30 April 2017
I keep seeing Steve Mondue's tweets about Dynamics 365 Financials and overshooting the target. blog this week, he does make sure you've seen it with his tweets doesn't he? I know that Steve is a CRM guy by background and this was his take on the Business ERP position but it's niggled away at me all week so I thought I'd get my thoughts down in response. What business size is Financials really aimed at? Is it a Quickbooks competitor or for companies who have outgrown it?
What business size is Financials really aimed at? Is it a Quickbooks competitor or for companies who have outgrown it?
Well I think Microsoft are trying for both and even other markets, ambitious and a big target. I know what you'll say though, a product that is sophisticated enough to satisfy the mid-market will be too complex for the entry level to get started with. And your right but forgive me, I think you've misunderstood what Financials is.
Think of Financials as a platform rather than a product. It's a set of tools with which you can create and deploy business processes very quickly. You can even have processes that achieve the same outcome but are different to cater for varying sizes or sectors. You can group those processes into 'sets' which are appropriate to run the smallest organisation that just needs a general ledger (like a small not for profit) or the largest most sophisticated group that has lots of divisions in lots of countries using multiple currencies.
In fact it's the mirror image of what's happening with the application formally known as CRM, where Microsoft have released the Enterprise Sales and Service 'solutions' and are working on the Business Sales and Marketing, then Service solutions that all run on the same underlying core platform and that are just different sets of forms and logic on the same underlying core entity/table structure.
For Financials, Microsoft have taken the NAV toolset and created currently three products that can sit on the Financials platform. Called Application Areas (dumb name, should have been called process sets) and currently hidden in that development environment, they are #Basic (the QB entry level competitor that's all you can sign up for currently) #Suite which takes you more into the mid-market 10 to 99 user level and #<blank> which is the 'full fat' NAV product complete with manufacturing, warehousing, service management etc. and I guess up to the 300 user limit.
When you are creating new customisations for Financials (for publishing in appsource) you must define which Application Area you want to put them in, are they QuickBooks competitor friendly and needed or full fat NAV level requirements. Add the #Basic or #Suite application area properties as required. You can do that for each field, button or option on each screen/form/page.
What's good about this is if Microsoft get it wrong (heaven forbid) and leave out functionality the market demands or over complicates it (although that never happens you understand) by putting things that they don't need in, it's a simple change to move it from the one application set to the other with no additional coding, just a property change.
In fact, right now in the NAV application itself, you can go and change from #Basic to #Suite by changing the User Experience setting in company information. Watch it though you cannot change back to #<blank> which is rather an anomaly right now – manufacturing and some others will disappear for ever!
I'd be first to agree that right now Microsoft is not where it needs to be with the Quickbook competing Financials, still quite a bit it doesn't do, still harder than it should be to get started with etc. But the platform is there. Tweaking the application set to what it needs to be just requires an understanding of what changes are needed, but that's probably the bigger challenge than doing it!
There's a lot of flexibility though, MS can create more application sets at will, I could easily see for instance #BasicPlus or even #BasicUK to satisfy particular requirements. One they could create is #Basic2017 and let the customers choose when to migrate from #Basic. That might address the one criticism of Saas ERP platforms, which is that you are forced to upgrade on a set date with little change to prepare for what the changes mean for you're processes.
So why not go after the sector of the market that they own now rather than where they are the new challenger? NAV is the biggest dog in the mid-market, I saw Netsuite announced 40,000 organisations are using their software last week, well I have seen the latest numbers but I'd bet with the year its having that it's now not far short of 160,000 on Dynamics NAV right now. Sales here in the UK are at record levels before we get Dynamics 365 Financials so when we shortly do, that can only accelerate. That Microsoft will enable us to have #Suite and #<Blank> will give us an unbeatable price point with the full equivalent of the premium product that's been cleaning up despite its high initial cost. What wouldn't Microsoft take opportunity rather than let Netsuite get to 41500 because some potential customers think they don't have a 'proper' Saas option?
The entry level QB/Xero/Sage market was always going to be a harder nut to crack without the track record. In fact Microsoft's Money/Office accounting history counts against it, no one wants to see the Finance software they rely on 'end of lifed'. We've got very used to being on every shortlist going for the midmarket in recent years, it's going to take time and by that, I mean several years, before its true at the entry level.
That is where this strategy is genius though, the mid-market is paying for (or has paid for) the platform and a lot of the application area, the additional ongoing investment needed to attack the entry level is laughably small (to Microsoft) compared with starting from scratch.
Steve's points about advisors, be they accountants or others (like him currently I guess), not recognising or knowing Financials is a good one and even Microsoft's marketing war chest won't change that overnight. But they have a couple of key advantages that should help win in the medium term.
First is the stack and integration to Office 365. What other finance product allows you to enter sales orders while still in Outlook? What other product allows you to enter journals from Excel? You might know QB/Xero/Sage well but I bet you know Office equally as well and sure as heck, your client will know it better. Then there is Power BI, what other product has a reporting tool half as good as Power BI?
Then we have the application formally known as CRM, for an extra $10 even as a single user and by 15 users it makes your financials cheaper, on a plan. So most if not all will get not just a great lead and opportunity tool (suspect a lot will stick with Excel) but the two things ultra-small businesses struggle with.
Marketing is something that every small business would like to do more of because they recognise it's the way to grow, they just don't have the time and knowhow. The marketing app should give them both, my fingers are so tightly crossed waiting, I've lost blood flow and if Microsoft don't deliver soon I'll get gangrene!
Last year when Microsoft announced Dynamics 365, they didn't include service at the business level. They changed that before I killed anyone but it was close. Small business have to compete with enterprise on service. That's fine when there are one or two people who 'just know' but when you grow you need processes. And the backstop process for when all else fails is a case. Every small business needs cases to ensure that every question from their customers is followed up and answered in a competent and timely way. Cases are brilliant and no other entry level product has anything even close.
Back to the second and most important way to get accountants or advisors on board. Financials key advantage is that it goes from $0 to $1bn, no exaggeration, I work with two clients who do over £1bn turnover. Every start up has the ambition to grow and not many would reject being the next Google, Facebook, Uber, AirBnB, Just Eat etc. Imagine being able to say to them that start with this and you'll never have to reimplement/change/learn anything new. You'll be able to interface to anyone or anything you need to. This can grow to as big as you need to it to be. A simple setting will allow you to turn on the functionality you need, when you need it.
Today those start-up's start with their friendly local accountant and QB/Zero/Sage and if their successful, that lasts a couple of years. Then they get frustrated and go find a 'proper' system' which is when I meet them. What's great for me that they've just got to the size where they can justify and afford decent consulting fees. Their business model is proven and they want to exploit the opportunity they now are sure is there, before anyone else does. They are impatient to get on with it but I have to tell them they need to start again as far as their systems and data are concerned.
So the message that will get advisors recommending Dynamics 365 Financials is simply, the rather blunt but effective
How do you like continually losing your biggest most lucrative clients, to me!