With Microsoft talking e-commerce, established players see opportunity and challenge

November 1 2019

When Microsoft introduces a product that could address a major new segment, the market notices. So when the company unveiled Dynamics 365 Commerce as part of the recent 2019 release wave 2 for its business applications suite, it raised the question of whether Microsoft has committed to delivering an e-commerce solution, and how established e-commerce vendors in the Microsoft channel would adapt.

So far, Microsoft has positioned D365 Commerce as an incremental update to Dynamics 365 Retail, an established product that adds a specialized retail architecture and industry-specific features and interfaces around Dynamics 365 for Finance and Operations. As "Commerce", the product adds a nascent e-commerce service based on the company's own internal B2C e-commerce system.

D365 Commerce has a long list of enhancements on its roadmap, many of which are not e-commerce related. Meanwhile, Microsoft recently stated that Dynamics 365 Retail sees more than 9.8 million checkouts processed per month, with more than 5,600 stores using the POS.

At Episerver Ascend 2019 this week, Episerver officials and their partners said Microsoft's decision to shift the positioning of their D365 Retail product to "commerce" is as much an opportunity as it is any potential competition at this point.

Microsoft has been transparent in its plans around the D365 Commerce product, said Karen Chastain, Episerver's senior director of g lobal alliances. Episerver is a long time Microsoft partner that uses Azure exclusively to run its cloud-based content and commerce platform. Chastain said Microsoft's efforts will be noticed by all commerce vendors in the channel, but their offering is not yet comparable.

From a partnership perspective, Microsoft has been very transparent and has been helpful from positioning standpoint. As a trusted vendor that drives so much Azure, we feel the strength of the partnership and they wanted to support us with that transparency.

We definitely feel that they're checking a box, that they want with these capabilities. We have a much more robust platform and will navigate working with them where we can. When we know it might be an option, we'll have to agree to compete, and that's ok too.

Buyers that do consider D365 Commerce in the next six to 12 months are likely to fall into one of two basic profiles.

For organizations with very limited commerce needs on top of the core retail and operational capabilities of D365 Commerce, full-featured commerce solutions may not be a good fit. But for any buyers with serious commerce and content management requirements, awareness of Microsoft's offering should help illuminate the more robust options in the Microsoft ecosystem. Chastain explained:

Microsoft are focused on retail and existing installs. They are not taking someone off Hybris or Episerver. It's an expand play, it supports that. It's missing a lot like site search, B2B. Customers will [compare it to how much they are spending] on another commerce cloud, but when they investigate, they will also look at other .NET options and it will rise all tides.

Ed Kennedy, senior director of commerce strategy at Episerver, expects the added attention to refocus companies on the value of their commerce investments. He told MSDW:

What's going to happen is that customers will say, 'We're spending this much on commerce with some other vendor on some other cloud, maybe I should bring it all to Microsoft.' And they'll evaluate [Microsoft's] Commerce product, and they'll see that, well, maybe they should look at other .NET options and it will rise all tides. We stand to gain from Microsoft taking a megaphone to its clients about commerce.

In the meantime, vendors like Episerver that are dedicated to Azure continue to gain favor among Microsoft sellers who are incentivized around increasing revenue tied to Azure consumption. Mike Rogers, Episerver's Dynamics 365 partner sales manager, explained that a vendor in Episerver's position serves a key purpose in helping Microsoft hit its goals, especially in introducing new customers to Azure.

Some of our wins are dark-to-cloud wins for Microsoft. This is the first taste of Azure these companies have had and that's led to other Azure opportunities. An example is [furniture retailer] Raymour & Flanagan, which had no Azure consumption. They were running in AWS. We replaced that with Episerver in Azure, Microsoft now has more Azure opportunities with them, and they're even looking at replacing their legacy ERP with Dynamics 365. Now they're making their bet on being a Microsoft shop.

Rogers added that a vendor that has committed to deploy only on Azure will also be in a better position with their Microsoft relationship than those who deploy across multiple clouds. It's not unheard of, he said, for a Microsoft co-sell effort with an ISV to ends in a win for the vendor but a deployment with another cloud provider.

Harris Schneiderman, regional sales manager at Intergen, now part of Empired (both a Microsoft and Episerver partner), advised that Microsoft's partners would be wise to watch for progress in D365 Commerce. Historically, key changes in Microsoft's trajectory have been written off by some observers, he notes.

Microsoft has a long history of entering new markets and this is an example of that. Many would agree that first try is very basic and there's some healthy skepticism initially in a preview release or version one. But over time, and we see this more in the cloud era especially, that they will be iterating and iterating, making the product better, and soon they become a serious player. Because if they don’t get traction in the market, then they won't pursue that market. But if they believe they can be successful they will keep investing.

Go back to the days when everyone said Microsoft was a desktop company, they'll never have a credible server product. Then it was that they'll never have a credible cloud platform, they're an on-prem company. And now those statements are ludicrous. So it's early days with Microsoft [and commerce] certainly, but I think any competitor that doesn't keep an eye on them, it is to their detriment.

He also pointed out the importance of Microsoft's co-selling incentives to its sellers, which offer new opportunities for ISVs like Episerver that have aligned themselves with Microsoft's core interests like Azure consumption.

Episerver was very early to building on Azure and getting their solutions certified [in the IP co-sell program]. So the incentives are there for a good Microsoft salesperson to delight their customer and retire quota more successfully if they deliver solutions like Epi going forward.  

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About Jason Gumpert

As the editor of MSDynamicsWorld.com, Jason oversees all editorial content on the site and at our events, as well as providing site management and strategy. He can be reached at jgumpert@msdynamicsworld.com.

Prior to co-founding MSDynamicsWorld.com, Jason was a Principal Software Consultant at Parametric Technology Corporation (PTC), where he implemented solutions, trained customers, managed software development, and spent some time in the pre-sales engineering organization. He has also held consulting positions at CSC Consulting and Monitor Group.

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