident remaining retail “white spaces” in your retail portfolio and how do you plan to fill them? For example, what about planograms/space planning, workforce scheduling and task management, price and assortment optimization, e-commerce/multi-channel order management, etc.?
MG: We work closely with customer and partner advisory boards to best understand what Microsoft can provide to drive the most value, versus what partners are expected to offer. We offer a focused solution for specialty retailers, but don’t plan to deliver every feature for micro-verticals in specialty. This means that partners focused on fashion, pharmacy, jewelry, etc. could develop their intellectual property (IP) in those areas. We are always enhancing our solution and working with partners to give them visibility into what’s coming.

Microsoft Dynamics AX for Retail—because of its integration and access to data—provides a great foundation of data for planning, but we don’t offer the forecasting/planning optimization out of the box. We work with global SIs and our own consulting group to fill those gaps in the upper part of the market, and with traditional Microsoft Dynamics partners in our core mid-market. The experience with our channel is one of our strengths, a feat that has worked well for us.

 

References and Recommended Reading

TEC. Microsoft Dynamics AX: The Chosen One Among Microsoft Dynamics ERP Equals? – Part 3. Oct 12, 2010.
TEC. SAP as a Retail Market Force: More Fact Than Fiction. Jan 5, 2012.
TEC. RedPrairie: Enabling End-to-End Supply Chains (from Manufacturer to Retail Shelf). Dec 29, 2012.
TEC. The Lesser-Known (Social) Facts about Microsoft Dynamics CRM. Oct 31, 2011.
TEC. Analyzing Manhattan Associates’ Supply Chain Platform Play – Part 3. Apr 13, 2011.
Microsoft Dynamics (White paper). Microsoft Dynamics for Retail - Product Overview - Delivering the Future of Retail … TODAY.

 

 
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