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Adapting to Serve Microsoft Dynamics 365 Business Central SaaS Customers

Wednesday, February 09, 2022
Reading time: 8 minutes

Your latest client has made the decision to deploy Dynamics 365 Business Central in the Microsoft cloud. They are excited. Their new SaaS ERP solution was ready to go-live in a fraction of the time and at a fraction of the up-front cost of their previous on-premises ERP. But just a few months after deployment, they have concerns. Why must they deploy updates so soon? How will their ISV solutions be impacted? Their customizations? Can they trust that their data will be protected? Will users lose productivity?

Despite the excitement around cloud ERP, implementation partners know that customers’ needs remain the same: business continuity, transparent costs, support for new business needs, and scalability. And often, Dynamics partners are the ones expected to close the gap between the loss of control over the infrastructure and making sure customer needs are satisfied.

In this article, I am going to cover major challenges Dynamics partners face as their customers transition their ERP software from on-premises to SaaS.

Is the Business Central SaaS market different from Business Central On-Premises market?

Instead of requiring a hefty upfront investment, Dynamics 365 Business Central runs on a subscription model, making it a more appealing option for small businesses looking to avoid the traditional up-front costs of purchasing an ERP solution. Some of the differences from the on-premises world include:

These advantages are encouraging more small businesses to choose the Dynamics 365 ecosystem, and they are looking for partners to support them. The revenue per customer is small, but the volume potential is big. Partners who can offer a simple and cost-effective implementation and support model are going to win this segment.

For the mid-sized and larger customer segment, the key advantage of SaaS over on-premises will be the ability to scale easily. However, the need to align ERP update rollouts within the organization with the Dynamics 365 Business Central release cycle, requires new change management approach to mitigate the threat of upcoming changes to business continuity. This segment will mainly look for partners that can offer services that reduces customers’ burden of change management and provide a simple and transparent pricing model that accounts for ERP maintenance costs and future growth. Here are few examples of such services: periodic testing solution with upcoming releases, adapting solution code to breaking changes of D365 Business Central, warning about changes in standard functionality used by the customer.

Do partners need to adapt their operating model to appeal to the SaaS segment?

Flexibility was one of the main reasons that Dynamics NAV gained popularity in SMB segment. With customizations, it could be implemented in any company that was willing to pay for those customizations. However, with SaaS, the name of game is scalability. And to be scalable, partners and customers must let the flexibility go. The ISV partners play an extremely important role here. It is way more effective to solve problems that multiple customers are experiencing centrally as opposed to on a case-by-case basis. Instead of implementing functionality from scratch, Value Added Resellers (VARs) cooperating with ISVs can offer the following benefits for the SaaS segment:

With the number of ISV solutions in SaaS increasing, VARs and ISVs need to tighten their cooperation. Here are the main areas that VARs and ISVs need to work on:

Sales

Even though all apps can be discovered and downloaded through Microsoft AppSource, at the end of the day, a VAR is still taking care of the customer. Customers are busy keeping their business running. It is very uncommon for them to spend time researching which ISV solution is relevant to them. Usually, they ask a VAR for a technical solution to cover their business requirements. And when it comes to support, customers prefer a single point of contact at their VAR instead of contacting multiple ISVs to troubleshoot. Therefore, AppSource should be treated as a distribution channel and a catalog and the VAR should be considered the main sales channel. VARs should do their research and pick the ISV solutions that will cover the majority of their customer needs. ISVs should invest in sales and marketing assets for VARs to use when customers are selecting add-on solutions.

ISVs must also address their pricing model. Most VARs package their offerings as a monthly subscription in alignment with Dynamics 365 Business Central billing. Per-user per-month is the most common pricing model offered to customers. ISV solutions with such a pricing model will be more attractive to VARs, as it allows VARs to keep their pricing simple, transparent, and consistent for their customers.

Monetization

The current situation, where every ISV is responsible for the monetization of their own app, may sound good with one ISV solution deployed to a few customers, but it presents a number of problems when you consider scaling:

Therefore, transacting licenses through VARs is far more scalable because the boundaries of responsibility are clear: ISVs can focus on product development, VARs on customer service and collecting payments from customers.

With this setup, there is no need for ISVs to invest in monetization functionality. It is enough to invoice the VAR based on the usage data from telemetry, and the VAR decides how to collect payments from their customers.

Support

The growing number of maintained customers, increased utilization of ISV solutions, and mandatory Dynamics 365 Business Central updates require VARs to review the efficiency of their ISV partnerships. As a VAR is deciding which ISV solutions best meet their customers’ needs, product support becomes extremely important. Here are the key questions for a VAR to ask an ISV when considering selling their product:

Implementation

With the rapid growth in Dynamics 365 Business Central customers, VARs and ISVs must work together to address the bottleneck of onboarding new clients. For VARs it means more revenue from implementation and maintenance, and for ISVs it means more licenses sold.

Implementing assisted setup wizards and creating how-to videos and spotlight tours does not make sense for an ERP solution tailored by a VAR for a specific customer, but these deliverables are very reasonable for ISVs with an ambition to add hundreds or thousands of new customers. And VARs can leverage these assets to boost the speed of implementations if they also invest in a standardized implementation process.

The speed and cost of implementing solutions based on ISV products will significantly drive down the costs and timeline of implementing ERP for new customers, driving the need for highly customized ERP solutions out of the market.

 Keeping solution up to date

The upgrades to customer solutions in SaaS are small, mandatory, and frequent compared to their on-premises counterparts. VARs must change how they approach upgrades for their growing SaaS ERP customer base. In on-premises implementations, these firms could afford to have a reactive approach: to wait for the new release, then assess what problems it causes for the customer, budget, plan, and then implement an upgrade. With the 60-day upgrade window in SaaS, partners need to take a proactive approach:

Key takeaways

Overall, here are the three key takeaways that Dynamics partners should consider to avoid disruption:

This article was first published on MSDW.

Andrius Čyvas
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