Is Dynamics 365 Finally Finding Its Feet?

By:  Jamie Mercer

Whenever a new product hits the market, the excitement about the theoretical implication and impact is almost always accompanied with a very practical hesitancy.

While all potential users want to benefit from what the product can offer, few, especially in the high-stakes world of business software, are willing to be the first to try it out. Even trusted tech giants aren’t immune from the uncertainty that surrounds a new release.

This was certainly the case when, in late 2016, Microsoft unveiled a platform which was to be the next phase in its business solutions strategy; a product which, the company hoped, would allow it to close the gap between themselves and its competitors in the race to dominate the burgeoning, and highly lucrative, CRM and ERP industries.

Microsoft touted Dynamics 365 as the future of business applications; a unified solution that centralized CRM and ERP functionality to help businesses be more productive, collaborate more easily, derive actionable insights from their data and make more-informed decisions that would push their organizations further.

Though businesses were keen to make use of cutting-edge tools like AI and machine learning that Dynamics 365 promised to deliver, many were hesitant to go all-in on the platform, concerned that this garden-fresh product would ship with quirks that would take time to iron out.

It’s undoubtedly true that Dynamics 365 went through some changes in its infancy; its licensing structure and product branding underwent a number of revamps in the first year, and Microsoft received plenty of kickback over its plans for how new apps like Dynamics 365: Business Central and Dynamics 365 for Marketing would be sold.

Now, after some 20 months of work to improve the product and build customer trust, Dynamics 365 looks to be bedding down and reaping the rewards of those efforts.

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The 365 boom

Since Microsoft CEO Satya Nadella announced the company’s new cloud-first mantra in early 2014, the company has poured huge amounts of time and money into cementing itself as a leader in cloud computing, working to safeguard its authority in an increasingly XaaS-lead industry.

Earlier this month, Microsoft announced that it had surpassed $100bn in annual revenue for the first time in its history. In its financial statement for Q4 2018, the company revealed total revenue for the fiscal year to be $110.4bn—the first time Microsoft’s annual earnings have surpassed $100bn.

A significant chunk of those unprecedented takings was driven by Microsoft’s cloud services, Dynamics 365 included. Revenue for the Dynamics suite as a whole grew by 11%, more than doubling its growth in 2017. After a year of slowly and steadily increasing adoption, Dynamics 365 itself generated 61% growth on last year.

A maturing platform

The changing attitude to Dynamics 365 in recent months was further reflected in a recent survey of the Dynamics ecosystem. One year ago, the study found that many Dynamics customers were concerned about the newness of Dynamics 365, with product immaturity cited as the number one roadblock by users—38% of whom stated that they had no intention of ever switching to 365. Much of that hesitation seems to have been cast off since then, likely thanks to Microsoft’s continued work to add functionality and stability to the 365 suite; this year’s report found that three-quarters of Dynamics customers planning to upgrade their software intend to move directly to Dynamics 365.

The same survey reported that 22% of Dynamics 365 end users had moved to the platform in the previous year, up 10% on 2017. Almost half of those organizations who’d migrated to Dynamics 365 in the past year had graduated from a smaller, independent ERP or CRM software, intimating that Dynamics is succeeding in selling itself as a good option for growing SMBs requiring a little more firepower. That said, a total of 45% of migrating companies had moved away from leading platforms Salesforce, Sage, Oracle, and NetSuite—so it would appear that, slowly but surely, Dynamics 365 is beginning to win over business users and position itself as a worthwhile contender to more established products.

The lure of the cloud

Thanks to Microsoft’s continued investment in serverless computing, the cloud appears to be an increasingly enticing option for users of legacy Dynamics products. Thirty-five percent of on-premises users stated that they have plans to upgrade to a SaaS version of their current solution, a massive jump from last year’s 8%. The ability to take advantage of new features and boost productivity came in at the top of reasons to migrate to the cloud.

In Gartner’s most recent Magic Quadrant for Sales Force Automation, Microsoft Dynamics 365 for Sales is positioned in the Leaders section, with only Salesforce remaining ahead in terms of market leadership, and product vision. In the report, Gartner praised Microsoft’s deep understanding of the market, supported by a consistent marketing strategy and market responsiveness.

And with a massive number of updates on the horizon, along with the recently announced changes to the way Dynamics 365 updates are delivered, it’s clear that Microsoft is still grafting to make the product as innovative, efficient, and reliable as possible for its future users.