Where is Dynamics in Microsoft?

It has been some years since Microsoft changed its financial reporting structure so that their ERP and CRM business, Microsoft Dynamics, was included in a larger division rather than reporting separately. Dynamics is now part of the Business Division, which also includes the ‘mega-earner’ Office applications.

How Dynamics contributes to the overall Microsoft business came to mind this week when I read a report by Mary-Jo Foley on the SharePoint product. In 2009, SharePoint earned Microsoft over $1.3 billion, and according to Foley usage of the software is growing at a phenomenal rate. Another source noted that, for the same year, Dynamics revenue was $1.25 billion. However the earnings for the Dynamics business in the latest annual report (2010) were reported as being flat. Bear in mind that Microsoft total revenue for 2010 was $62 billion – so Dynamics is less than 3 percent of the business. Perhaps some good news is that in the first quarter of 2011, the Dynamics business grew 4 percent.

Back when I sold Dynamics software, I reported on a talk by a senior Dynamics executive about what it was like running the then ‘Microsoft Business Solutions’ (MBS).

It was interesting to hear how difficult and long he found it turning MBS into a division that could work properly. He also gave some insights into how Microsoft builds its business – aims for platforms rather than products…

If the strategy for building platforms still holds true, then SharePoint is succeeding. It is becoming a de facto standard in many businesses for content and document management, and collaboration. The part of Dynamics that is doing well is CRM, however the ERP part has not established itself as a platform in the same way.

With other products doing so well – “Kinect sensors selling at a rate of about 130,000 units a day, selling 657,534 Windows 7 copies per day … a copy of Office 2010 sold every second” according to Foley – and a strong focus on the new Windows Phone 7 mobile operating system, how important will the Dynamics business continue to be for Microsoft?

Some time ago, I wrote that Microsoft is becoming like the old IBM:

IBM was good in some areas and terrible in others, but still continued in the terrible areas, so too is Microsoft.

I am aware that the performance, growth and market share of the Dynamics ERP products vary geographically, but one does have to ask what role Microsoft’s executives see for Dynamics. If they want to spend a lot of resources to grow in the consumer and mobile sectors, how much will they have left over for Dynamics? Their competitors in the ERP space – SAP, Oracle, Epicor, Infor, and yes, SYSPRO – are able to focus all their efforts and talents on enterprise software issues.

I wonder, is Microsoft just too proud to admit they made a mistake and that ERP software is not really their field of expertise? Could the analysis be true that:

Microsoft will continue to increase its CRM software revenues by increasing its share in the ever increasing CRM market. We also expect it to more than offset any revenue loss experienced from ERP software sales.

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One thought on “Where is Dynamics in Microsoft?

  1. Pingback: The Blessing and Curse of SharePoint's "Grandma's Attic" – Part 1 » The TEC Blog

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