G U I D E L I N E S Business practices, based on the real-world experience of successful Microsoft partners, that help you enhance your opportunities in the small and medium-sized business segment with solutions based on Windows Small Business Server 2003

P a t h s t o O p p o r t u n i t i e s w i t h W i n d o w s S m a l l B u s i n e s s S e r v e r 2 0 0 3 : E x t e n d i n g t o M i c r o s o f t D y n a m i c s G P Sponsored by: Microsoft

Janet Waxman February 2006

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I n t r o d u c t i o n

The market for business management and application software represents a large and growing opportunity for IT solution providers, value-added resellers, and systems builders focusing on the small and medium-sized business (SMB) market. Nearly every business today uses some sort of business management and accounting application to keep track of and manage core financials, cash flows, sales orders, payroll, inventory, and distribution, and SMBs are no exception.

Many small businesses opt to start with entry-level packages that offer basic functionality and easier setup at prices that target small businesses; however, as their needs become more complex, many SMBs find themselves "stuck in between," that is, they have outgrown their entry-level packages but are unable to afford � both monetarily and in terms of implementation and operational complexity � any of the leading enterprise-level financial management applications designed for large businesses and enterprises. Providing a solution for these businesses that are ready to graduate to the next level of business management application opens a window of opportunity for service providers focusing on this market.

Microsoft Dynamics GP 9.0 (Dynamics GP) is a solution designed specifically for businesses in this situation. Previously known as Microsoft Great Plains, the product was renamed Microsoft Dynamics GP with the 9.0 release to reflect Microsoft's vision of driving transformational change in business solutions. Microsoft chose the new name to reinforce solution concepts, including helping companies work more dynamically, supporting their growth, and empowering them to succeed in a changing business climate. Dynamics GP provides similar features and functionality to enterprise-level packages, but with pricing, implementation, and usability targeted to a smaller business.

Dynamics GP features a Business Portal that delivers information, applications, and business processes through a single access point. It also contains modules targeted to a broad range of business management functions, including Financial Management, Supply Chain Management, Human Resources and Payroll, Analytics, and Reporting.

Dynamics GP and Windows Small Business Server 2003

Microsoft Windows Small Business Server 2003 (SBS 2003) is a server infrastructure solution designed to address the needs of SMBs. It provides a technology platform for small businesses to take advantage of server and application functionality otherwise available primarily to larger businesses and a technology "building block" on top of which partners can implement business applications and other value-added services for their customers.

SBS 2003 and Dynamics GP were designed to work together. Businesses that currently run SBS 2003 Premium Edition have the infrastructure they need to implement Dynamics GP; conversely, businesses looking to implement Dynamics GP will require a centralized server infrastructure and database system such as SBS 2003 Premium. And as a business application, Dynamics GP provides an opportunity for SBS 2003 partners to expand their service offerings and provide additional value-added services beyond their core IT infrastructure offerings.

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Although selling and implementing Dynamics GP requires a set of skills different from that which most infrastructure partners currently have in-house, SBS 2003 partners can take advantage of the ecosystem of Microsoft partners to team up with complementary Dynamics GP specialists to supplement their offerings.

This document, Extending to Microsoft Dynamics GP, is part of a series of guidelines based on research conducted by IDC to capture the knowledge and practices of experienced Microsoft partners worldwide. These partners include system builders, value-added resellers, and solution providers who specialize in SBS 2003 and Dynamics GP deployments. This guide is designed to help partners realize the opportunity to sell Dynamics GP on top of SBS 2003 to increase the value they bring to their customers, deepen customer relationships, and realize new revenue streams. Insights that IDC learned firsthand from experienced Microsoft partners provide prescriptive guidance. For more information on this series, visit https://partner.microsoft.com/IDCwhitepapers.

T h e O p p o r t u n i t y f o r B u s i n e s s M a n a g e m e n t A p p l i c a t i o n s i n t h e S M B M a r k e t

Business management applications have already achieved penetration in the SMB market, but IDC nevertheless forecasts continued growth. IDC estimates that the worldwide market for financial applications in the small business segment (defined as businesses with fewer than 100 employees) approached $4.0 billion in 2005 and will grow to over $4.4 billion by 2009, as shown in Figure 1. When the revenue for medium-sized businesses (defined as businesses with between 100 and 499 employees) is added to the revenue of the small business segment, IDC forecasts that the total worldwide opportunity for financial applications will grow to over $7.3 billion by 2009.

F I G U R E 1

W o r l dw i d e F i n an c i a l A p p l i c a t i o n s M a r k e t F o r e c a s t b y C o m p a n y S i z e , 2 0 0 5 � 2 0 0 9

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Growth of financial applications within the SMB market is fueled by several factors:

! Need to conform to financial regulations. The rise of various forms of financial regulation around the world is driving the need for "cleaner" accounting practices, which in turn is driving the need for improved accounting and financial tools that provide tracking functionality, especially for SMBs that are growing rapidly and have plans to become publicly traded companies in the near term.

! Increasing business management needs in SMB market. As small businesses continue to face competitive and market pressures, they require increasingly sophisticated use of their business applications. As a result, they require more of the types of features and functionality offered by Dynamics GP. Small businesses can find value in fine-grained analyses of costs and margins for designated lines of business, but these analyses require software with the capabilities of an integrated accounting software package such as Dynamics GP. Further, small businesses that started with an entry-level package are increasingly requiring additional depth in their business management and accounting solutions, leading them to look to upgrade to a more robust package.

! Availability of packaged applications priced to target small businesses. Packaged accounting applications abound in the market, each with varying complexities and affordability. Such integrated applications, many with pricing and usability targeting SMBs, are driving smaller businesses to consider the purchase and integration of such applications into their IT infrastructures. Partners reported that Dynamics GP provides a robust, feature-rich solution with an intuitive GUI. They also noted that it provides much of the functionality and benefits of packages designed for enterprise and large business customers but in a format that is accessible to SMBs.

! Availability of infrastructure platforms priced to target small businesses. Server infrastructure solutions provide a superior platform for business management applications. With the availability of server infrastructure products targeting small businesses, they can take advantage of business management products. For example, SBS 2003 Premium provides an infrastructure that is ready to support Dynamics GP and includes integrated technologies such as Microsoft Exchange Server 2003 and Microsoft SQL Server 2000. These integrated technologies allow the exchange of business data across other applications and independent software vendor (ISV) solutions and facilitate the analytical and reporting solutions of Dynamics GP.

! Lack of competition from hosted models. Unlike customer relationship management and sales force automation, in which there are noted offerings using a hosted model, there are fewer providers of accounting or business management applications using the hosted model. As a result, small businesses continue to look to standalone applications to fulfill their needs. Partners attribute this lack of a hosted offering to the additional complexity required for successful business management installations, the requirement to integrate with other onsite applications, and the confidential nature of the data housed by the application.

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Customer Profile and Points of Pain

When Microsoft partners were asked to identify the profile of the typical customer and the points of pain driving the customer toward implementing a business management application such as Dynamics GP, they summarized the situation with one word: "functionality." Typical Dynamics GP customers are migrating from an entry-level package such as Microsoft Small Business Accounting or similar competitive packages because they have outgrown their current package's functionality and are looking for a more complete solution with greater depth in finance and accounting. Another common first-time customer scenario is a new company that has been spun off from a larger organization, typically referred to as a hub-and-spoke scenario, and needs to implement its own standalone business management and accounting package.

Although some nuances exist across different vertical market segments, business management and accounting applications are used by nearly every business across the board. Segment variation tends to extend into the adoption of different modules; for example, shipping companies are more likely to take advantage of inventory and advanced distribution capabilities such as "available to promise" and advanced picking, while not-for-profits may choose to implement features such as grant management or encumbering budgets.

S u c c e s s f u l S t r a t e g i e s f o r A d d r e s s i n g B u s i n e s s M a n a g e m e n t A p p l i c a t i o n s i n t h e S M B M a r k e t

Partners interviewed for this project emphasized that because Dynamics GP is a business management application, it requires a different sales and implementation expertise from infrastructure products such as SBS 2003. Unlike SBS 2003 deployments, which require partners with deep technical infrastructure expertise, successful Dynamics GP deployments require partners with deep expertise in the subjects of business management and accounting and, secondarily, in the consultative selling process. In some small businesses, the same person may make infrastructure and business application decisions, but in larger organizations the contact may be different. In either case, the sale is addressed in a different way. As one U.S. partner explained, "The model works best when you have accounting expertise on staff. It may be possible to sell the product without knowing accounting, but to properly implement it and understand client needs, you need to have an understanding of accounting."

Further, Dynamics GP implementations frequently turn into full-on business process consulting engagements. As one U.S. partner explained, "A high priority in a Dynamics GP implementation is the customer's accounting and business processes. We look at their processes and make recommendations on how they can use Dynamics GP to improve these processes."

"The model works best when you have accounting expertise on staff. It may be possible to sell the product without knowing accounting, but to properly implement it and understand client needs, you need to have an understanding of accounting."

"A high priority in a Dynamics GP implementation is the customer's accounting and business processes. We look at their processes and make recommendations on how they can use Dynamics GP to improve these processes."

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Technical expertise is of much less importance because installation of the Dynamics GP application is relatively straightforward and most customizations and integrations can be done with out-of-the-box-tools. In fact, many Dynamics GP partners choose not to carry IT experience in-house, instead preferring to partner with technical experts and infrastructure partners where necessary. One Dynamics GP�focused U.S. partner stated, "At one time we did have IT personnel on staff, but we couldn't keep them busy enough with our Dynamics GP implementations, so now we partner with an infrastructure partner when we require those skills."

Entry Points for Dynamics GP Engagements

Given the differences between selling SBS 2003 and Dynamics GP, two viable entry paths emerged in the Dynamics GP opportunity for an SBS 2003 partner:

1. Continue to focus on infrastructure, and partner with a Dynamics GP specialist. This is often the least disruptive and usually the most straightforward route into Dynamics GP for an SBS 2003 partner without current expertise in business management or accounting. This strategy entails identifying and partnering with a Dynamics GP expert partner as the "partner behind the partner." It enables the SBS 2003 partner to expand its solutions portfolio and present itself as a single point of contact to its customers for a wider variety of technology and business applications. In parallel, it can begin to gain exposure to Dynamics GP, the selling process, and the methodology required for successful Dynamics GP engagements. Because new Dynamics GP deployments often lead to SBS 2003 upgrades and vice versa, these partnerships can bring in revenue for both the infrastructure and the Dynamics GP partners.

2. Add accounting, consultative selling, and Dynamics GP expertise to supplement existing technical infrastructure expertise. This route is more difficult because it involves incorporating a new set of skills in-house. For a partner who has traditionally focused on infrastructure, adding the required capabilities will likely require hiring new senior staff with the appropriate expertise. Partners who fall into this category can offer their customers one-stop shopping because they can handle both the infrastructure side and the business management/accounting application side under one roof. This capability can lead to significant business opportunity because many Dynamics GP engagements bring along infrastructure upgrades. However, unless the SBS 2003 partner already happens to have senior staff with deep business management and accounting backgrounds, this route will require significant investment in management time and new personnel and most likely will also require changes to the partner's business practices. Successfully selling Dynamics GP may also require different sales skills because the sales approach for this application is different from the approach required for infrastructure sales.

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The fact that such partnership strategies exist is a testimony to the strength of the Microsoft partner ecosystem. One SBS 2003 partner who is pursuing a partnership strategy toward Dynamics GP described its experience:

We are an infrastructure provider with offerings centered around SBS 2003, but we're often asked by our clients to get involved in business solutions for them, including accounting solutions. I don't want to be an accounting expert and we don't have any experts on board, so I looked for a partner with Dynamics GP expertise. I found our Dynamics GP partner, and we've done a number of projects together that have gone very well. Also, it's good for our partner too, as it's becoming more difficult for someone without infrastructure expertise to operate in the Dynamics GP arena.

D e p l o y m e n t S t r a t e g i e s f o r D y n a m i c s G P E n g a g e m e n t s

Partners interviewed for this project had different deployment strategies for Dynamics GP rollouts. While one approach is to implement all modules up front, a more common scenario involves using a phased approach:

! Phase 1: Initial deployment. Typical initial deployments consist of the Core Financials module and sometimes additional modules that are absolutely fundamental to the customer's business. These other modules most often include Sales/Purchase Orders, Inventory, and Distribution. Often this phase requires an SBS 2003 deployment or upgrade prior to the Dynamics GP deployment.

! Phase 2: Additional modules and customizations. As customers gain experience using Dynamics GP, they typically find other areas where they can get added value by extending their Dynamics GP solution. Follow-on work includes implementing additional modules, performing deeper-level customizations, and integrating with specific third-party inventory or distribution packages. These follow-on engagements can also require infrastructure upgrades.

Engagement Life Cycle

A Dynamics GP engagement follows a "classic" consultative sales process, beginning with problem discovery and leading to solution development, implementation, training, and handoff. One partner shared the life cycle provided in Table 1.

"I found our Dynamics GP partner, and we've done a number of projects together that have gone very well. Also, it's good for our partner too, as it's becoming more difficult for someone without infrastructure expertise to operate inthe Dynamics GP arena."

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T A B L E 1

S a m p l e D y n am i c s G P E n g a g e m en t L i f e C y c l e

Phase Key Actions

Planning and requirements

• Define roles and responsibilities for project resources, structure project administration, identify dependencies, assess and mitigate risks, and develop project plan.

• Provide customer with overview of Dynamics GP software.

• Analyze business requirements against industry practices and product functionality.

Technical build • Install, configure, and test Dynamics GP technical environment.

Application build • Perform application build.

• Configure application modules to meet identified customer requirements.

• Develop and test interfaces, customizations, and reports.

Data conversion • Convert customer data into the new system.

• Reconcile data to ensure accuracy and completeness.

Acceptance • Conduct validation testing by internal project team and key end users.

• Provide training to enable users to effectively test the system.

• Modify the system configuration to address any issues identified during testing.

Deployment • Roll out new application to the entire user community.

• Perform wide-scale user training.

Production cutover • Deliver tested and approved system to production mode.

• Perform final data conversion and refresh.

Production support • Provide hands-on assistance at customer site to ensure the seamless transition to the new system.

Post-deployment account management

• Continue ongoing communications with customer after deployment to ensure continued satisfaction and identify any necessary post-deployment support needs.

Source: Microsoft partner experienced with Dynamics GP interviewed by IDC, 2005

Partners estimated that an end-to-end engagement using the methodology outlined in Table 1 requires an average of three to six months.

Customization

Partners take different approaches to performing customizations in Dynamics GP. Some partners try to minimize the amount of customizations required in an engagement, with one U.S. partner commenting, "We do some report writing and modify some of the screens, but we try to keep it to no more than that." Other partners are more comfortable with deeper-level customizations, with one partner estimating an average of $7,500 to $10,000 in service revenue from an average engagement involving customizations.

"We do some report writing and modify some of the screens, but we try to keep it to no more than that."

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However, all partners agree that the majority of the customization needs can be handled using the built-in Integration Manager and other out-of-the-box tools.

The primary types of customizations reported by Dynamics GP partners include:

! Customizing reports. Several partners indicated that these reports are the most common form of customization.

! Customizing screens. Partners reported that with the functionality in Dynamics GP, there can be a significant amount of effort involved simply in identifying which data elements to display and configuring the user screens appropriately. Screen customization can typically be done using out-of-the-box tools.

! Integrations. Many customizations involve exporting data to and importing data from third-party applications such as specialized vertical distribution packages. Integrations are most likely to require custom coding.

ISV Solutions Available for Dynamics GP

A healthy base of ISVs is actively developing value-added solutions that enhance Dynamics GP by providing industry-specific solutions. Nearly 100 ISV solutions are available for Dynamics GP Standard in areas such as agriculture, finance, real estate, manufacturing, retail trade, transportation, and services. Partners who become familiar with the range of ISV solutions available to extend the capabilities of Dynamics GP can use them both as a value-added differentiator to better address their customer needs and as a way to increase the overall revenue size of engagements.

F o l l o w - O n R e v e n u e M o d e l s f o r D y n a m i c s G P E n g a g e m e n t s

One of the common themes among experienced partners is their search for ongoing, predictable revenue streams. Partners focused on SBS 2003 infrastructure have found successful methods of obtaining ongoing revenue using methods such as offering managed services and support. This ongoing revenue supplements the revenue made from initial deployments and has grown into a highly profitable line of business for many partners.

As a business application, Dynamics GP does not provide partners with an exact equivalent revenue stream. Nonetheless, a variety of revenue opportunities can help partners turn initial deployments into additional revenue, such as:

! SBS 2003 pull-through. It is common for Dynamics GP to bring along an upgrade to SBS 2003. One U.S. partner estimated that "about 50% of Dynamics GP deployments require an upgrade to SBS 2003 along with them, and even of those who don't upgrade their server infrastructure right away, most of them do end up implementing SBS 2003 a year or so down the line." Another U.S. partner noted, "I can think of four clients that implemented SBS 2003 because they went to a new version of Dynamics GP."

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! Follow-on engagements. Initial Dynamics GP deployments commonly lead to follow-on engagements that can take the form of implementing additional Dynamics GP modules, developing new reports and customizations, or performing integrations.

! Updates and upgrades. Updating customers to new versions of Dynamics GP can result in additional services revenue. One U.S. partner said, "We're constantly doing upgrades for our customers to bring them up to the current version of Dynamics GP."

! Training. Partners can offer value-added training on Dynamics GP, including training at the point of initial implementation and refresher courses down the line.

! Software support and maintenance revenue. Customers can sign up for annual support and maintenance contracts with Microsoft, and by acting as renewal agents for these support contracts, partners are eligible to make margins on the support renewal fee. Partner margins are based on a combination of sales volume and new customers added on a rolling 12-month basis and range from 15% to 22% on support contracts.

! Business management operations consulting. Partners well versed in business management processes and applications can offer pure consulting services to help small business customers streamline their operations.

R e q u i r e d S k i l l S e t s t o S u c c e e d i n D y n a m i c s G P

Most of the partners interviewed for this project utilize relatively small implementation teams typically consisting of two or three staff members. The heart of the team is the consultant, who has a diverse skill set that includes product, accounting, client management, project management, and even high-level technical skills. Typical teams consist of one or two full-time consultants, plus part-time project management and/or technical resources. Table 2 shows how partners break down the skills in the engagement team.

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T A B L E 2

S k i l l S e t s R e qu i r e d f o r D yn a m i c s G P D e p l o ym e n t

Job Title Responsibilities Required Skills

Sales Qualifies, brings in new deals • Business development

• Consultative selling

Consultant Helps close the sale

Manages and executes end-to-end implementation

Provides advice on customer's accounting and business procedures

• Consultative selling and engagement management

• Customer relationship management

• Project management

• Expertise in accounting, usually having an accounting background

• Product expertise

• High-level technical

Project manager

Manages tasks, schedule, budget, and dependencies

• Account management

• Project management

IT engineer Manages technically challenging aspects of the implementation

• Overview of operating system environment

• Integration

Source: Microsoft partners experienced with Dynamics GP interviewed by IDC, 2005

In larger partner organizations, a separate sales team is responsible for bringing in new business, but in many smaller organizations, the consultant plays this role as well. In either case, the consultant is usually required to help close the deal and then takes over as the primary individual performing the guts of the implementation.

Some partners have a separate product management role, while others require their consultants to handle that aspect of the engagement in addition to handling the core implementation. Additionally, partners tend to bring in an IT person only when he or she is required for the more technically challenging aspects of a deployment. IDC found that many smaller Dynamics GP partners and infrastructure partners team up to staff projects. Some of these projects are initiated by the Dynamics GP partner while others are initiated by the SBS 2003 partner.

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Building Skills Required for Dynamics GP

Partners described the difficulty in finding individuals with all the required skills to be a successful consultant. Said one U.S. partner, "My problem is it's hard to find people who can truly do it all. For example, I work with a guy who is good at client communications and knows the product well, but he's not great at project and team management."

Another U.S. partner offered IDC a novel suggestion for partners looking to pick up the required skills. "You might want to approach a partner with Dynamics GP expertise to sit in on and learn from some of their engagements. We get approached by other partners, and we've invited several to tag along on installations. We are a service-oriented business, and we're happy to help." The partner went on to explain that its motivations were not entirely altruistic. "Often it comes back to work in our favor because partners we've helped train sometimes come back and bring us into an engagement or refer business our way."

Resources and Training on SBS 2003 and Dynamics GP

Microsoft provides training and resources to help partners develop the skills necessary to effectively promote, sell, deploy, and manage SBS 2003 systems. Partners can find product information, resources, and news at the following Web site: https://partner.microsoft.com/smallbusinessserver2003.

! The Small Business Specialist Community is designed to help partners identify and address SMB requirements and to sell Microsoft products that are designed for SMBs, such as SBS 2003. Partners enrolled in this program receive specialized training and marketing resources and are entitled to use the Small Business Specialist designation to differentiate themselves in the marketplace. More information can be found at https://partner.microsoft.com/smallbusinessspec.

! As Microsoft partners grow their businesses and reach out to larger customers, they can continue on to gain competencies in the Microsoft Partner Program. These competencies are designed for Certified and Gold Certified partners and provide them with additional benefits and resources. For SBS 2003, two competencies are particularly important: OEM for System Builders and Network Infrastructure for resellers. For more information, visit https://partner.microsoft.com/partnercompetency.

To help its Dynamics GP partners ramp up on the required skill sets, Microsoft offers a variety of resources and training, including:

! Classroom training. Traditional classroom training is available to provide a foundation in Microsoft Business Solutions products and processes. Courses range from introductory information to advanced topics and include demonstrations, presentations, hands-on product experience, and discussions with other attendees.

! eCourses. This online training option offers classroom-equivalent training courses via the Internet. eCourses are designed to cover detailed concepts on specific subjects and allow users to choose the order in which to view the content.

"You might want to approach a partner with Dynamics GP expertise to sit in on and learn from some of their engagements."

"My problem is it's hard to find people who can truly do it all."

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! Foundation Library. The Foundation Library is also available via the Internet and provides self-directed tutorials that cover many topics related to Microsoft Business Solutions to help partners gain familiarity with a new feature or module or to refresh existing skills.

! Onsite training. Partners can contract with Microsoft Business Solutions and arrange for a certified instructor to visit the partner site and provide specific training to a set audience.

S a m p l e D y n a m i c s G P D e p l o y m e n t s

Like SBS 2003 deployments, Dynamics GP projects can vary greatly in size and scope. Table 3 provides four sample Dynamics GP deployments taken directly from partner interviews. IDC notes that in general the partners described a roughly 2:1 (or more) ratio of services to software revenue. Some specific lessons from these deployments include:

! A U.S. partner with experience implementing SBS 2003, a staff of 16�50, and revenue of $1 million to $5 million teamed up with a Dynamics GP specialist for business management and financial application deployments. For a Dynamics GP�only engagement, the Dynamics GP partner takes the lead and performs the deployment on a time-and-materials basis. This Dynamics GP partner stated to IDC, "We don't do any projects as fixed bids, although we're very accurate with our initial bids on a time-and-materials basis." A typical deployment is $30,000, with $20,000 coming from services and $10,000 from software. Overall gross margin is $11,000 (37%), with 30% gross margin on software and 40% gross margin on services.

! The same U.S. partner with experience implementing SBS 2003 also described a typical engagement in which the customer requires installation of both SBS 2003 and Dynamics GP. In most engagements, the SBS 2003 partner and the Dynamics GP partner each create a proposal for the client that covers their portion of the project, and they manage their own project relationship, although they will also subcontract with each other if the customer prefers a contract with a single entity. Principals of the two organizations meet with the client to evaluate the customer's needs and jointly coordinate their efforts. In this case, the SBS 2003 partner performs the engagement on a time-and-materials basis with a "not-to-exceed" limit, while the Dynamics GP partner operates on a time-and-materials basis without a not-to-exceed limit. The Dynamics GP partner explained to IDC, "If the SBS 2003 partner makes a proposal with a not-to-exceed amount and I'm supporting them, I'll bill them on a time-and-materials basis. If I go over this not-to-exceed amount, he's at risk to eat the difference." A typical SBS 2003 plus Dynamics GP deployment yields $45,000 in total revenue for hardware, software, and services, with more than half of the revenue and gross profit coming from services.

"We don't do any projects as fixed bids, although we're very accurate with our initial bids on a time-and-materials basis."

"If the SBS 2003 partner makes a proposal with a not-to-exceed amount and I'm supporting them, I'll bill them on a time-and-materials basis. If I go over his not-to-exceed amount, he's at risk to eat the difference."

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! A U.S. partner with a staff of 16�50 based in a suburb of a major urban area specializes almost entirely in Dynamics GP engagements; Dynamics GP projects represent about 95% of its revenue. This partner also performs SBS 2003 implementations when required for a Dynamics GP deployment, which happens quite frequently. In fact, the partner told IDC, "About 50% of the time our customers' infrastructure is so out of date that to do a Dynamics GP deployment we have to upgrade them to SBS 2003 first. For the rest, their infrastructure is okay, but even of those who don't do the upgrade right away, many do an SBS upgrade a year or two down the line." This partner described a typical project encompassing installation of both SBS 2003 and Dynamics GP that yielded $60,000 in revenue, with half of the revenue coming from services. Gross profit for this project was $20,000, with about 70% coming from services.

! A U.S. partner with a staff of 5�15 and revenue of $1 million to $5 million based in a major urban area is a Dynamics GP specialist. It performs engagements on what it describes as a "managed time-and-materials" basis. The partner describes the approach as follows, "We have a consultative sales process where we come up with a detailed work plan with the customer and then manage to that budget. So while our contract is written on a time-and-materials basis, our agreement is to hit that budget, and we're usually very close to that estimate." This partner described a larger initial deployment netting $176,000 total, of which $22,000 came from software and $154,000 from services. Gross profit for this project was $106,000, with $85,000 coming from services and $4,400 from software.

T A B L E 3

F e e s , E f f o r t , a n d P r o f i t f o r D yn a m i c s G P D e p l o ym e n t s

Partner description

U.S. partner with a staff of 16�50 and revenue of$1 million to $5 million, based in a small urban area

U.S. partner with a staff of 16�50 and revenue of $1 million to $5 million, based in a small urban area

U.S. partner with a staff of 16�50, based in a suburb of a major urban area (partner declined to state revenue)

U.S. partner with a staff of 5�15 and revenue of $1 million to $5 million, based in a major urban area

Project description

3-seat initial Dynamics GP deployment

10- to 15-user SBS 2003 license + initial deployment and 3- to 5-seat Dynamics GP license + initial deployment

15-seat SBS 2003 license + initial deployment and Dynamics GP Standard license + initial deployment

5-user Dynamics GP deployment: Core Financials plus Distribution modules

Total fee ($) 30,000 45,000 60,000 176,000 Software 10,000 13,000 20,000 22,000 Hardware 0 4,500 10,000 0 Services 20,000 27,500 30,000 154,000

Level of effort (hours) 240 900 Gross profit ($) 11,000 (37%) 15,125 (34%) 20,000 (33%) 106,000 (43%)

Software 3,000 (30%) 3,450 (27%) 4,000 (20%) 4,400 (20%) Hardware NA 675 (14%) 2,000 (20%) NA Services 8,000 (40%) 11,000 (40%) 14,000 (47%) 85,000 (55%)

Source: Microsoft partners experienced with Dynamics GP interviewed by IDC, 2005

"About 50% of the time our customers' infrastructure is so out of date that to do a Dynamics GP deployment we have to upgrade them to SBS 2003 first. Even of those who don't do the upgrade right away, many do an SBS upgrade a year or two down the line."

"We have a consultative sales process where we come up with a detailed work plan and then manage to that budget. So while our contract is written on a time-and-materials basis, our agreement is to hit that budget, and we're usually very close."

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N e w C a p a b i l i t i e s i n D y n a m i c s G P 9 . 0

Some of the new capabilities offered in the 9.0 release of Dynamics GP include:

! SBS 2003 integration. Dynamics GP 9.0 integrates with SBS 2003 Premium Edition, simplifying setup and providing one-click installation.

! Setup checklists. New process-based checklists streamline setup and provide audit information to help users avoid missing any key steps and maintain user accountability.

! Centralized updates. With Dynamics GP 9.0, administrators can now update workstations from the server without having to visit all client machines. This functionality reduces the costs of administering the system and minimizes end-user work disruption. Service Packs may also be deployed more readily.

! Personalized role pages. These pages provide employees with a personalized user experience with new role-based home pages that provide relevant information and access tailored to their daily responsibilities. More than 20 predefined role templates, ranging from Accounting Manager to Order Processor and IT Operations Manager to Dispatcher, provide employees in the organization with information and access specific to their job.

! Works like and with Microsoft Office. Dynamics GP 9.0 works with Microsoft Office, providing users with access to their Microsoft Outlook calendars within role pages and offering letter writing templates and wizards that enable creation of Microsoft Office Word communications from Collections Management and Human Resources modules, as well as from SmartLists. The integrated Microsoft Office Excel PivotTable Creator provides users with a familiar way to get to important information from their business system.

! Executive Center. The new Business Portal Executive Center offers inquiry access to transaction details, as well as personally identified key performance indicators that are important to managers' and executives' business success. The Executive Center includes interactive graphs, tables, announcements, and reports that allow managers and executives to stay on top of the information they need in a browser-based environment outside the transaction system.

! Personalized report access. New report navigation provides personalized access to the reporting options each individual uses most often. Users can select transaction and financial reports from the Microsoft Dynamics GP Report List � including new SQL Reporting Services Reports � customize them as needed, and then store them for one-click access.

! Customer extranet. Business Portal now extends the access of information to customers and sales staff through security-enhanced extranet capabilities. New functionality provides sales order entry; inquiries for shipment status, account balances, inventory stock levels; and a customer home page where users can deliver key selling and customer service messages. This enhancement combines with automated Electronic Document Delivery of order confirmations, ship notices, and back-order status to improve customer connections and provide increased service levels.

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! Integration with Microsoft CRM 3.0. The integration between Microsoft Dynamics CRM 3.0 and Dynamics GP 9.0 has been updated with a new XML-based processing engine. This new solution provides visibility into Microsoft Dynamics GP data from within Microsoft CRM 3.0, including quantity, availability, credit limit validation, order type selection, and access to tax schedules.

D y n a m i c s G P B u s i n e s s P r a c t i c e s a n d R e c o m m e n d a t i o n s

The following are business practices and recommendations gleaned from Microsoft partners experienced with Dynamics GP:

! Team up with a Dynamics GP expert partner. This is the easiest and fastest way to get started on Dynamics GP opportunities.

! Hire staff with the right skills. Building Dynamics GP expertise in-house requires hiring senior people with the proper skill sets, which is challenging because partners reported these skill sets to be difficult to find in the job market.

! Practice consultative selling. Partners need to engage in a consultative selling and engagement process; that is, when meeting with prospects, partners need to ask consultative questions to understand their needs, match these needs against their services, plan a phased approach to implementation, engage clients throughout to ensure that what they are developing meets clients' requirements, and continuously check on clients following the engagement.

! Obtain training and certification on Dynamics GP. Partners reported that individuals who complete the certification process will need to demonstrate that they have picked up sufficient knowledge both in accounting and Dynamics GP to perform at least basic deployments.

! Accompany a Dynamics GP partner and ask questions. Although it may come as a surprise to some readers, some Dynamics GP partners welcome SBS 2003 infrastructure partners to "tag along" and watch their Dynamics GP engagements at no charge or obligation. Some are happy to do it just to be good ecosystem partners, but others believe the SBS 2003 partner may return the favor by involving them in future Dynamics GP engagements.

! Network, network, network. Partners interviewed reported that one of the keys to success is being constantly in front of prospective customers and engaging with other Microsoft partners in the ecosystem.

! Perform tightly focused, phased implementations, especially in the beginning. This approach enables the partner to constrain each stage of the deployment while it is learning the product and the process and keeps initial deployments from spinning out of control.

! Manage project and client communications carefully. Partners reported that they offer attentive service and hand-holding to ensure that customers are successful in their deployments.

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! Invest in implementation planning and methodology. By conducting a significant amount of preparation up front, partners can more accurately scope projects, ensure the availability of staff and resources, improve ability to deliver the required functionality in the agreed-upon schedule, and mitigate execution risk.

! Reserve resource availability for the length of the project. Planning out staffing requirements for upcoming months and ensuring the availability of resources to deliver on commitments can help partners avoid surprises.

C h a l l e n g e s a n d O p p o r t u n i t i e s

Challenges

Because Dynamics GP is a business application and not an infrastructure play, there does not seem to be a path forward to implementing a managed services model analogous to that which many SBS 2003 partners have leveraged into a highly successful business practice. This lack of a managed services model may come as an adjustment for SBS 2003 partners getting into Dynamics GP, and partners will need to explore other areas for follow-on revenue, including upgrades and updates, deployment of additional modules, and the use of Dynamics GP as a "pull-through" opportunity for SBS 2003 deployments.

Being a successful Dynamics GP consultant requires a diverse skill set, including consultative skills and accounting, product, and technical knowledge. It is difficult to find individuals with all of the skills required to be successful Dynamics GP consultants. Many experienced Dynamics GP partners reported that they have a hard time identifying and hiring such people, which implies that it will be even more difficult for SBS 2003 partners with no track record in Dynamics GP to entice senior people with the required skills to join their team. Building a Dynamics GP practice without these senior individuals will be very difficult. Partners can address this challenge by intensifying the search for senior individuals with the right skill sets, providing intensive training for existing staff, or identifying Dynamics GP�experienced partners to team up with in engagements. Microsoft can address this challenge through a more concerted effort to build skill sets in Dynamics GP and Dynamics GP�certified partners.

Opportunities

Partners have stated that Microsoft Dynamics GP is a strong fit for the SMB market segment. Further, partners reported the availability of many strong products from a variety of vendors targeted at the entry level and other strong products targeted at the large business and enterprise levels, but these same partners stated that Dynamics GP is unique in addressing this middle range of the market.

Dynamics GP provides a number of add-on revenue opportunities, including strong pull-through for SBS 2003. Many partners reported that because Dynamics GP requires an up-to-date server infrastructure, 50% or more of Dynamics GP engagements have required SBS 2003 upgrades as well.

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Partners looking to get involved with Dynamics GP can tap into the strong Microsoft partner ecosystem. They can team up with a Dynamics GP partner to enter into engagements or even sit in on engagements with a Dynamics GP partner to pick up the required skills.

Adding Dynamics GP capabilities can improve the SBS 2003 partner's competitive standing. It can position the SBS 2003 partner as a more full-service partner to its small business customers.

The opportunity exists for Microsoft to certify service consultants in Dynamics GP and help play a matchmaking role with partners who are looking for skilled staff.

C o n c l u s i o n

Dynamics GP is a business management application that is targeted squarely toward the sweet spot of the SMB market and works hand in hand with SBS 2003 infrastructures. It offers an opportunity for SBS 2003 partners to layer business application functionality on top of server deployments and can serve as a driver for customers to upgrade their server infrastructure to SBS 2003.

Successful Dynamics GP deployments require a consultative selling process driven by business consultants with a wide range of expertise, including business, consultative, product, and technical skills. Although hiring or growing these skills organically may prove challenging for many partners, SBS 2003 partners can take advantage of the existing partner ecosystem to identify Dynamics GP partners with whom they can team on engagements. This approach provides a quicker path to opportunity and allows the infrastructure partner to act as a single point of contact for its customer while expanding the services it can offer and increasing its potential revenue stream.

A p p e n d i x : I D C R e s e a r c h M e t h o d o l o g y

In 2005, Microsoft sponsored an IDC research effort to understand the increased deployment of Microsoft SBS 2003 solutions in small businesses and related value-added offerings including Dynamics GP and business management. In over 100 in-depth partner interviews, IDC discussed with these partners the different paths to success they have found with SBS 2003 consulting opportunities.

C o p y r i g h t N o t i c e

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