While Microsoft officials were using this week’s Dynamics Convergence 2012 conference in Houston to update the company’s cloud ERP integration roadmap, they also took the opportunity to sketch in more elements of their vision for end-to-end integration of manufacturing, retail and the supply chain on Dynamics ERP.
In public presentations and one-on-one interviews, Microsoft senior managers painted a picture of a company that hopes to leverage its uniquely broad reach into consumer, desktop and enterprise platforms and applications to build the seamlessly integrated supply chain that numerous competitors, including SAP and Oracle, also hold up as their ERP Holy Grail.
Microsoft has been laying the foundation for “retailers of the future” -- and the agile manufacturers that could someday supply them -- for some time now. Last year, it released a cloud ERP “framework” for discrete manufacturers that calls for using social media and mobile analytics devices to distribute manufacturing intelligence beyond the shop floor. It shipped Dynamics AX 2012, a major revamp of the midmarket flagship of the four-product Dynamics family that added model-driven customization and pre-built extensions for manufacturing, distribution, and retail.
During the Convergence keynote, Microsoft showed how this vision might play out. In one demo, a fictional clerk at an apparently Dynamics CRM-driven electronics store used Facebook invites and a mobile tablet to welcome a customer by name, compare prices, and even crank up the volume on a home theater system. In another demo, Dynamics called attention to schedule and cost overruns in a financial management project and suggested changes for getting back on track.
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Some analysts who saw the demos were impressed with Microsoft’s ideas for managing vertically integrated, ERP-driven supply chains through easy-to-use “natural user interfaces” (UIs), social media and mobile analytics. “I think it’s one of the most important things to come out of Convergence,” said R “Ray” Wang, CEO and principal analyst at Constellation Research Inc.
“The key benefit of that retail solution is it’s integrated back to ERP right out of the box,” Wang said. “That information can’t be out of sync, especially since we’ve got manufacturers that are able to come up with a concept and get it to your doorstep in 10 days.” Such tight, responsive integration and flexibility could also help manufacturers build customer loyalty, which is especially important in an age when counterfeiters can deliver knock-offs almost as fast, he added.
“It’s never been integrated enough to deliver on the customer experience,” Wang said.
A small sampling of Dynamics users interviewed at Convergence suggests strong interest in the UI technology tempered by wait-and-see skepticism over delivery dates. One graphic designer whose company is both a Dynamics user and Microsoft development partner said it switched to Microsoft's cloud ERP offering, Dynamics CRM Online, from NetSuite -- one of the few natively cloud-based ERP products -- because the latter's UI is much harder to use.
Microsoft Dynamics ERP and vertical integration
The electronics store scenario, Microsoft officials said, demonstrates how brick-and-mortar retailers could someday use its many platforms to take advantage of the same social media marketing, customer analytics and product customization that until now have been mostly exclusive to e-commerce.
Some of those retailers could also be manufacturers, according to Kirill Tatarinov, president of the Microsoft Business Solutions division, speaking at a press conference after his Convergence keynote. Tatarinov said some manufacturers are taking more control of their sales and retail channels, to the point of opening two or three flagship stores under their own brand.
“This is a trend that we’re seeing in manufacturing that we spotted early,” he said. “Companies are moving more toward complete vertical integration from being focused on one or two areas and outsourcing the others.” The Microsoft Dynamics ERP architecture already supports this kind of vertical integration, Tatarinov said.
One example, according to Microsoft, is the Lotus F1 Formula One racing team, which chose Dynamics to run its design, manufacturing, retail and merchandising operations. Microsoft itself is following the same trend, branching out with its own retail stores.
“Manufacturers are starting to get rid of the distributors between them and doing direct to consumer,” Wang said. “Manufacturers are realizing that they’re going to have to get into selling on their own.”
Company officials also reiterated their ongoing case for Dynamics as the best choice for the second tier in two-tier ERP. Dell, for example, uses Dynamics AX for assembly plant automation.
Since the release of Dynamics AX 2012 last year, Microsoft has also claimed to be the only ERP vendor that can handle discrete and process manufacturing in the same instance of the software.
“It’s one planning engine,” said Kees Hertogh, director of product management for Dynamics AX. That approach helps manufacturers break down the artificial walls between process and discrete to build “unified natural models” of their business processes while improving efficiency through lean manufacturing, he said. “We’ve done a lot of work in making it easier to do lean,” Hertogh said. “They can actually tiptoe into lean versus doing a massive business process redesign.”
One example of a company using the hybrid manufacturing features is the Royal Canadian Mint, which taps the process-manufacturing features of Dynamics AX to refine metal, then switches to discrete to custom-stamp the coins.
Metro UI: New face of Dynamics ERP?
By Microsoft’s admission, executing this ambitious vision hinges greatly on spreading the Metro user interface of its Xbox 360 game system and Windows Phone to other platforms, including the upcoming Windows 8 operating system, a beta version of which Microsoft released in a “consumer preview” in February.
The company says the new UI will run on multiple devices, from smartphones to desktop PCs and large screens, with or without a mouse or keyboard. It is oriented toward touch-screen control but will vary access by the type of device and user preference. Hertogh noted Microsoft is also developing Kinect-based motion-detection and natural UI devices for manufacturing shop floors.
Wang suggested Microsoft has a lot to offer in this area, pointing out that it was an innovator in the “surface computing” that has been popularized by the swiping motions used on Apple’s iPad screens, he said.
“The point is to create really flexible experiences” for all users of the common interface, including retail clerks and their customers, Wang said. “The system that is taking your credit card is also the system that can handle inventory.”
But does the Convergence demo differ that much from the supply chain integration visions of ERP competitors like SAP and Oracle? Wang said Microsoft might have an advantage.
“A lot of the early parts of the retail solution are there,” Wang said. “I think it’s going to take them another three to four years to build out this roadmap. The problem is it’s never been integrated before.” Microsoft has chosen to work with partners to build the end-to-end architecture, which could be a strength that will also present its own challenges, he said.
“For the midmarket and some of the larger manufacturers, there’s an opportunity to do a swap-out” of their existing ERP system in exchange for lower cost and greater flexibility. But that will only happen if Microsoft gets its act together and actually delivers on its ambitious vision, Wang said.