Per-user pricing for Microsoft Dynamics

Microsoft is changing the pricing format of its four Dynamics ERP applications families. By moving from a per-module basis to a per-user basis, the company hopes to make it easier for its partners to sell the software.

While rivals Oracle and SAP engage in a mix of direct and indirect selling of their ERP applications, Microsoft relies on partners to sell its Dynamics offerings.

Microsoft unveiled the new ERP pricing just before the start of its Worldwide Partner Conference (WPC) taking place in Boston this week.

Instead of trying to help new Microsoft ERP customers navigate through over 1,000 different pricing options based on hundreds of modules, the software vendor's partners will start selling three standard application suites for each of its four ERP product lines as of 1 August.

"For most of our customer base, the options were so finely grained, it was like going to a car dealership and having them say it's extra for floor mats," James Utzschneider, general manager of Dynamics marketing at Microsoft, said.

Under the Business Ready Licensing model, partners will sell the Microsoft Dynamics Business Essentials, the Dynamics Advanced Management and the Dynamics Advanced Management Enterprise ERP suites for each product line: Great Plains (GP), Navision (NAV), Axapta (AX) and Solomon (SL).

"It's the next logical step," Utzschneider said. The change in pricing is a natural extension from the company's September rebranding of its four ERP product lines under the Dynamics banner, he added.

Microsoft has the ultimate aim of offering customers a single Dynamics code base beginning in 2008.

The move is less about lining up Microsoft's ERP offerings with those from Oracle and SAP, which are already grouped into suites, than about simplifying life for Microsoft's partners, Utzschneider said.

Microsoft's per-user pricing will differ from that offered by its rivals. While Oracle and SAP provide named user pricing, Microsoft will offer concurrent user pricing, he added.

"Users really like concurrent pricing," Ray Wang, principal analyst at Forrester Research said. "It gives them flexibility and is easier to manage." This is particularly the case when a company using Dynamics wants users working different shifts every day to be able to access the applications.

Andy Vabulas, chief executive officer at Microsoft partner IBIS, sees concurrent user pricing as a real strategic advantage. He welcomed the new pricing model.

"It makes so much sense," he said. "This will take the friction out of the sales cycle." Previously, partners like IBIS have had to spend time justifying Microsoft's per-module pricing versus its competitors' per-user model.

Wang sees the pricing for the entry-level Dynamics Business Essentials suite of US$2,250 as fairly aggressive, since it's less than what SAP or Oracle currently charge.

In coming up with the new pricing model, Microsoft was strongly influenced by its experience with Dynamics NAV in Europe where the vendor already offered optional per-user pricing. "We used NAV as a test bed to learn how to apply the program across our partners worldwide," Utzschneider said.

The Dynamics suites include free online training for all users and standardises Microsoft's global ERP offerings.

In order to get its channel partners used to the per-user pricing, Microsoft will continue offering per-module based pricing for a 90-day period from 1 August, meaning the new pricing will be fully rolled out by mid-October.

Existing Dynamics ERP customers aren't affected by the new pricing model although if they wish to move to per-user pricing they have that option.