Microsoft - the modern ERP arms merchant

Brian Sommer Profile picture for user brianssommer February 8, 2016
If you think Microsoft CEO Satya Nadella is everywhere lately, you're not wrong. But when it comes to ERP partnerships, there's a method to Nadella's globetrotting. Here's how Microsoft is changing the modern ERP landscape.

Last year, at Sage’s annual user event, there was Satya Nadella, CEO of Microsoft, on the big screen discussing how Microsoft technology was going to help Sage in its application and cloud development efforts. The language between the two firms was further amplified in this September press release:

Sage, the world’s leading small business accounting and payroll solutions provider, today announced a global agreement with Microsoft to collaborate on future product development. This will include new Sage products built on Microsoft platforms and closer integration across the two companies’ respective product portfolios. Through this agreement, Sage will deliver next-generation accounting and bookkeeping productivity tools built on best-in-class Microsoft cloud solutions.

Was this a new tech bromance in the offing or part of a larger trend? It’s the latter!

Enterprise application software is a very different market today. The ‘good old’ days of ERP (i.e., the 1990-2010 era) was a time when material releases or upgrades were a rare commodity (i.e., once every few years). Worse, they were an absolute pain to implement. Code changes were slow coming and clients were slower still implementing them.

That world is gone. Today’s multi-tenant cloud solutions destroyed the old world order. Most enterprise vendors now ship 2-4 releases annually. At one point, I saw a vendor release over 100 upgrades in a year (sometimes there can be too much of a good thing). Upgrade frequency is definitely up, but so too is the materially of the upgrades. Vendors are now overhauling their user interface/experience about every 18 months now. Innovations in analytics and mobile functionality are currently pushing tons of new capabilities to software buyers today.

But new capabilities are looming, each with game-changing potential. The need to include machine learning, artificial intelligence, big-data influenced data models and more into ERP suites is making software vendors reconsider what their solution stack should contain, and where they’ll get those components. Will they get these new game-changing capabilities from:

  • the usual old school systems software providers
  • open-source products
  • their own custom development efforts; or,
  • other technology providers?

Hmmmm, I smell change afoot.

One of the key players to watch in this is Microsoft (with Amazon playing a close second). If you’ve been to a recent ERP conference, I’d give even odds you’ve seen a Microsoft pitch like this one:

Satya Nadella is everywhere in ERP

Photo © TechVentive, Inc. – All Rights Reserved – From 2016 Acumatica User Conference

The New Microsoft

Microsoft? Really? Really! Microsoft is providing some powerful tools and capabilities to a lot of ERP vendors these days. Unit4, SYSPRO, Acumatica and others have been provided some slick tools that plug into their product lines and cloud technology stacks. Your next application purchase could very well have some material Microsoft technology powering it.

It seems every ERP conference I attend lately has a Satya video or live mini-keynote from a key Microsoft executive. What’s interesting with this is that Microsoft has a large enterprise application business of its own. Products like Dynamics (Great Plains), Dynamics AX (Axapta), Dynamics SL (Solomon) and Dynamics NAV (Navision) have made up the Microsoft Business Suite for years. But because these products competed with other ERP vendors, Microsoft wasn’t always the go-to source for many ERP vendors for technology stack components. That was then. Today, it’s a very different story:


Photo © TechVentive, Inc. – All Rights Reserved – From 2015 Acumatica Analyst Meeting

Some of the new Microsoft stack pieces are very cost effective, a sentiment I’ve heard from several CIOs, when compared to some of the other traditional systems software solution providers. Performance has been solid, too. And, a lot of the cloud ERP vendors like the cloud capabilities that Microsoft has to complement its tools.

The really attractive tools appear to be Microsoft’s new artificial intelligence/machine learning and business intelligence solutions. Lots of ERP vendors want these:


Photo © TechVentive, Inc. – All Rights Reserved – From 2015 NetSuite User Conference

I haven’t seen so much professed love for one software company like this in eons. ERP vendors are liking this new Microsoft, and are giving it a chance to power big chunks of their cloud solutions. Some of the most discussed items I’m seeing ERP vendors glom all over include Power BI, Office 365, Azure Cloud SQL Server - to name a few.

Unit4 has positioned its ERP product line around the ‘self-driving’ concept. In a mid-2015 press release, Unit4 stated:

Unit4 will use the smart technology in Azure’s PaaS platform components and Microsoft Office solutions including predictive analytics, machine learning, event stream analysis and complex event processing. Combined with Unit4’s People Platform, the collaboration boosts speed of innovation and will see customers benefiting from a new approach to enterprise computing.

To deliver on the promise of self-driving ERP, Unit4 and Microsoft will establish a development team to ensure that innovations in Azure and Office are used as quickly as possible within the Unit4 People Platform. Contextual information will be derived by combining business data within Unit4 applications with relevant information from Office 365, Office Delve, email, calendar, Yammer and more.

Microsoft’s value proposition and technology edge may be more significant than many might think. In the area of machine learning, the company formed its Microsoft Research group in 1991. It developed capabilities in 1997 to detect junk mail in its Hotmail service. It utilized its smart technology to suggest travel routes in its Bing map application in 2008. Likewise, the Bing search technology was enhanced in 2009 to identify the most relevant search results. Other products, like Kinect and Skype, have been beneficiaries of Microsoft’s machine learning technology. In 2015, the company productized this capability and its Azure Machine Learning went GA.

Just look at the Azure Active Directory from Microsoft. Microsoft has amassed an enviable roster of ERP and other software vendors to be part of this program. Users of solutions like Salesforce, Workday and others can take advantage of single sign-on capabilities:


Source: Azure Active Directory Marketplace

There are more vendors using this Azure Active Directory solution, too. Major HR software vendors like Ceridian are using it with its DayForce HCM product line. HR vendor SkillSoft/SumTotal uses Microsoft: Azure, Hyper-V, Windows Server vNext and other products. Unit4 is in on the action:


Source: 2015 Image from Microsoft presentation re: Unit4

What does all this mean?

Microsoft has quietly but quickly put together a powerful program to get numerous ERP vendors in its systems software camp. Microsoft’s CEO clearly, actively and visibly made this a major priority for the company. His personal involvement in all of these deals is not only apparent but highly effective, too. Microsoft’s program has succeeded in getting vendors to actively and aggressively assimilate many Microsoft solutions into their offerings. These aren’t simple one product licensing deals. These are multi-product deals – and – most importantly, many involve advanced technologies like machine learning.

Where were Microsoft’s competitors when all of this was going on?

Intacct and NetSuite use Oracle database technology (as does Oracle, of course). Salesforce, Oracle and other firms use Oracle equipment, too. Oracle’s gear is impressive and their 12c database (with its container technology) is pretty slick, too. SAP has its HANA and Sybase products. But, are other ERP vendors embracing their technologies? Are other ERP vendors going to these firms for their advanced technology needs? I’m not seeing a rush of this activity.

I’ve got to give the momentum to Microsoft for now. This is more than a marketing win for them. All of this market penetration points to a very well-orchestrated program that Microsoft executed over the last couple of years. They did something else really well, too. It doesn’t appear that Microsoft strong-armed these vendors into accepting some products that weren’t desired. Instead, Microsoft created a suite of tech stack components that vendors would likely value – with many of them focused on delivering value in all-new capabilities or services. In other words, they didn’t lead with a tired relational database management pitch. They focused on the technologies that will power digital economy focused businesses. Of course, ERP vendors would want these tools.

The tech stack war seems to have some new players – I see them as arms merchants. Microsoft appears to have opened up a big lead. Open-source solutions are filling a lot of gaps, too. Workday and Infor are big users of open source technology. But, to be fair, most cloud ERP vendors are using more than a smattering of open source components.

The real tragedy in all of this is that major changes in ERP solutions only happen every decade or so. When the tech world changes (e.g., from client server to internet browser to cloud), the tech stack AND the leader board usually change, too. If Microsoft’s competitors didn’t act on this latest change, they may be out of the running for many years to come. That could be a big lost opportunity.

One chapter in ERP architecture has closed and apparently a whole new one is starting. This should be fun to watch.

Image credits - noted under each picture. Feature image - Four successful business men joining two puzzle pieces  © Gajus -

Disclosure - Unit4, Workday, NetSuite and Infor are diginomica premier partners. Acumatica is a diginomica partner.

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