ERP Systems: Microsoft Dynamics 365 (The Good, the Bad and the Ugly)

The Good: The shift made by Microsoft by porting their Dynamics AX ERP solution to a web-based application (aka D365) hosted in the Microsoft cloud, offered them a boost on the ERP market. The integration with the Office and BI stack, as well Microsoft’s One Version strategy of pushing new features almost on a monthly basis, and of having customers at a maximum 2 releases from the current version, makes from D365 a solution to consider for small to big organizations that span over business sectors and geographies.

The Bad: Currently the monthly release cycle seems to be a challenge for the customers and service providers altogether. Even if the changes in existing functionality are minor, while the functionality is thoroughly tested before releases, the customers still need to test the releases in several systems, especially to assure that the customizations and integrations still work. This can prove to be quite a challenge in which automatic or semiautomatic tools can help when adequately used. Even then, a considerable effort needs to be addressed by the parties involved.

The burden is bigger for the service providers that build their own solutions for D365 as they need to assure in advance that after each release the applications still work. From customers’ perspective, the more such applications they use, the higher the risks of delays in adopting a release or, in extremis, to look for similar solutions. In theory, with good planning and by following best practices the risks are small, though that’s just the theory speaking.

If in the past 2-3 instances were enough to support the ERP during and post implementation, currently the requirements for the cloud-based solution more than doubled, an organization arriving to rent 5-7 D365 instances for the same. Moreover, even if the split between the main blocks (Finance, Supply Chain, Retail and Talent), plus the various Customer Engagement packages, provides some flexibility when thy are combined, this leads to a considerable price increase. Further costs are related to the gaps existing in the available functionality. More likely Microsoft will attempt closing some of the gaps, however until then the customers are forced to opt for existing solutions or have the functionality built. Microsoft pretends that their cloud-based ERP solution provides lower ownership costs, however, looking at the prices, it’s questionable on whether D365 is affordable for small and average organizations. To put it bluntly – think how many socks (aka products) one needs to sell just to cover the implementation, the licensing and infrastructure costs!

One important decision taken by Microsoft was to not allow the direct access to the D365 production database, decision that limits an organization’s choices and flexibility in addressing reporting requirements. Of course, the existing BI infrastructure can still be leveraged with a few workarounds, though the flexibility is lost, while further challenges are involved.

The Ugly: ERP implementations based on D365 make no exceptions from the general trend – given their complexity they are predisposed to fail achieving the set objectives, and this despite Microsoft’s attempts of creating methodologies, tools and strong communities to support the service providers and customers in such projects. The reasons for failure reside with the customers and service providers altogether, the chains of implications forming a complex network of causalities with multiple levels of reinforcement. When the negative reinforcements break the balance, it can result a tipping point where the things start to go wrong – escalations, finger-pointing, teams’ restructuring, litigations, etc. In extremis, even if the project reaches the finish, the costs can easily reach an overrun of 50-150% from the initial estimation, and that’s a lot to bear.