EONE BLOG
Why Microsoft ERP Partners Are a Little Confused Right Now

By Martin Olsen, Co-Founder / Product Director Friday, July 21, 2017



Mid market Microsoft ERP resellers are somewhat confused right now. For twenty years this has been a strong, solid, profitable, consistent industry and it has been a pleasure to be part of it. I talk to partners across the globe and I am seeing more companies looking to exit, some looking for acquisition targets, and just about all of them looking to diversify their offerings. I see partners looking to retool to discover a profitable business model in the current environment.

I want to focus on some of the challenges facing Microsoft’s reseller community and the ISVs that support them. The Microsoft ERP software space is at an intersection in 2017, leaving many of our reselling partners with some big decisions to make.  There are a couple of key factors our partners are weighing up:

  1. ERP (especially Dynamics GP) Pricing is at an all-time low: Microsoft has pushed the price point of their on-premise solutions down very low. This is a great opportunity for customers to get a fully featured ERP at a bargain price.  This lower pricing model makes it difficult to build a profitable business selling Dynamics GP/NAV alone as there much less available in ‘software revenue’.  This pushed resellers to rely on implementation services revenue to run a profitable business which many are doing very successfully.

  2. Microsoft is pushing VAR’s strongly to move to ‘only cloud’ ERP solutions: With the launch of Dynamics 365, (AKA a small business version of Dynamics NAV delivered in the cloud, together with Dynamics AX in the cloud for Enterprise customers), Microsoft is following through on their ‘cloud first’ strategy.  This is a new brand new offering by Microsoft that comes with all the teething issues on any new software release, which takes multiple years before the solution becomes stable and totally reliable.  The low-cost subscription pricing available for this solution, together with low margins for resellers, meaning that once again Microsoft is pushing their partners to become ‘service delivery’ focused and make their money through implementation. Certainly, over time the subscription license revenue will build up but that is a number of years away before it supports a reseller business.

  3. Other Cloud Players: As Microsoft pushes resellers to adopt their new 365 offering, this is giving the VARs a reason to pause and re-evaluate the software they represent and take to market. There are a number of well-established cloud players in the market with deep and solid products that target their familiar mid-market space.  ERP solutions like NetSuite, Acumatica, Intacct, and Sage are all strong players that are attempting to lure these resellers to take up their products.  All of these solutions come with their own good points and also their fair share of issues.  The Microsoft community has been selling against these tools for many years, which makes it mentally difficult to get on board and join their teams, but each VAR is passionate about doing what they have to do to make a profit. There are many Microsoft resellers that have already diversified and added one or more of these tools to their mix of offerings.

  4. Time to Go?: A number of these Microsoft ERP resellers built businesses up to 20 years ago and have made a very good living and tucked away a nest egg.  The thought of rebuilding based on another technology set is less than appealing and some of these owners are understandably considering exit strategies.

  5. Customers will not move: I do not think Microsoft has ever understood the complexity of an ERP implementation and the massive disruption to a business of changing ERPs.  ERP customers do not make a decision to change lightly.   Netsuite, for example, has spent a huge amount of money trying to convert Dynamics GP customers over to NetSuite for the past 5 years.  This attempt has generally failed miserably as they found that GP customers just will not move.  There is no doubt there have been some wins along the way but overall there has been no mass migration despite much targeted marketing. 

  6. Microsoft had a belief that they could move customers from their existing on premise solutions of GP and NAV over to 365, (they launched 365 at a large user group meeting of GP and NAV customers). Microsoft found the same thing as Netsuite; these customers do want to move.  They like the system they have, they do not want the implementation costs, they do not want business interruption, and there is no compelling reason to make a jump. (The wonders of cloud is just not reason enough to move).

  7. Direction Confusion: Microsoft’s marketing has been roughly as cohesive as the Trump White House. There is mass confusion at the reselling partner level and equal confusion at the customer level.  I attended a partner event 3 weeks ago called ‘Understanding Dynamic 365’ which was pitched at their existing customer base.  When the partner needs to host explanatory events it is clear that the marketing effort has entirely missed its mark.

  8. The problem this creates is ERP selection constipation.  Partners are not sure what tool to push. Partners are gearing up in a new direction but are not ready to deliver.  Customers are confused.  This leads to a great number of ‘no decision’ deals hanging out there.

  9. Wavering Focus: Given the confusion that partners are facing, and not wanting to be left behind, partners are investing all their time and energy in gearing up for their cloud offering.   This means VARs can lose focus on their existing base and how they have traditionally made a successful business.   It is always easier to sell to an existing customer but with a change in focus these opportunities are often left untapped.

  10. Missing Mid Market: Cloud ERP seems to be focused on the small end of the ERP market.  Tools like Xero have been very successful at the tiny end. QuickBooks is all conquering at the on premise model but has struggled a little with their cloud application. Microsoft has dumbed down their mid-market solution to target the small end of business. This ‘simplifying’ has assumed that most businesses are the same and have the same needs from an ERP.  In the mid-market this is simply ‘fake news’. Each business is different and they need an implementation that meets their specific needs, follows their business processes, and integrates with their other business solutions.   I hear rumors that Microsoft is going to release a more mid market offering shortly, but there is nothing there at present.

  11. Lack of Innovation: This might be a controversial point, but I still hold that not a lot has changed in ERP in 15 years. The cloud is hardly an ERP innovation but more a hardware change. Pretty graphs and BI has been around for a long time. Microsoft is talking up some of their ‘new technologies’ like the common data model, Flow, Power Apps etc but under the hood, these are good ideas that are a very long way from being useful.  There is potential here but right now all I see is a great deal of marketing and little useful substance.



I have covered many of the issues facing a Microsoft VAR, but we need to discuss what the solutions might be for these businesses.  First and foremost is that these VARs are ‘for profit’ business and they should do everything they can to remain profitable and successful.

  1. Take this chance to double down on your customer base: Make your customers happy.  Work with them to get the most out of their existing software solution. Sell them add-ons that give you both software revenue and services for implementation. Integrate their solutions with the best of breed business cloud apps. Amaze them with BI.  Work hard on making the ERP users efficient and knowledgeable.  Do this and they will never move systems.

  2. On Premise still has legs: Do not be scared to go to market with an on premise ERP solution. There is still a massive demand for business data to be located into the IT rack on premise. This is a tried and tested offering that you know how to deliver and you have hundreds of companies that think it is perfect for them.  Use your happy customers as references to sell more product. 

  3. Add a cloud offering: Diversifying your offering important and adding a ‘cloud ERP’ revenue stream is important. This may or not be a Microsoft offering, that choice is up to you.

  4. Go All in Cloud: This is a great choice for new VARs who can build a business based on the new rules but will be a tough move for existing VARs. The business is totally different and you will struggle to rebuild your business, your process, and your offering.

  5. Stick with your market: If you offer solutions to the mid-market, stick with that. Trying to go up to the Dynamics AX space will be very dangerous, and going down to the tiny ERP space will not support your cost structure.  You are already great at the mid-market, you are good in this market, stay there.  The mid-market is a massive market in ERP.

To summarize it is a fun time to be in the mid-market ERP space. There is a lot going on and many options to consider.  The old mantra of ‘do what you do well’ still holds. Looking after your existing customers is paramount. Investing in new areas should be a key strategy, but do not do so at the expense of the customers and business model that got you to where you are today.




Posted in: #Microsoft #partners


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Written By Martin Olsen , Co-Founder / Product Director

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