Enterprise System Spectator blog: ERP and enterprise system vendor evaluation, selection, and implementation.

The Enterprise System Spectator

Friday, March 14, 2008

Microsoft Dynamics revenue growth less than stellar

Josh Greenbaum has put together some revenue numbers for Microsoft Business Solutions, the group that develops Microsoft's enterprise applications, and finds that the group has been growing at a rate less than half of that shown by SAP and Oracle.

The numbers are not easy to get at, since Microsoft stopped reporting revenue for the group in 2006. But Josh made note of a mention by Kirill Tatarinov, head of Dynamics, that revenue was now at $1 billion. Comparing that number to the $919 million reported in 2006, it appears that Dynamics has only been growing at an annual rate of 8.8%.

Josh writes:
But instead of something to crow about, $1 billion – a growth rate of 8.8 percent – represents a pretty lousy number for a group that was growing in double digits only a year earlier. It’s even worse when you consider that during roughly the same period SAP grew 18 percent and Oracle grew 30 percent if you include its acquisitions, and an estimated 8.8 percent if you look at pure organic, non-acquisition-based growth. And don’t forget, that 8.8 percent growth includes what everyone at Dynamics calls the hockey puck growth curve for CRM, which, I was told, has been growing at 100 percent per year for the last two years. Which means if you want to understand how non-CRM growth is at Dynamics, it’s safe to either knock a few points off the overall number (7 percent? 6 percent?) or discount the heavy growth in CRM as a largely revenue neutral.
As Josh points out, this less-than-stellar revenue picture could explain the revolving door of top management personnel at Microsoft Dynamics.

So, what to make of the slow growth of Microsoft's enterprise system products? I don't think the blame can be placed on the products themselves, which comprise the Axapta (AX), Great Plains (GP), Navision (NAV), and Solomon (SL) ERP systems. Microsoft obtained these products in its acquisition of Great Plains and Navision in 2001 and 2002 respectively. These were good products prior to Microsoft's acquisition, and Microsoft has continued to develop them. Customers I speak to are generally happy with them. (Microsoft developed its CRM product from scratch, subsequent to those acquisitions.)

I think the problem is that Microsoft is just getting outsold, especially by Oracle and SAP. Microsoft's sales model is 100% through business partners, a model that is more difficult to manage than that of Oracle and SAP, which rely primarily on their direct sales force and supplement it with resellers. Resellers tend to get busy in implementation with a few good accounts and are apt to slack off new sales efforts. Microsoft can't lean on resellers at the end of the quarter in the same way that Oracle, for example, can lean on its own direct sales force.

Furthermore, few resellers have the scale to compete effectively in larger deals. With the rise of globalization, many small and mid-size companies today are truly international businesses, with production and distribution operations throughout the world. A small reseller in Chicago, for example, cannot deploy resources as easily as SAP or Oracle in supporting a customer with operations in Europe and the Far East. If they try to compete, they simply get outsold by the big guys.

Microsoft is apparently having some success in signing up larger organizations as resellers. Witness the announcement this week that Microsoft is expanding its relationship with EDS to sell Dynamics CRM. Such relationships certainly address the scale issue, but I still question how much EDS is going to jump when Microsoft starts pushing at the end of the quarter.

Now we have Steve Ballmer claiming that Microsoft is now the "leading provider of enterprise software" in terms of "total dollar volume" -- a claim that is ludicrous on its face. Apparently, Ballmer is lumping in Microsoft's database (SQL Server) and its collaboration system (Sharepoint) with Dynamics -- clearly apples and oranges.

Microsoft has ambitions to compete in business applications with Oracle and SAP, but it is trying to do so with a sales model inherited with their acquisitions. The revenue picture reflects the reality that in some fashion Microsoft needs to think about having some role in direct sales for larger deals.

Update, 5:00 p.m. A source at a Microsoft reseller points out that Microsoft's direct enterprise sales people do in fact get recognized when a Dynamics sale goes through for one of their customers. However, the sale must be done through a reseller, and the Dynamics products are not included in Microsoft's volume license agreements. But since Microsoft's direct sales people are measured on enterprise license sales revenue, Dynamics is not top of mind for these folks. In other words, I don't believe they have a quota for Dynamics.

Related posts
Microsoft Dynamics: management changes spell lack of direction

by Frank Scavo, 3/14/2008 01:38:00 PM | permalink | e-mail this!

 Reader Comments:

One comment added to this article hypothesized that Microsoft's direct sales force may not have a quota on Dynamics. In the same comment, a reference is made to the direct enterprise sales force within the Dynamics field organization.

Some added thoughts:
Microsoft actually fields several different selling organizations structured alond a matrix of target customer size, geographies, and other parameters. One of the parameters not heavily embedded in this matrix at present is vertical industry focus, and this (I believe anyway) is a key factor in analyzing the ability of Dynamics to compete in the ERP space at present. This scenario magnifies dramatically when you extend that same postulate to and thru the various reseller channels that Microsoft sits on top of.

Microsoft has been in catch up mode on developing, deploying, and perfecting a verticalization model that works in a partner-centric go-to-market model. It is making strides in this effort, but still has a ways to go to have resellers (who currently tend to be product generalists) in a position to effectively sell against competitors with strong vertical value propositions and the internal subject matter expertise to make those vertical value propositions relevant to their target buying audience.
Post a Comment

Links to this post:


Powered by Blogger

(c) 2002-2018, Frank Scavo.

Independent analysis of issues and trends in enterprise applications software and the strengths, weaknesses, advantages, and disadvantages of the vendors that provide them.

About the Enterprise System Spectator.

Frank Scavo Send tips, rumors, gossip, and feedback to Frank Scavo, at .

I'm interested in hearing about best practices, lessons learned, horror stories, and case studies of success or failure.

Selecting a new enterprise system can be a difficult decision. My consulting firm, Strativa, offers assistance that is independent and unbiased. For information on how we can help your organization make and carry out these decisions, write to me.

My IT research firm, Computer Economics provides metrics for IT management, such as IT spending and staffing benchmarks, technology adoption and investment trends, IT management best practices, IT salaries, outsourcing statistics, and more.

Go to latest postings

Search the Spectator!
Join over 1,700 subscribers on the Spectator email list!
Max. 1-2 times/month.
Easy one-click to unsubscribe anytime.

Follow me on Twitter
My RSS feed RSS News Feed

Computer Economics
Outsourcing Statistics
IT Spending and Staffing Benchmarks
IT Staffing Ratios
IT Management Best Practices
Worldwide Technology Trends
IT Salary Report


2014 Best Independent ERP Blog - Winner 2013 Best ERP Writer - Winner Constant Contact 2010 All Star Technobabble Top 100 Analyst Blogs

Key References
Strativa: Business strategy consulting, strategic planning
Strativa: IT strategy consulting
Strativa: Business process improvement, process mapping, consultants
Strativa: IT due diligence
Strativa: ERP software selection consulting and vendor evaluation
Strativa: CRM software selection consulting and vendor evaluation
Strativa: Project management consulting, change management
StreetWolf: Digital creative studio specializing in web, mobile and social applications
Enterprise IT News: diginomica

Spectator Archives
May 2002
June 2002
July 2002
August 2002
September 2002
October 2002
November 2002
December 2002
January 2003
February 2003
March 2003
April 2003
May 2003
June 2003
July 2003
August 2003
September 2003
October 2003
November 2003
December 2003
January 2004
February 2004
March 2004
April 2004
May 2004
June 2004
July 2004
August 2004
September 2004
October 2004
November 2004
December 2004
January 2005
February 2005
March 2005
April 2005
May 2005
June 2005
July 2005
August 2005
September 2005
October 2005
November 2005
December 2005
January 2006
February 2006
March 2006
April 2006
May 2006
June 2006
July 2006
August 2006
September 2006
October 2006
November 2006
December 2006
January 2007
February 2007
March 2007
April 2007
May 2007
June 2007
July 2007
August 2007
September 2007
October 2007
November 2007
December 2007
January 2008
February 2008
March 2008
April 2008
May 2008
June 2008
July 2008
August 2008
September 2008
October 2008
November 2008
December 2008
January 2009
February 2009
March 2009
April 2009
May 2009
June 2009
July 2009
August 2009
September 2009
October 2009
November 2009
December 2009
January 2010
February 2010
March 2010
April 2010
June 2010
July 2010
August 2010
September 2010
October 2010
November 2010
December 2010
January 2011
February 2011
March 2011
April 2011
May 2011
July 2011
August 2011
September 2011
October 2011
November 2011
December 2011
January 2012
February 2012
March 2012
April 2012
May 2012
June 2012
July 2012
September 2012
October 2012
December 2012
January 2013
February 2013
March 2013
May 2013
June 2013
July 2013
September 2013
October 2013
December 2013
January 2014
February 2014
March 2014
April 2014
May 2014
June 2014
July 2014
August 2014
September 2014
October 2014
November 2014
December 2014
February 2015
March 2015
April 2015
May 2015
June 2015
July 2015
September 2015
October 2015
November 2015
February 2016
May 2016
June 2016
July 2016
August 2016
September 2016
October 2016
January 2017
February 2017
May 2017
June 2017
October 2017
January 2018
April 2018
May 2018
Latest postings