What to expect from the upcoming Microsoft Dynamics cloud services

Microsoft is set to launch a cloud version of its Dynamics ERP this summer. Industry analysts weigh in on how Dynamics cloud services could shape up.

At this year's Convergence conference, Microsoft announced plans to make its Dynamics ERP offerings -- NAV 2013 and GP 2013 -- available on the company's Azure cloud platform. Since then, Dynamics customers and analysts alike have had much to speculate about. Will users who choose the hosted versions find the migration from in-house ERP worth it? Will GP and NAV be faster and easier in the cloud? And when Microsoft Dynamics cloud ERP launches in June, will it live up to the hype?

The consensus among industry analysts seems to be that Microsoft's move of Dynamics to Azure is better late than never. "There's been a lot of waiting for the [Azure] platform to develop in maturity, and it seems it's finally getting there," said China Martens, an analyst at Cambridge, Mass.-based Forrester Research whose work centers on application development and delivery. "We had been expecting these [cloud ERP] versions of Dynamics NAV and GP to be out by the end of last year, but they're not coming until June, in part because the performance wasn't there. It's still a learning curve."

Oracle has been even slower in terms of adopting anything around cloud.

Christian Hestermann,
research director, Gartner Inc.

Microsoft Dynamics cloud ERP has great promise, Martens added, but NAV's and GP's success in a hosted environment will depend entirely on how smoothly Microsoft and its cloud partners can deliver their services -- a test of the software giant that will not yield results until mid-summer.

Microsoft cloud ERP vs. SAP and Oracle

Christian Hestermann, research director at Stamford, Conn.-based Gartner, said Microsoft Dynamics customers probably won't encounter any surprises from the impending Azure suites. "[Microsoft's announcement] isn't anything new from an end-user perspective, because already today they have a lot of choice in terms of hosting partners, either with a traditional upfront license or with a subscription-based license," he said. "They're making small steps in the direction [of cloud ERP] by offering two of their SMB [small and medium-sized business] solutions -- GP and NAV -- on the Azure platform."

It's important to note that Microsoft's new approach to cloud ERP is still quite different from those of tier one rivals SAP and Oracle, Hestermann explained. "Oracle has been even slower in terms of adopting anything around cloud. Over the last couple of Open Worlds, they started to get into the topic. Finally, they've bought Taleo and a couple SaaS [Software as a Service] systems out there, but there is not yet a clearly communicated [cloud ERP] strategy," he said.

SAP has taken more time to establish itself in the cloud ERP market, according to Hestermann, with years of on-demand service through SAP Business ByDesign under its belt and its acquisition of the SuccessFactors cloud services. "[SAP]'s cloud on-demand story has been very much around their line of business, add-on functionality to their large ERP suite," he said.

Current Microsoft Dynamics customers interested in cloud might best be served by shopping around first, rather than automatically moving to Dynamics on Azure, experts suggest. "I think for any manufacturer looking at cloud ERP, digging down into what the various vendors are offering [is important]," Martens said. "Is it fairly simple functionality -- and is that good enough -- or is all the sophistication there in terms of the cloud? This is one area where maybe, for the moment, on-premises has the edge."

Potential benefits of Microsoft Dynamics cloud ERP

When it comes to leveraging these expanded cloud options, Microsoft Dynamics customers in manufacturing should examine which of their business needs could benefit most from improved communication across the organization, Hestermann said -- in other words, "those parts where there is a lot of collaboration with external parties and remote users." This could include connecting with suppliers of varying sizes and giving them the ability to access some of the manufacturer's information in the cloud, leading to greater visibility across the supply chain.

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Microsoft Dynamics customers could also improve their mobility strategies by moving to the Azure platform, Hestermann said. "With a cloud system, it's easier to have mobile or remote access, because by nature those systems are more easily accessible with the Internet. It's less a question of functionality and more a question of requirements when it comes to which [modules] work in the cloud," he said.

Business transactions in general should run faster on Microsoft cloud ERP, Forrester's Martens noted, and smaller, up-and-coming manufacturers will especially benefit from the ability to more easily adjust the scale -- and the cost -- of their ERP systems. "There's a sense that potentially, Azure [ERP] could be cheaper than on-premises," she said.

According to Kimberly Knickle, practice director at IDC Manufacturing Insights in Framingham, Mass., giving Microsoft customers the option of letting someone else handle the hosting and infrastructure portion of ERP will help ease the incremental adoption of modules and functionality, free up the manufacturer's IT department, and make the whole system more flexible.

One of the main reasons why Dynamics in the cloud -- and cloud ERP in general -- holds appeal for manufacturers is cost-effective access to IT resources, she added.

"It's about IT efficiency and agility, and enabling business innovation down the road," Knickle said. "Putting Dynamics in the cloud gets [manufacturers] access to all of this, plus automation and faster deployment."

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