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Microsoft among ERP vendors increasing built-in vertical functionality

As Microsoft enhances built-in vertical functionality of Dynamics AX for partners, an IT director explains the cost analysis and features that led his company to take the AX route.

The ERP system selection process has long included criteria such as industry-specific functionality and the need for as little customization as possible. ERP vendors are trying to get closer to meeting that need, though even the latest advances still involve system integrators and leave room for niche providers.

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This week, for example, Microsoft will announce that it has purchased intellectual property from several companies to augment the functionality in its Dynamics AX product for the manufacturing, professional services and retail markets. Its partners will still need to develop actual industry versions for customers, but they will have less to do because the base product will have functionality and business processes common across those broad industries already built in, such as capacity, expense, performance and talent management. This will result in quicker and lower-cost ERP implementations, Microsoft officials said.

The deals are with LS Retail EHF, Fullscope Inc. and Computer Generated Solutions Inc. Athens, Ala.-based Fullscope has developed ERP software for the manufacturing industry, more specifically for process industries such as food and beverage, life science and pharmaceuticals. Iceland-based LS Retail EHF develops retail and hospitality ERP software, and New York-based Computer Generated Solutions makes software to meet the needs of the professional services industry.

Microsoft isn't alone in its quest to minimize ERP customizations and cater to specific industries. Oracle Corp. acquired Retek, a specialty ERP retail company; Lawson Software Inc. has M3 Analytics for the food and beverage industry; and SAP AG has SAP for Retail and SAP Manufacturing.

Then there are the Software as a Service ERP vendors such as NetSuite Inc., which customizes its offering to manufacturing, retail, wholesale distribution, agriculture and other industries. There are also companies that offer ERP products for certain niches, such as Tensoft Inc.'s Multi-National Consolidation, which specializes in centralizing financial data across companies that deal with different currencies.

"The last thing that [customers] want to be in is the software business," said Jim Shepherd, a vice president and research fellow at AMR Research Inc. in Boston. "They don't want to customize and would love to find [an ERP solution] that fits them 100%. That is the ideal … a vertical solution that reduces a lot of the modifications."

Jeff Kadlec, director of IT at Ridley Inc., agreed that that would be the ideal scenario. But he said that, for now, that customization is par for the course with ERP systems.

"I would like to get an [ERP system] out of the box and use it, but none of us are naive enough to think that you're not going to have to customize it," said Kadlec, who began using a version of Dynamics AX two years ago.

I would like to get an [ERP system] out of the box and use it, but none of us are naive enough to think that you're not going to have to customize it.
Jeff Kadlec
director of ITRidley Inc.
Kadlec's system selection process, however, had other criteria that were more important than the amount of customization or a vendor's familiarity with Ridley's business. He said he was more concerned with the viability of the vendor, whether it would continue to support its product 10 years down the road, the software's operational costs, and -- most of all -- its ability to reduce inventory expense. Ridley, a holding company for animal feed and nutrition companies such as Feed-Rite and McCauley Bros. Inc., spends 70% of its $700 million capital budget each year on inventory, feed ingredients and logistics.

"We needed a system that showed us things real time … where our inventory is anytime, anywhere, all the time," he said.

Kadlec compared the ERP suites from Microsoft, SAP, Oracle and Lawson, which came within $30,000 of each other, including the software and implementation costs. Then he had three different consulting firms do a cost analysis of the long-term support and staffing costs for the ERP vendors' systems. All determined that Microsoft Dynamics AX would cost about $1 million a year less than the others.

Broken out, an SAP developer would have cost him around $130,000 a year; a Microsoft developer costs about $70,000 a year, he said.

Being a Microsoft shop also shaped Kadlec's decision, but it wasn't the only factor, by far, he said. "We had a list of 80 criteria that we wanted to match."

Ridley worked with systems integration partner Fullscope on the implementation. Today, Dynamics AX is integrated with Ridley's production, receiving, shipping, inventory and logistics systems. And Ridley reduced its inventory investment by 30% this year, "by knowing what we have, when we have it and where it is," Kadlec said.

Let us know what you think about the story; email: Christina Torode, Senior News Writer

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That was a nice post about Microsoft dynamics ERP. Author has explained in an interesting way and with the help of this post we can able to know about Microsoft AX, NAV, GP.