Dynamics 365 – Consumption vs. the Channel
I talk to a lot of partners… all the time… about a lot of things. One item that seems to come up increasingly more often, is about this incessant chant around “Consumption”, and Microsoft’s increasingly aggressive herding of partners towards that shining light. Many partners I talk to don’t even know what it is, and to be honest, I am kind of fuzzy on it too, but it is obviously paramount to Microsoft.
Post Updated 10/08/17 (end of post)
While not entirely clear to me, I can take a stab that anything that spins Azure servers is generating consumption. I would assume then, that all Microsoft first-party SaaS apps spin those servers. I also assume, that any third-party apps that run on Azure, or run on first-party SaaS apps, also spin them servers. Conversely, any on-premise or partner-hosted applications, do not move the Azure needle. So you do not have to know why consumption is paramount to Microsoft, you just have to understand that their cloud makes it happen, and everything else doesn’t. As a kid, I clearly remember my Dad’s explanation for many of his decisions was “Because I said so!“. So let’s assume as fact, that Consumption is King, and that Microsoft is hell-bent on getting more of it.
Dynamics 365 vs Consumption
At any Dynamics 365 related event today, you are seeing a huge number of new capabilities and services. The one thing that all of these really cool things have in common? They drive consumption. But if you take a look across the Dynamics business solutions portfolio, there are several products that do not drive consumption today: GP, SL and even NAV, with the exception of the unmeasurable blip from Financials. Customer Engagement (CRM) on-premise, and AX on-premise do not spin the right meters either. The only Business Solution products that generate consumption today are the SaaS versions of Dynamics 365 Customer Engagement and Operations (AX). So the majority of the available, and currently installed base of, Business Solutions, are on the wrong path.
Why did the Chicken Cross the Road?
Because consumption is on the other side. The problem is, too many customers and partners are still on the wrong side of the road. The Stock Market is placing a very low value on these customers, cloud is the darling, today’s market leaders, are market leaders because of cloud, nothing else matters. Microsoft got a late start, and has been playing catch up, but they are catching up. They can see the top of the hill and know that consumption is the path to get there; if you are not on that path with them, prepare yourself for marginalization (to paraphrase MH).
Will Tenerife see the light of Day?
Marko made it clear… Tenerife is ready to ship… right now. Full NAV capabilities in a SaaS product, a huge loyal NAV channel, with no reason not to start spinning Azure servers anymore. So if consumption is the goal, why is this ready-to-go consumption machine sitting on the sidelines? Figuring out pricing? That is a one meeting process. No, something else is going on here, and I think it started with the elimination of the “Business Edition” concept.
On the Customer Engagement (CRM) side there will now be a single product, with gated feature levels. One Sales App for example. That means one code base to maintain, advance, support and connect to/from. A single platform that can handle customers of all sizes, SMB to Enterprise. Awesome! But now turn your head to the ERP side. Let’s go ahead and ignore GP and SL, as these non-consumption generators, are Dead Platforms Walking. There may well be a battle shaping up between NAV and AX.
Does Microsoft need more than one ERP?
Let’s face it, Microsoft is not going to invest heavily in the SMB customer. They basically just pulled the plug on the first legitimate efforts the Business Solution Teams have made specifically for SMB with the Business Editions, in favor of the simpler to maintain, gating of enterprise features. I actually have no issue with this, depending on how it fleshes out. And obviously one enterprise customer can generate a lot more consumption than a shitload of SMBs. So why not take the same approach with ERP? Take the already “SaaSed” AX, an enterprise product, and create a similar feature gating scenario that they plan for CRM. A one-size-fits-all ERP. Stepping back from whatever your particular platform of choice is as a partner, and looking through the Microsoft side of the lens, that could have a lot of appeal.
Steve talks out his ass
It’s true… I am not an ERP partner, and I don’t have a dog in this fight. I have listened to many different partners; explaining to me why GP will never go away, or how complex AX is, and why a SMB could never use it, or how NAV is the most used Dynamics platform. I have also heard about how completely different these ERP products are, from a platform and development standpoint. I can appreciate that, because as a CRM partner, I struggle grasping any of these ERP platforms. So clearly, many of the NAV vs AX nuances will be lost on me. But I think they may also be lost on many at Microsoft as well. All of these platform teams are pretty siloed. I not sure if even they grasp the nuances between them, much less the leadership team abstracted above them, deciding the fates.
Pruning vs. Limb Removal
I think the Business Solutions team has been struggling with multiple conundrums. If they place too strong a lever on cloud over on-premise, a segment of customers and partners will be alienated. If they announced end-of-life for GP, another segment of customers and partners will be alienated. If they announced that SaaS AX was going to be the single platform moving forward, almost all of their existing ERP customers and partners would riot. If you agree that the platforms are indeed that different, then it is the same level of investment for a NAV partner to “start over” with AX as it is for SAP for example, and they will be quite angry with Microsoft. It would be no different than if they told me that going forward, CRM would be an enterprise only product, I would have no choice but to re-defect to Salesforce.com. So the things that Microsoft must do to meet the new consumption bar, are in a pitched battle with a strong status quo. But at some point soon, I expect that Microsoft is going to swap the pruning snips for the chainsaw.
But Steve, we have seen Roadmaps!
Roadmaps indeed. There are roadmaps for GP, SL, NAV, etc., and if you are taking their existence to mean your platform of choice is safe, you should think again. Remember, there were also roadmaps for MDM, Parature, and most recently “Business Edition”. Roadmaps are simply an attempt to plot out a future path, based on what is known, at the time that the roadmap is generated. Based on recent history, you should not put much faith in any roadmaps, not today, and probably not ever again in this new world, from Microsoft or any other cloud company… it’s just not realistic.
Stopping the Hemorrhaging
Microsoft does not break out the specific revenue numbers for Business Solutions. They talk about growth, etc, and they may very well be doing fine on the Business Solutions side of the house. But if they are, it is in spite of massive amounts of money that have been flushed down the toilet in recent years. Imagine how much better off they would be, if those missteps had been avoided. Hindsight is very expensive. The Stutz through Jujhar era was very expensive. James Phillips now has command of this seemingly rudderless ship. A ship, that if properly navigated, could be a huge driver of consumption. He will have to make some very unpopular decisions, leading to factions of even his own crew revolting. But if consumption is the goal, revolt is the rough water he must pass through.
Calm Waters Ahead?
As a Microsoft Business Solutions Partner, you crave stability and predictability, as do most of your customers. Clearly you were all spoiled during the decade preceding cloud. Even with a comprehensive strategy and a firm hand on the ship’s wheel, there are no calm waters to navigate to anymore. The best we can hope for, is that we stop hitting successive hurricanes.
A Fictional Post
So I have made quite few speculations in this post that are not based on any official or unofficial information that Microsoft has shared. In fact, since I am under NDA, if any of this was discussed, I could not have shared these thoughts at all. So this is all my personal read of the tea leaves. If you have been reading my blog for long, then you know that I am just as often 100% correct, as I am 100% full of shit. So please, don’t make any business decisions based on anything I write, but don’t just sit on your ass either.
So I heard from quite a few folks about this post, many leaning towards the “Steve is full of shit” side of the house. As in the past, I have not altered what I said above, but wanted to add more information here. One of the things I heard loud and clear, is that even though Tenerife may well be a consumption machine, NAV has been generating a significant amount of consumption already. It seems that a goodly number of hosted deployments are in fact hosted on Azure, so I am not afraid to admit that I was quite a bit off on that one. One thing I can guarantee, it will not be the last time I am completely wrong. James Crowter wrote an excellent recap of where things now appear to be here.