A new licensing plan will make Microsoft's enterprise resource planning (ERP) applications, Dynamics AX, GP, NAV, and SL, available on a subscription basis. The new Service Provider License Agreement for those products, effective Jan. 2007, lets partners "rent" the products from Microsoft rather than pay for them up-front, which could encourage new hosted solutions by reducing partners' initial costs. However, Microsoft has not said when its ERP products will support "multitenancy," which allows service providers to securely support multiple customers on shared servers and is a key to making the hosting model financially attractive for small customers.

Following CRM's Lead

The Service Provider License Agreements (SPLAs) for the Dynamics ERP products follow a similar move for the Dynamics customer relationship management (CRM) application, which was made available on a subscription basis with the release of CRM 3.0 in Dec. 2005.

As that program did for CRM, the new Dynamics ERP licensing program removes a barrier that service providers confront when planning hosted services—it reduces those partners' startup costs by eliminating the need to purchase the products up-front. Furthermore, the subscription model is not limited to the Dynamics ERP products; all Microsoft products that the Dynamics line require (Windows and SQL Server, for instance) are also available via SPLAs.

Not Multitenant, "ERP Live"

The new licensing model does not address one important and oft-cited technical limitation that impacts partners attempting to offer hosted solutions. Specifically, the Dynamics ERP products were designed to be run and managed by customers in-house on dedicated server hardware and thus do not support configurations in which multiple customers are supported on the same hardware. This limitation is especially problematic for partners offering hosted ERP solutions for small customers, since those customers will likely be less willing to bear the incremental costs of dedicated hardware.

Lack of multitenant support probably contributes at least as much to the limited availability of hosted Dynamics ERP offerings as the previous lack of a subscription licensing model. Only a few partners offer hosted solutions on Dynamics ERP products today—for example, Navisite offers hosted GP. Similarly, Microsoft has signed up about 20 partners to host Dynamics CRM solutions, but the company will probably not see major adoption of the model until it releases the next version of the product (code-named Titan) in mid-2007. Titan will support multitenancy and will also be accompanied by a new Microsoft-hosted CRM solution called CRM Live.

Unlike Dynamics CRM, the ERP applications have no announced multitenant versions. Nor has Microsoft announced plans to offer its own set of hosted ERP solutions. Such a move will most likely wait until the company sees clear evidence of market demand, demonstrated by either its partners or competitors, such as SAP (which does not yet offer hosted ERP solutions) and Sage (which offers a hosted solution called Accpac Online).

Resources

More information about the new Dynamics licensing plan is available at www.microsoft.com/dynamics/partners/hosting.mspx.

Microsoft's plans for a hosted CRM service are described in "Hosted Service Based on CRM Product" on page 22 of the Aug. 2006 Update.

More information about Microsoft programs for hosting partners can be found in "Partner Hosting Opportunities Expanded" on page 32 of the Dec. 2006 Update.