Insider Insights into Changing ERP Software Buying Trends from Paul White, Microsoft Corp.

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At Convergence 2012 I had the chance to interview Paul White, Senior Director-ERP Product Management at Microsoft Corporation since 2010.  Paul is based in the UK and for 5 years prior to 2010 was the Director of Microsoft Dynamics, responsible for Microsoft's Business Applications business in the UK. The Dynamics product with the largest customer base in Europe is Microsoft Dynamics NAV, so during our conversation NAV was the definite focus.  But Paul’s insights into the changing trends in ERP software selection and buying patterns, especially in the SMB [Small and Medium Business] space, go across all product and geographic lines.

Editor: What trends do you see for SMB buyers of ERP software?

Paul White: “The biggest challenge in our marketplace is not the cloud transition and all the rest. It is more about who SMBs want to serve them. Our industry has spent the last 20 years serving SMBs through relatively small local regional VARs or SIs but we see that model changing beyond all recognition. We don’t consider the economics for small local regional VARs will survive for much longer, you have to have scale. In our minds we see new channel partners emerging. We think SMBs will look to different kinds of organizations in the future to serve their business application needs. Whether it is banks or accountants or industry groups.”

“For example, we have one project in Canada where a big agra chemical supplier just wants to equip its supply chain with a standard ERP solution, a standard business application. That is not something that used to happen 3, 5, 10 years ago; but now,  going forward, those distributors don’t want to go individually through the process of selecting an application. Their key supplier will do it for them and provide it almost as part of the franchise kit. Accountants have always played a role in the recommendation, but actually now we see more of them looking to provide it as a service, as a platform for their business process outsourcing. So we see accountants taking finance departments away from their clients and doing all the transactions for them.  I think the cloud is changing the cash flow for our traditional channel and makes new business models possible for a new channel.”

“I think there is big swing coming in how prospects [people in the ERP Software selection process] determine who to buy from and search for applications. The whole RFP concept that everyone has grown up with will largely disappear. Yes, we can all party when that happens, just because it is inefficient.”

Editor: How do SMB buyers find Microsoft Dynamics NAV?

Paul White: “Through referrals from people in industry, previous experience, Bing and occasionally Google, through some of the channels we talked about earlier, accountants, banks, industry associations.  The usual suspects. Clearly many of them now find products that way, rather than responding to 1980’s, 1990’s [style] marketing.  That used to be the old construct of the market, not anymore. They certainly want to “click and try”. “Try” might be an immersive experience on the web that gives them a feel for the product, as opposed to a trial. And then they want to get into a practical conversation with someone who understands the business, who can add value to the conversation, before they then move into the rest of the sales process.”

Editor: What is the ideal partner model based on these changing scenarios?

Paul White: “The key issue is IP [Intellectual Property]. A partner has got to bring something unique to the mix. It used to be good enough that you were within 20 miles drive and knew the product. That was sufficient to entitle you to offer the proposition. Now, that does not even get you to first base. You either need to be operating at scale, which inevitably nets out to a cost proposition, or operating in their industry and have specialist capability, or you already trade with them for some other reason. You supply banking services or accounting outsource services or you are their primary supplier of stock. You have some other engagement. The cost of sale is the biggest issue. Partners cannot afford to spend the time that customers have historically wanted them to spend. Customers won’t pay the prices that are associated with that time. So it is all going to have to change.”

Editors: Several years ago in an interview you commented on the fragmented ERP market. Is this still the case? How does Microsoft want to position itself in this market?

Paul White: “If you think about the replacement cycle of ERP solutions, they are very low.  (Note: Here Paul referred to an abacus analogy used in an earlier presentation. The graphic of the abacus as a symbol of a functional yet simple accounting system compared with a cockpit type control panel symbolizing today’s multi faceted systems.). If you have an abacus, and it works, why would you buy another? That is kind of the space the whole industry has been in. Our ambition is to offer users the rich display, which we think might provide greater interest because it offers greater value. But at the moment, in the current market, the replacement cycles only support the incumbent suppliers, people like Sage and Intuit, reoccurring revenues and big maintenance contracts. This may not provide all the value to customers that they might wish.”

“We have to try to offer something different. Microsoft is well poised to do that because of the other assets we’ve got. The reoccurring theme is that this is not generally about ERP functionality, they do what customers need them to do, it is about providing a broader context for our capability, it is about integrating process with communication and collaboration capabilities. That is how we will advance our proposition in the marketplace and differentiate our story. And the more we do that, the faster the market will defragment. The current fragmentation reflects that people are not changing their systems.”

Now it is time to give your insights.

If you are a reading this, and currently involved in a software selection process, do you agree with Paul’s assessment of how your research and buying trends have changed?

If you are a Dynamics ERP partner, do you agree with Paul’s vision of the ideal partner model, and do you think you are there yet?

And is Microsoft positioned effectively to differentiate itself in the competitive ERP software marketplace?

I look forward to your comments.

By Anya Ciecierski, ERP Software Blog Editor

1 thought on “Insider Insights into Changing ERP Software Buying Trends from Paul White, Microsoft Corp.”

  1. Henry Courdelion

    Paul White deludes himself into thinking that Microsoft have got "their" strategy right. This is a person beating the corporation drum to their own beat. The definition of SMB's is far too wide to take such strategic views and whilst Microsoft propagate partially developed, non-integrated software solutions there will always be a need for a local person with the skills needed to hand-hold the client. "SMB" covers a very small number of larger companies that may fit his model. I would argue that Dynamics NAV has no future if that is their approach to system delivery, which I believe it is, as evidenced by the horribly biased dealer favouritism that already exists in their channel.

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