Microsoft: Partnering Up or Partnering Down?

Microsoft is making its Dynamics business applications more industry relevant, the company revealed at its Convergence conference in San Diego in March. The software giant an-nounced Dynamics Industry Solutions, a new program under which Microsoft will build in additional vertical capabilities to its ERP and CRM applications through a combination of internal development, small-scale acquisitions, and a deepening of its Industry Builder incentive program, according to Tami Reller, corporate vice president of Business Solutions Marketing, at the conference. Future industry-specific offerings codeveloped by Microsoft and its partners can be standalone offerings or ISVs can build on top of them, according to Reller. Microsoft had been relying on its partners to add industry-specific functionality to its Dynamics software. This was sometimes problematic for customers that needed vertically focused solutions. "Those users were largely dependent on code developed on top of Dynamics, often by very small ISVs' code that wasn't backed by Microsoft," says Yvonne Genovese, a vice president and distinguished analyst at Gartner. That behavior is about to change. "We're strengthening opportunities for our partners," says James Utzschneider, general manager of Dynamics marketing. At the conference the company also announced Microsoft Dynamics Certified Solutions, a third-party program in which Microsoft tests and approves new code from all partners certified on Microsoft Dynamics software. Microsoft will then identify the top 500 ISV solutions that meet the specialized needs of particular industries. Laurie McCabe, vice president of SMB insights for AMI-Partners, says, "If you think back to Microsoft's acquisition of Great Plains, everybody thought that would send ISVs running, but it didn't. For Microsoft's partners it's a question of how much farther are they going to go with this vertical initiative and how much room they're going to give the partners. Some will see this as a threat, others won't." Utzschneider pointed to the strategic alliance Microsoft recently struck with public-sector information management software vendor Tyler Technologies. With its headquarters in Dallas, Tyler has more than 6,000 customers, most of which operate in the U.S. local-government sector. Tyler Technologies has 1,500 staff and approximately $200 million in annual revenue. In January the two companies announced a joint development of public-sector accounting functionality for Dynamics AX, suitable for out-of-the-box use by governments worldwide. The enhanced version of Dynamics should appear in the latter part of 2009, according to John Marr, Tyler president and CEO. Marr welcomed Microsoft's industry-focused move after having spent years talking to Microsoft, but found it challenging to define a relationship that would benefit both companies. "They're now saying, 'Be a part of our development team.'" Moving forward, Reller says more verticals will be added to the current five--manufacturing, distribution, retail, professional services, and public sector--that comprise the Dynamics Industry Solutions program. "This is just the starting point. As we see continued uptake in specific areas, we'll base our expansion from there." --Colin Beasty

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