Blog written by:
Guus Krabbenborg
Time to read: 5 minutes
25 October 2016
After Directions EMEA 2016, Microsoft Dynamics NAV partners face crucial decisions on their future
CRM
CSP
Dynamics 365
NAV
Office 365
As a longtime Microsoft-observer with a perspective geared toward Microsoft Dynamics, I’d like to share some of my impressions of the important trends from this year’s Directions EMEA 2016 in Prague.
This article is based on a more detailed analysis from in this year’s Directions 2016 Business Report for Dynamics partners.
For me these are among the most important stories and questions coming out of Directions EMEA 2016:
- Being a Dynamics NAV partner in todays’ market is like dancing on a volcano. The recent announcements around Dynamics 365 will make this effect even stronger! These days, Dynamics NAV partners face the biggest challenges ever in their companies’ history. The combination of cloud, subscription pricing, new types of competitors, continuous innovation and the changing buying behavior force business owners and their shareholders to explicitly step out of their comfort zones. These trends call for new entrepreneurship, new business models and ongoing change. The question is of course if the current partner channel is ready, able, and willing to do so.
- According to Microsoft, all Dynamics NAV partners need to transform their businesses in order to stay relevant. However, many partners still have not even started this process – not with action and sometimes not even in their minds! Paul White, who is worldwide responsible for Microsoft Dynamics in the SMB market, forecasts that only 20 percent of the current NAV partner community will eventually make this transition. So partners who have not started their transformation process yet should really hurry in order not to be left behind.
- A relevant question is if today’s NAV channel is mentally prepared to make this change. After all, the majority of the current business owners started their companies in the early- to mid-nineties, when they were 35 to 40 years old. Well, if you add 20 to 25 years on top of that, you’ll understand that many owners today focus more on risk reduction and pre-retirement rather than on starting a whole new business line.
- In Prague, Microsoft announced the so called ‘AND strategy’ for her partners. This basically is the advice to partners to continue their NAV projects business, while at the same time building a new, incremental cloud business, most likely in a separate unit with:
- A separate team;
- A business model based on less license margin and smaller services revenues;
- A focus on winning new customers;
- A lower cost profile;
- And a different mindset.
- The Dynamics NAV product has made a great revival! Only a few years ago the future of the product was openly questioned. In Prague, however, we all felt the excitement and saw that Dynamics NAV is back again! A few observations: the launch of the new NAV 2017 version, an impressive stream of additional innovations around NAV, 100 extra NAV developers in the R&D teams, a continuously growing number of NAV customers and finally NAV was selected as one of the cornerstones of Dynamics 365 via “Project Madeira”
- Paul White presented the audience with Microsoft’s case for the attractiveness of the SaaS markets. Today, these SaaS markets are still smaller than the on-premise markets. However, the growth rates of SaaS solutions (up to 12 percent year over year) are much higher than the growth rates in the on-premise markets (only 1 percent YoY).
- Microsoft explained her top four priorities for the NAV partner channel:
- Helping partner to drive down the Cost of Sales by shifting from a sales oriented approach to a marketing oriented approach
- Helping partners to improve the lifetime value of their customers by setting smart pricing and packaging and a limitation of the churn rates
- Channel development for Dynamics 365. Microsoft expects to find new Dynamics 365 partners in the Office 365 channel, amongst Hosting Service Providers, BPO partners via accountants, traditional Dynamics ERP partners, and traditional ISVs
- Exploring the ISV opportunity. Microsoft plans to make a bigger effort to help ISVs reach international scale.
- In order to be successful in the “cloud first” world, NAV partners need to expand their ERP-only portfolio with solutions like Dynamics CRM, Office 365, Azure, Power BI, Flow, and Cortana Intelligence Suite. On top of that they need to differentiate their offerings more than ever before. And finally, they need to market, sell, deliver, and support digitally. Again, these are all huge changes for the majority of the partner channel!
- Either via on-premise or via cloud, Microsoft is still focused on reaching the 200,000 NAV customer milestone in 2019. Achieving this goal would really be a piece of art! It means that the second 100.000 customers will be recruited in only 5 years’ time, where it took Navision and Microsoft over 20 years to win the first 100,000 customers.
- Lots of oxygen was taken out of the room in the various sessions on Dynamics 365. On the one hand this was logical since that solution can be seen as the future successor of Dynamics NAV. On the other hand, it was not logical since the general impression is that only 20 percent of the current NAV channel will be able to transform their companies to a successful cloud business. But where else should Microsoft present her new solution?
- Rather than just focusing on the functions and features of Dynamics 365, partners definitely need to pay attention to the business side of this new solution. What does it take to make a success out of Dynamics 365? And what changes must the average NAV partner make in order to become successful?
- Dynamics 365 will not be part of the Microsoft Dynamics pricelist. This new solution will only be sold via the Cloud Solution Provider (CSP) program. Partners can choose between CSP Direct (aka Tier 1) or work with a Value Added Distributor in CSP Indirect (Tier 2) arrangement. In the coming weeks and months every Dynamics NAV partner has to make a choice between these two options.
- The pricing models for Dynamics 365 are quite different from the current NAV subscription pricing. For example, there will not be a tiered model anymore that provides higher margins at higher volumes. Nor there will be bottom-up pricing from Microsoft to the partner. In contrast, Microsoft will dictate a ‘street price’ on which partners get a margin. All these changes are due to the standards of the CSP program. The days of the Dynamics teams making her own rules and policies within the Microsoft organization are gone forever!
- The organization committee of Directions EMEA had many reasons to be proud. They reported 1,772 attendees representing 588 partners from 52 countries from all over the world. That’s an all-time record!
- The 2017 edition of DIRECTIONS EMEA will take place on October 4th – 6th in Madrid. It will be the 10th anniversary of the EMEA event, so probably reason enough for a small party.
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