Microsoft Dynamics catching up to cloud, says Tatarinov

Profile picture for user pwainewright By Phil Wainewright November 6, 2014
With CEO Satya Nadella pursuing a new strategy, the Microsoft Dynamics team faces change. I asked Business Solutions chief Kirill Tatarinov how it's going

Kirill Taratinov Convergence EMEA 2014 clip
It's been a year since Microsoft's Dynamics business unit — officially known as Microsoft Business Solutions — last brought its annual Convergence EMEA conference to Barcelona. And almost nine months since its chief, Kirill Tatarinov, courted controversy when he told my diginomica colleague Stuart Lauchlan that no one serious is doing cloud.

A lot has changed since then, after the installation of Satya Nadella as Microsoft CEO. Not the pace of cloud ERP adoption among larger companies, though, according to Tatarinov — more on that below.

First of all, let's catch up with how the new strategy's working out. Building on the notion of 'One Microsoft' initiated by his predecessor Steve Ballmer, Nadella has laid down a strategy of being a 'productivity and platform company'. Within that strategy, the Dynamics range of CRM and ERP products provides the business productivity component, while Office contributes the personal productivity element and Azure completes the platform.

So the contribution that MBS makes with Dynamics is core to delivering on the strategy. I sat down with Tatarinov at this week's event to ask how that's going. First of all, he spoke about the alignment on a common strategy:

Historically we were coming from different backgrounds and different starting points. It would be fair to say that now we're converging towards the same objective, which is, the latest solution is always in the cloud, it's continuous stream innovation and customers get access to the latest technology. That's the path were on.

Some parts of Microsoft entered that journey sooner than the others but I think now it is quite visible how we're going to be partners and aligned on that mode of execution.

On bringing MBS up to speed

That path is a tougher one for MBS than it is for other parts of the company, he admitted.

It would be fair to say that Business Solutions historically, as far as cloud adoption has been concerned, has not been on the leading edge — let's be clear about that — especially on the ERP side.

We still do see many customers who prefer a private cloud mode of deployment. Even those who go to the cloud, we see many of them actually use a mixed deployment mode, where some aspects of the solution that they're on is on premises, some is brought on the cloud. And there's some companies who are choosing the cloud and we're quite happy to support them.

But that mode of continuous innovation is here for the entirety of Microsoft.

As a result, the release cycles for Dynamics products are accelerating:

A year ago we introduced Dynamics and NAV 2013, which was a very significant release. Now, last month — so it's been only a year — we introduced Dynamics and NAV 2015, which is tremendously important. And we'll continue with that kind of pace. In fact if anything, we will now transform into even more frequent cadence.

Make no mistake, that transformation takes cultural change, it takes change in engineering systems, it takes change in engineering approaches, and now we have a unified common approach to how we build things, how we share across the company. That's been a very important part of the transformation that Satya [Nadella] has really spearheaded.

There's no question that MBS is a core part of that transformation, he added, noting that Nadella knows the division well having previously served as both corporate vice president of MBS and as head of software development for Dynamics.

Satya knows this business quite well from his past experiences. Satya certainly understands — and it's now part of our core and part of our strategy — how critical it is business process be delivered as part of the digital work experience.

On partnering with Salesforce

Another part of the transformation means accepting partnerships with the likes of, which competes directly against Dynamics CRM. Tatarinov gave his rival full credit for its achievements.

I think it would be fair to say that is one of the cloud pioneers. They've entered cloud earlier than anyone else and we have to give them credit for what they've done over the years.

The fact that they essentially came out and endorsed Office 365 as the best productivity solution in the cloud is quite significant from that respect. At the same time, Office 365 is what Dynamics is built on so in a way, this is an endorsement of the Dynamics platform.

We're quite excited about this partnership. This is just the way the world expects mature and sober technology leaders to behave, and that's precisely how the two companies now are working together.

Nevertheless, even though will be accessing exactly the same APIs and services as Dynamics CRM, he argued that customers will still be better off staying with the Microsoft product.

In the final analysis, customers will find that the types of integration — all the APIs and all of the services are completely shared — but the type of integration that Dynamics will bring with Office 365 and as a platform will simply be unmatched in the industry.

There is a very simple explanation for this. We are the only one who takes deliberate dependence on that platform.

We simply tell our customers, if you don't want to run our tools end-to-end, you're going to be able to plug in other tools for other providers for productivity or for the cloud, but you will not get the full benefit of our solution, because our solution is the best when it is together.

So that message — that the whole, if you choose the whole from Microsoft, is better than the sum of the parts, or better than two parts from us and one part from someone else — that is precisely the message that many of our customers are receiving now. [They] benefit because they made their choice of Microsoft as a complete provider of their technology needs.

On ERP moving to the cloud

Finally, I couldn't help wondering if Tatarinov had modified his views on who's moving ERP to the cloud. The growth of online products is clearly accelerating — Dynamics as a whole grew 15 percent last quarter, while within that CRM Online's growth is above 80 percent.

But he told me it will "quite a few years from now" before we see large companies moving ERP into the cloud.

Make no mistake, there is still very significant private cloud or on-premises deployments that are happening and those typically are larger deployments.

We're now in a situation where 60 percent of Fortune 500 companies run Dynamics somewhere in the organization. Many of the largest banks run Dynamics CRM, in particular.

While some portions of their organization may be in the cloud, the core, right now, they choose to be on-premise. The fact that we can offer this hybrid mode is quite attractive to them.

As far as for a large company to move their administrative core into the public cloud, if it happens, it happens many, many years from now. Most likely it's going to happen in some form of a private cloud, either run by them or run by someone else in dedicated fashion.

My take

Still no large companies running core ERP in the cloud, then, at least from Microsoft's perspective. But a much more joined-up approach to connecting across Microsoft's product portfolio and tightly linking the Dynamics business products, whether in the cloud or on-premise, into Office 365 and Azure services. For more on how that integration works, read my interview with Dynamics CTO Mike Ehrenberg.

Disclosure: is a diginomica premier partner. Microsoft paid my travel expenses to attend its Convergence EMEA event in Barcelona.

Image credit: Microsoft