Tuesday, April 19, 2011

What’s new with Microsoft Dynamics AX 2012

Microsoft held its Convergence conference in Atlanta last week, and one of the big items on the agenda was the scheduled general availability this August for Dynamics AX 2012 (formerly known as Axapta). There are several areas in which this new version of AX is a real advance for Microsoft, positioning AX up-market more and more as a viable alternative to SAP and Oracle for many customers.

First, let’s see some areas where Microsoft is moving the ball forward with AX.

Microsoft Dynamics AX as an ISV platform

With this new release, Microsoft is positioning AX as more than just another ERP offering. It is now pushing AX as a platform for other independent software vendors (ISVs) and business partners to build out narrow industry-specific solutions. AX currently has strong functionality for manufacturing, public sector (in four countries currently), service industries, distribution, and retail (coming soon).

Of course, many other ERP vendors target specific industries. But Microsoft is going beyond this level of focus. It has a major effort underway to recruit ISVs and business partners to extend this industry-specific AX functionality with more narrow solutions to target certain sub-industries.

For example, Microsoft has already signed up Lexis Nexis to build its legal firm solutions on top of native AX functionality for professional services. Likewise, Aldata is providing fashion and apparel industry functionality on top of AX’s retail industry solution. In another example, Microsoft recently purchased intellectual property from Tyler Technologies for the public sector and rolled it into the AX core. Now Tyler is building solutions for the government and government contracting sectors on top of AX.

Few ERP vendors are moving as aggressively to position their products as a platform for other ISVs. Smaller ISVs often do not have the resources to keep their products up-to-date with the latest technologies. By building on top of AX, they can focus their efforts not the part that really counts--the industry-specific part--instead of modernizing legacy code or reinventing the wheel with another general ledger. In one-on-one analyst briefings, Microsoft executives tossed out approximate numbers of ISVs currently in discussion about following the example of Lexis Nexis, Aldata, and Tyler Technologies—if half this number commit to AX as a platform, it will be truly impressive.

International support

There are also improvements for global implementations. Dynamics currently has development centers in Brazil, Russia, India, and China (the so-called BRIC nations). It is rolling in localizations for these countries and others into the core product, which greatly improves its global support. AX traditionally has relied upon local partners to provide customizations, which may still be appropriate in some localities. But too many partner localizations sitting on top of one another can be cumbersome. So, Microsoft’s approach makes a lot of sense to take on more of these international requirements in the core product.

Expanded functionality

In terms of new functionality, there is much to like, with new core ERP features and functions for supplier relationship management and case management, a new constraint-based product configurator, public-fund accounting, project quotation and budget control for service businesses, better multi-entity capabilities, and embedded business intelligence and reporting. There is also a new role-based user interface, and enhanced interoperability with familiar Microsoft tools such as Word, Excel, Outlook, and Sharepoint.

From the first day keynote, it was clear that Dynamics AX has its share of whiz-bang features, thanks to its ability to leverage innovations coming from other parts of Microsoft. For example, Microsoft's Lachlan Cash showed a prototype the new AX visual Kanban display, manipulated by means of the user’s body motion, using Microsoft Kinect, which is technology used in Microsoft’s Xbox gaming console (see photo). Cash pointed out that such an application would be ideal in a down-and-dirty manufacturing plant, where it might not be advisable to have users touching a keyboard and mouse.

There is much more, too much to list here. A "what's new" fact sheet is available that outlines all the enhancements of this new release and is worth a careful read.

Cloud deployment options

During the conference, many observers headlined their reports, in effect, that Microsoft is “moving its Dynamics line to the cloud.” However, the reality is that Microsoft is moving AX to the cloud in stages. At present, prospects can have their AX systems hosted in partner data centers. When the 2012 version is released in August, it will be continue to be available as a hosted solution in partner data centers, with hosting in Microsoft's Azure cloud available with the next major version after AX 2012.

Although options for cloud-based deployment with the AX 2012 version are currently limited to hosting in partner data centers, this should be sufficient for most customers. As pointed out in the analyst briefings, customers today tend to be conservative in moving their core ERP functions such as financial applications off-premise, although they may be interested cloud deployment for selected functions, such as CRM, time and expense reporting, and applications that support the mobile workforce. As Microsoft and its ISV partners build out complementary products on Azure, all customers will benefit, whether they have AX hosted on Azure or continue with on-premise deployment. So, Microsoft still has time to build out its cloud deployment options.

Where does AX fit?

Considering all of the above, Microsoft Dynamics AX is a strong candidate for organizations in the mid-tier and above, especially for those with the following characteristics:
  1. Organizations in sectors targeted by AX, specifically manufacturing, distribution, retail, public sector, and services. These are major industry groups covering a broad swath of business types.

  2. Organizations that have standardized or want to standardize on Microsoft's technology stack, such as Windows Server and MS SQL Server.

  3. Organizations where users want to leverage their familiarity Microsoft's end-user productivity tools, such as Microsoft Office, Exchange/Outlook, and Sharepoint.

  4. Organizations needing an ERP system that can scale globally to multiple international locations without incurring the overhead and expense of an SAP or Oracle.

  5. Or, conversely, organizations that have SAP or Oracle running for centralized functions such as financials and HR, but desire a lower-cost, small footprint solution for local operations or satellite offices/plants—the so-called “two-tier” strategy.
Finally, organizations running multiple legacy systems that want to consolidate to a single modern platform are well advised to short-list Dynamics AX. Its backing by Microsoft in many cases will be enough to warrant AX a closer look. With the enterprise software industry undergoing consolidation over the past decade, Microsoft’s continued investment in AX gives customers and prospects the assurance that AX is not at risk for being acquired and orphaned.

A practical way forward

The enhancements introduced in Dynamics AX 2012 are not revolutionary, but rather reflect the continued evolution of a product that has become the centerpiece of Microsoft’s ERP strategy.

Microsoft’s promotion of AX as a platform is an interesting product strategy, enabling ISVs and business partners to build out more focused industry solutions (the so-called “last mile” of the solution). This approach blends well with Microsoft’s partner strategy, allowing partners to find new ways to make money while increasing the attractiveness of AX as a niche solution in a variety of sub-industries. As more and more prospects choose cloud-based solutions, traditional sources of partner revenue (e.g. hardware sales, networking, etc.) will dry up, and partners will need to provide more of a value-add. Industry-specialization is their ticket.

Microsoft is also moving in the right direction in strengthening AX for multinational organizations. Microsoft’s efforts now make AX a real alternative to SAP and Oracle, either as a complete replacement or as part of a two-tier deployment, with SAP or Oracle operating at headquarters and AX running in satellite locations. For those uncomfortable with a de-facto duopoly at the top end of enterprise ERP, the emergence of Microsoft Dynamics AX as a viable option is a welcome development.

Update, May 18: corrected timing of hosting options for AX 2012.

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Update on Microsoft Dynamics products and plans


Paul Sita said...

Thanks for the update Frank.

It still sounds like the real acceptance of AX in the upper mid tier is very far away, with MS pushing off the need for specific functionality to ISVs. When will this really occur and to what standards? In the upper mid market AX has a reputation for being complex and unwieldy to implement. I'm not sure that these announcements do a lot to counter that.
Paul Sita

Frank Scavo said...

Hi Paul. Thanks for the note. I don't see it this way at all. It is not that MS is "pushing off vertical functionality" to ISVs, but letting them develop more narrow industry solutions on top of AX vertical functionality.

Second, I do not agree with the characterization of AX being complex and unwieldy to implement. For large companies and upper mid-tier (however you define), there are a couple other vendors I would characterize that way, in contrast to AX, which as I wrote, has a smaller footprint.