The new packaging plan Business Ready Licensing defines two product bundles common to all Dynamics enterprise resource planning (ERP) products and a pricing scheme based mainly on concurrent users. In addition, Microsoft will charge one price globally for the Dynamics ERP maintenance contract, called the Enhancement Plan, and will offer discounts on Dynamics Customer Relationship Management to ERP customers. Although the new licensing plan is easier to understand, it restricts customers to the product bundles Microsoft defines and is thus less flexible than its predecessor. Consequently, some customers may find themselves licensing Dynamics modules they do not need.

Two Editions, Per-User Pricing

The four major Microsoft Business Solutions (MBS) ERP products—Dynamics AX, GP, NAV, and SL—offer small and midsize businesses support for financial accounting, inventory management, tracking of intercompany transactions (such as orders and payments), and managing other company resources, such as personnel. Within each product, distinct applications—or modules—support specific business functions, such as manufacturing or accounting.

Historically, customers have licensed Dynamics products module-by-module (module pricing differs for each product), working with MBS partners to determine the specific modules they required. On top of this a la carte pricing, GP, NAV, and SL offered distinct product editions—Professional and Standard. The Professional and Standard editions for a given product were similar functionally but differed in the numbers of users supported; specifically, Standard editions were intended for 10 or fewer users.

Business Ready Licensing simplifies this complex and disjointed landscape and largely does away with per-module pricing. The program defines two product bundles common to all Dynamics products. Bundles are differentiated functionally (as opposed to the user-limit differentiation of the previous Standard and Professional editions) and pricing is based mainly on the number of concurrent users.

Business Ready Licensing defines the following editions:

Microsoft Dynamics Business Essentials Edition bundles a core set of financial accounting, supply chain management, and reporting features. Financial management features include general ledger, accounts receivable and accounts payable; supply chain features include sales order processing, purchase order processing, and inventory management. The edition targets small and midsize businesses looking for basic financial accounting and business management.

Microsoft Dynamics Advanced Management Edition supplements Business Essentials with advanced financial features, such as cash and collections management, and project accounting; more sophisticated analytics and reporting; basic manufacturing features; and additional supply chain management capabilities, such as requisition management. For AX and NAV, Advanced Management also includes those products' customer relationship management (CRM) features. (GP and SL do not provide native CRM features.) Advanced Management will appeal to larger distributors, manufacturers, and project-driven organizations, such as large construction companies.

Supplementing the Advanced Management edition, Microsoft has reserved a set of Advanced Management Enterprise components that can be added to Advanced Management on per-module basis. These additional modules are licensed for a flat fee (per-user pricing does not apply) and include additional manufacturing features, such as shop management and capacity planning. Also available through Advanced Management Enterprise are Dynamics development and customization tools, which will appeal to larger companies doing Dynamics customization work in-house.

Although the new licensing plan will likely be easier for partners and customers to understand, it restricts customers to the product bundles defined by Microsoft and is thus less flexible than the previous Dynamics licensing plans. Consequently, some customers may find themselves licensing Dynamics modules that they do not need. For example, a consulting company desiring a basic financial accounting package will probably have little use for the inventory management features bundled with Business Essentials. While Microsoft claims that most companies will find the new licensing model comparable in cost to the prior model, it seems likely that at least some customers will pay more than they would have previously.

Consistent Price, Benefits for Support Plan

Accompanying the Business Ready Licensing announcement were several changes to the Enhancement Plan, the Dynamics maintenance contract that entitles customers to ongoing product support and upgrades. Most notably, Microsoft has instituted a consistent charge for the contract worldwide (the plan will cost 16% of total software licenses annually). Although this is not a change for Microsoft's Dynamics customers in North America, the cost of the Enhancement Plan has varied widely in other regions. Microsoft will also make plan benefits consistent across the globe. For example, the company will make its CustomerSource Web site, which provides resources such as a knowledge base and discussion boards, available globally in a variety of languages and country-specific versions.

In addition, the reworked Enhancement Plan includes the new benefit "transition investment credit," which lets customers apply already-paid licenses when they switch from one Dynamics product to another (or one edition of a Dynamics product to another). For example, a customer could move from GP Business Essentials to AX Business Essentials, paying only the difference in cost between the two products. Transition investment credit complements "investment protection" (previously called transformational assurance), a similar benefit that will allow customers to move to the eventual, consolidated Dynamics ERP product when it appears sometime after 2008, without having to repurchase licenses.

Free CRM Server

To encourage uptake of the Dynamics CRM product among its Dynamics ERP customers, Microsoft is offering to waive the CRM server license fee for the following customers with active Enhancement Plans:

• Customers of the Advanced Management edition of any Dynamics ERP product (customers who are part of the Business Ready Licensing program)
• Customers of the Professional edition of GP, NAV, or SL (i.e. customers who purchased GP, NAV, or SL licenses under Microsoft's previous Dynamics licensing plan)
• Customers of Dynamics AX who purchased the product under Microsoft's previous licensing plan.

The license waiver applies to the Dynamics CRM Professional Edition server, which ordinarily starts at about US$1,200 per server through Microsoft's Volume Licensing program. However, Dynamics ERP customers wanting to take advantage of the program will still be required to purchase Dynamics CRM user licenses, which start at about US$600 per user via Volume Licensing. However, starting in Oct. 2006, CRM user licenses will be available on Dynamics price lists (although the price of those user licenses has not been set), which will make it unnecessary for ERP customers to purchase CRM user licenses through a separate Volume Licensing order.

Availability, Pricing, and Resources

As of Aug. 2006, the Business Ready Licensing plan is available for Dynamics AX, GP, NAV, and SL worldwide. The price for Business Essentials is US$2,250 per user for GP, NAV, and SL; Advanced Management will cost US$3,980 per user. In either edition, AX licenses will cost an additional 15%.

Through mid-Oct. 2006, new customers can license Dynamics products through either the previous per-module plan or via the new Business Ready model. After that time, Microsoft will no longer offer per-module pricing for Dynamics products.

The new Dynamics licensing plan is described in more detail at www.microsoft.com/dynamics/purchase/totalcosts.mspx.