I think the best way to analyze Microsoft’s Convergence conference this week in Atlanta is to first understand that the company is fundamentally an ERP provider. I know they do other things — I am using Word right now. But in a choice between ERP and CRM, Microsoft is an ERP provider albeit one that has good CRM chops — better than many other ERP suppliers.
Microsoft offers four ERP products, the most popular of which is Great Plains. Being an ERP company is a good thing; it’s a big market that will never go away and if you can build and service good products you will most likely make money. This all comes down to a state of mind, an attitude, a gestalt that permeates much else that the company does.
I think we sometimes lump ERP and CRM into a small number of buckets, which is a mistake because there is a vast difference between systems built for discrete manufacturing and those made for financial services. It takes skill and keen insight to build one system that can serve both masters, even with modifications. Microsoft has done this well and it supports a large partner base of thousands who specialize in delivering solutions to various markets.
NetSuite, Sage, SAP and Oracle are also ERP providers and they share a similar, though far from identical, gestalt. Salesforce.com is decidedly not an ERP company and its gestalt is very different.
The difference is in how companies see business processes. Back office processes are more clearly defined and more easily quantified. For instance, generating an invoice might draw on many sources for data but the end result is concrete. In the front office things are more abstract. A marketing campaign may have goals and objectives but the hard reality is that the goals will not be met without the cooperation of many people who are not employees and who pursue their own enlightened self interest — i.e. customers. This reality has fueled the consternation of back office leaning managers for generations as they try to make sense of marketing spending.
With this in mind, I attended the keynote session of Convergence on Sunday. The most telling point for me was a demo of some very nice integration between Great Plains and Microsoft CRM. The demo scenario was a spike in product returns identified by the CRM system and how the company handled it. Once the CRM system found the spike the action shifted to the ERP system, which quickly helped users track down a defective part, strategize a solution with a supplier and issue a purchase order to accomplish the fix. At the end, processing returned to the CRM system to make appointments to repair the defective products.
It was quick and efficient. The guilty were identified and righteousness was restored. What the scenario lacked was any empathy for the customer and any way for the vendor to demonstrate it. Once social techniques were used to surface the problem, it was business as usual. In other scenarios a CRM vendor might have found ways to demonstrate concern for the customer. The CRM vendor would have a clearer understanding that the customer has other choices and the longer a problem festers — even a problem that has a satisfactory resolution — the less likely the customer will be to look favorably on that vendor in the future. Such a vendor might have issued a bulletin and dedicated part of a Web site to remediation bulletins, for instance. That wasn’t part of the demo but it should have been.
This is the heart of the gestalt — cold logical processing vs. the empathetic self-consciousness of a vendor that knows in its DNA how to deal with customers.
Microsoft has differentiated itself by focusing on delivering competent products at low prices so that small and emerging companies can afford high quality software that streamlines business and, frankly, eliminates the overhead that would otherwise swamp many businesses. But no vendor can be all things to all people, at least not forever. Covering a broad market is something that many vendors do when markets are new and products are relatively undifferentiated. Aging markets force vendors to pick something they can be good at and to stick with it or perish.
Microsoft’s position as a fast follower is well known. Rarely has it been first into a market but its market power is such that it can take over a trend and drive it down the commoditization curve, sometimes too quickly, before it has time to fully emerge and develop. You see this beginning to happen with social technology and with cloud computing.
I didn’t see enough social computing and my impression is that the company is not as far along at integrating it into the mainstream of its computing as other vendors. That said, it is not as far behind as others either. In line with its fast follower approach it is off the lead but ready to pounce.
In cloud computing, it will only go so far as to endorse the idea of massively scalable infrastructure — infrastructure as a service (IaaS) — a rather low common denominator. It seems agnostic about SaaS and PaaS preferring to leave them to customer preference, which comes across as providing the ability for many vendors to host their own clouds. The result of this approach will be data centers in the sky rather than cloud computing.
Cloud computing takes more coordination and a willingness to open up to the rest of the world to enable heterogeneous integration and the business and process innovation that comes with it. In a CRM gestalt this would make perfect sense but in an ERP gestalt this may be a bridge too far at least for now.