Microsoft’s switch from product to service: what it means for you

Matthew Gibson, Associate CRM Consultant, blogs about Microsoft's transition from product to service provider and its implications for you, the customer.

Microsoft is changing how it sees what it does: no longer does it view itself as offering a range of products. Instead, it provides a family of services. In 2010, Office 365 was announced, encompassing the traditional mainstays of Microsoft productivity software, including Word, Excel, and SharePoint. This year we are going to see a similar consolidation of the business apps (such as Dynamics CRM and AX) into Dynamics 365.

This is part of the bigger picture of servitisation in the technology industry, which involves technology providers moving away from selling single, monolithic programs on a lifetime basis to licensing cloud-hosted apps, generally on a per-user per-month basis: an approach referred to as Software as a Services (SaaS).

What are the advantages of this approach? Upfront costs are lowered for customers, who only pay for the number of users they need. By hosting the software in the Cloud, customers don’t need to buy and maintain hardware, and integration with other online apps is easier. There is a closer interaction between the provider and customer, as technical support is included in the subscription, and updates can be released more frequently. With all this in mind, it is not surprising that Microsoft is increasingly focussing on a SaaS model for its business and productivity apps.

So what does this mean for the customer? At the same time as uniting CRM and AX into a single suite, Microsoft are creating an even more flexible licensing structure. Customers will have access to “Team Member” subscriptions which will give light access across all apps – perfect for users who need to interact with Dynamics at some point in their workflow, but don’t need full access. Users can also be licenced by app (for example, Sales or Financials). Gone are the days of buying a licence that included CRM Sales, Service, and Marketing for a team member who only needs to use one of them.

By offering Dynamics 365 as an online service rather than a product, Microsoft will also be able to leverage other online services to offer greater value to customers. Windows Azure, Cortana Intelligence, and Azure IoT (Internet of Things) open up new horizons for sourcing and transforming data.

Customers won’t necessarily need developers or partners to make the most of these services, either. Applications such as Power BI, PowerApps and Microsoft Flow will allow customers to design custom dashboards, apps and processes using data from a huge number of online sources. Microsoft is also introducing AppSource, a platform where ISVs, partners and customers can share and sell apps that they have created. This is a radical change worthy of its own discussion, but it is enough to say it would be possible for a customer to create a useful app for internal use, and then entirely cover their D365 licence costs by selling it on Appsource.

Microsoft will continue to offer both Dynamics CRM and AX as on-premise products. However, as time goes on, the fact that the company’s focus is on online services will become more and more apparent. Dynamics 365 will only be available online, and so there will be a growing gap in functionality between Microsoft online services and on-premise products. Customers considering on-premise deployments of CRM or AX should consider not just current conditions, but conditions four years or more down the line and the functionality they will need to maintain competitive advantage - or risk having to perform a costly migration to Cloud services in the near future.

Overall, Microsoft's move from selling products to offering services is one that will lower short to medium term costs for online customers, decreasing the traditional risks of implementing new systems. It will also empower online customers by enabling them to take advantage of easy integration with other online services, grant them the ability to design apps that suit their business processes, and even enable them to generate revenue from licensing these apps to others. However, on-premise customers may find themselves missing out on new functionality and the competitive advantage it offers.

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