As we move into the year’s final month, many business minds turn to thoughts of replacing old or aging financial / ERP systems. (What, you thought their minds turned to sugar plum fairies just ‘cause it’s December?)
We’ve long espoused the strengths of the Dynamics NAV product, since even before Microsoft acquired the company around 2004. (Disclosure: PSSI has been a Dynamics NAV reseller since 2002.) Feedback industry gurus and editors after the recent annual NAV “Directions” Conference we attended in Phoenix earlier this year indicates where the market is heading these days. Today, we’ll share a few of those thoughts with our readers…
Microsoft talks often about its cloud initiatives, especially Azure. With the recent announcement of Dynamics 365, Microsoft’s cloud ERP offering, the seeds of confusion were sown. As it stands, the simple take is this: the Microsoft ERP roadmap shows two versions of D365 will be offered.
The first is an extension of the product released in summer code-named Madeira – that’s basically a lower-end, financials-only NAV cloud offering with subscription pricing. This product is called the Business Edition. It appears positioned, with a very low entry price point, at folks coming off a product like QuickBooks who have grown to require a higher level of functionality. It seems also targeted at NetSuite, but at a much lower price point.
The other flavor of D365 will be a mashup of Microsoft CRM and the current Dynamics AX product. That will be called the Enterprise Edition.
But Microsoft also has tacitly recognized that not all customers want cloud. In fact, according to Ray Wang, a partner at Constellation Research, “more than half of customers prefer the on-prem” solution.
Our own observations among SMB clients (in the $10M to $100M revenue range) is that the overwhelming choice preference is for the on-premise variety, since they’re mostly involved in manufacturing and distribution, where cloud solutions are simply too risky for their day to day shop floor operations to rely upon.
Nonetheless, Wang and others predict Microsoft will continue a heavy push to move clients to cloud solutions. The answer to the obvious question of “Why?” is simple enough: it’s a lot more profitable to Microsoft. Customers who lock into cloud solutions are not likely to ask for their data back (wherever it might be) very often, and the monthly recurring revenues are locked in long term. It’s a sweet deal for the provider. But as Wang also notes, after about 5 years of subscription pricing, a customer ends up paying more for cloud than they would for on-prem, where the software is largely a one-time payout.
Says Constellation Research’s Wang: “If you own on-premises software, and you are diligent at updating the software for regulatory, tax, and other legal requirements, there’s no real good reason to move to the cloud and pay more over 5 years. However, if you need the constant innovation in the product, then the cloud may make more sense.”