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Microsoft is stepping up its drive into the high-end enterprise applications market where it will take on the dominant ERP and CRM players Oracle and SAP.

While Microsoft already has some enterprise users of its Dynamics software, notably its CRM (customer relationship management) offering, the vendor has yet to go all out to target high-end ERP (enterprise resource planning) software users. That was the main message from the company's executives, speaking at the company’s Convergence show in San Diego last week.

Microsoft CEO Steve Ballmer told delegates that Dynamics is "enterprise-ready" in terms of the software's security, reliability and scalability. The work the vendor is doing around ease of use and ease of implementation should appeal to enterprises every bit as much as to Microsoft's core Dynamics user base among small to mid-size businesses, he said.

"That doesn't mean we're going to take on the supply chain of General Motors tomorrow morning, because that's more of a complexity issue than it is a scale issue," Ballmer said. "Our sweet spot today is small enterprises … but we're just going to keep expanding our sweet spot."

Ballmer described SAP as Microsoft's "big competitor" in the enterprise market. The two companies have enjoyed a close relationship in the past even co-developing and selling their first joint product, Duet, and executives from both vendors have in the past said that their business applications compete in different markets.

Will Microsoft begin offering migration programs to lure existing SAP and Oracle users off their existing applications? "That's a good question," said Satya Nadella, corporate vice president of Microsoft's Business Solutions group. "We may over time: we already offer some incentives."

Microsoft partners have already built migration offerings to bring Oracle's JD Edwards users over to Dynamics AX and Oracle's PeopleSoft ERP customers to Dynamics GP.

Microsoft is also hoping for what Doug Burgum, senior vice president of the company's Business Solutions group, refers to as "the echo of Y2K".

In the run-up to preparing for the Y2K bug, many companies decided to replace their ERP systems in 1999, several years earlier than they had previously planned. Those decisions led to a huge growth in ERP sales at that time.

If these organisations are working on a seven-to-ten year cycle for the next system replacement, this would mean it is a good time for Microsoft to throw its competitive hat into the ring.

Microsoft is increasingly being asked to participate in request for proposals (RFPs) by enterprises, according to James Utzschneider, its general manager of Dynamics marketing. Microsoft sells Dynamics through its partners and some of them may lack the necessary skills to deal with a company the size of a Wal-Mart or a Coca-Cola when they're more used to interfacing with a Coca-Cola division, he said.

Being able to manage Dynamics deployments across 150 global sites may also be beyond their comfort level. While some partners will be able to scale up to meet the needs of enterprise customers, Microsoft will also look to work more with global systems integrators such as Accenture, Utzschneider said.

Nadella is particularly interested in the services arm of IBM. "I'd love to work with IBM as a global SI on top of Dynamics," he said, adding that discussions between the two companies are already in progress.

Enterprise customers may also require more hands-on involvement from Microsoft once they purchase Dynamics, but the vendor has no plans to change its existing business model of strong reliance on its partners. "In any relationship, there's still a need for a trusted third party," Utzschneider said.