Microsoft is moving its Dynamics ERP (enterprise resource planning) applications to its Azure cloud platform, the company announced Monday at the Convergence conference in Atlanta. The belated move represents a major change for the way Microsoft sells Dynamics, which has traditionally been sold through partners in on-premises and hosted form.
The next major releases of Dynamics will run on Azure, and customers "will be able to move to the cloud on their own terms," Microsoft said in a statement.
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Industry observers have been wondering for years whether Microsoft would make such a move, and Kirill Tatarinov, corporate vice president of Microsoft Business Solutions, alluded to the speculation during a keynote speech Monday morning.
He sought to calm any partners and customers in attendance who might have fears about what the cloud option will mean for their businesses. "Whatever we do, we bring the ecosystem with us," Tatarinov said. "It is hugely important for us to take the entire ERP ecosystem into the cloud. All those people who make those changes and bring Dynamics to you today will be there in the cloud."
Microsoft is also planning this week to discuss how partners can profit from the Azure deployment model. For one, partners will be able to sell "cloud-enabled" vertical applications, services and add-ons through the Dynamics marketplace. Microsoft has also released a Cloud Partner Profitability Guide for partners.
That said, Microsoft has no real choice but to embrace partners for cloud-based ERP, given the software's added complexity and the general need to fine-tune it for each customer. It would also be unwise for Microsoft to simply shunt partners aside, because of the vast, in-place sales channel they provide.
The eventual addition of an Azure deployment model will heighten Microsoft's competition with companies like NetSuite, which sells a cloud-based ERP system, as well as SAP, which has introduced Business ByDesign, an on-demand software suite.
The first Dynamics ERP application to get the Azure treatment will be NAV, with a major release currently scheduled for 2012, Tatarinov told press and analysts after the keynote.
Azure Dynamics deployments will incorporate multitenancy, an architecture that differs from traditional hosting in that it allows many customers to share the same instance of an application, with their data kept private. This allows vendors to deliver upgrades frequently and more easily to customers, and provides economies of scale that can potentially bring down costs.
Salesforce.com CEO Marc Benioff, one of the industry's most vocal proponents of the cloud computing model, has compared the architecture to an office building, where many different companies have private, confined offices, but share electric lines, plumbing, structural supports and other infrastructure components.
While multitenancy remains an important technology for cloud computing, its relevance is waning as the industry, including Microsoft, makes advances in virtual machine management, Tatarinov contended.
Microsoft's experience gained by delivering CRM Online at scale, along with those technical advancements, will help drive down the cost of ERP in the cloud, he said.