Blog Post: Azure for whom? Lessons from the early days of Dynamics NAV in the Microsoft cloud

By Jason Gumpert, Editor

When Microsoft announced the availability of its Azure-based hosting for Dynamics GP 2013 and NAV 2013, some value-added resellers (VARs) had already taken the plunge into Azure-based hosting.  Microsoft' s first step toward "ERP in the cloud" gives any VAR the potential to become a hosting provider, with all the opportunities and risks that provides - to both their own business and their customers.

Abakion, a long time Dynamics NAV partner based in Denmark, is one of the first VARs to embrace the Azure deployment model. Their managing director, Kenneth Kryger Gram, told us in an interview that the decision to host their clients' NAV 2013 solutions on virtual machines in Windows Azure Infrastructure Services has worked out well for the company and its clients in a number of ways, from pre-sales activities through the deployment process and in post go-live support.

"It was interesting for us to see performance and deployment.  It has proven to be simple and easy," says Kryger Gram. He sees Abakion's opportunity to manage its customers' Azure-hosted deployments as an opportunity to generate more business, increase revenue, and help customers put their ERP investments toward functional and process improvements rather than IT infrastructure. 

With Feature Pack 1 of NAV 2013, Microsoft has introduced new server scripts that will significantly improve the experience of deploying NAV 2013 on Windows Azure, says Kryger Gram.  So while Microsoft server and network expertise is still required, the essential process of deploying a NAV solution, from creation of the virtual machine to installing SQL Server to adding Dynamics NAV, can all be handled via script and readied in minutes.

"They did a tremendous job," he says.  "You could do the same in an on-premise environment, but it is optimized toward Azure."

The Azure sizing guidelines provided by Microsoft have been appropriate, if not generous, says Kryger Gram.  Abakion has deployed NAV on Azure for eight clients so far, with more in the pipeline, and performance and sizing have not been a concern.

In the past, Abakion has worked with hosting partners, but they now plan to focus on hosting their clients' systems directly in Azure by relying on a new internal team. 

"It requires additional skills that are not in [VAR] companies today," says Kryger Gram. "Partner needs to understand that it adds a layer to their business in terms of risk.  We, as [a hosting partner] are now 24x7 responsible for the customer's system running. If Azure is down, now we're the contact.  With a hosting partner or in-house infrastructure, we could help, but it wasn't blamed on us. So partners need to understand that they need a critical mass of skills to support this because they'd become [the primary resource.]"

Customers who choose to host their solution in Azure would appear to have fewer, if any, changes to prepare for.  Much like any existing partner-hosted deployments, they will pay for hosting , though pricing levels and structure will be left up to the VARs.  And as with any hosting decision, they will have to figure out the impact on the their network and enterprise architecture.

Rob Helm, managing vice president of research firm Directions on Microsoft, sees opportunities in Azure for multi-national organizations looking at Dynamics NAV. "Azure is global and there are decent size midmarket companies that operate globally and work on NAV," says Helm. "It may mean better choices for management and security than a lot of hosting partners can provide on their own because of Microsoft's gigantic scale.  In most parts of the world, Microsoft is likely to have hosting centers nearby."

For pricing, Abakion considered a few approaches to the right rates, before deciding on a simple, per-user fee.  Given the variables of server size and computing hours, they initially thought pricing could become a more complex calculation.  The reality though, was that a simple pricing structure made the most sense for both customers and partner, keeping it financially viable for the partner but still affordable. In fact, charging for Azure-hosting has opened up a new stream of revenue for Abakion that will "boost incoming revenue by 25 percent this year," as Kryger Gram wrote in a blog post on Microsoft's The Edge blog. "This increase is huge, and shows just how much of an advantage is created by hosting Microsoft Dynamics NAV on Windows Azure."

By giving virtually any Dynamics NAV or GP VAR the option of investing in Azure hosting, Microsoft has introduced a mix of risk and opportunity for customers.  More VARs with powerful hosting capabilities will mean more choice for customers, and perhaps better pricing.  But on the downside, a flood of new so-called hosting providers means a range of competency levels.

It's also a question of whether ERP hosting in the SMB space is really the place Microsoft wants to be. Competitive positioning may demand it, but for their mix of business software initiatives, it is still unclear how valuable partner-managed hosting will be for Dynamics ERP or for Microsoft's cloud vision.

"SMB ERP is a tough fit," says Helm. "There is need for customization, but at the same time ERP systems stay stable for a long time. So they don't always need the elasticity that the cloud provides. I wonder how workable it will be as a business. Microsoft may be watching early deployments to see how it brings it own hosted ERP into play with Dynamics AX."

Why might a company pass on the option of hosting their clients Dynamics NAV or GP solutions in Azure? In reality, any partner not willing to invest in the right team should leave it to someone else.  A well qualified hosting partner will manage the provisioning, maintenance, and other services that go into high quality hosting like performance management, 24x7 monitoring of servers, and streamlining the provisioning process.

What should existing hosting providers be doing to adapt? In Kryger Gram's view, they should look hard at getting on board with Azure in some way. "Microsoft is very aggressive in the pricing of Azure. What we've seen so far for traditional hosters with regard to Azure and Office365 is that they seem reluctant to change because of their investment in hosting infrastructure. If I was a hoster I would see how fast I could move to Azure because I already have the knowledge of capabilities."

Current hosting providers can also make the case for sticking with their services. For one thing, would you rather deal with a partner who has recently spent a few weeks learning the basics of the hosting business or one that has seen it all over many years?  RoseASP, for example, has highlighted a range of factors they are already able to support that might leave newcomers scratching their head - things like database access via Excel, printer support (something that Kyrger Gram says has worked better in Azure than with his past hosting providers for NAV), management of all licensing, and experienced 24x7 support.

Microsoft does not yet support remote desktop services on Azure, but this may change as soon as July, according to Linda Rose of RoseASP.  When it does, it would add another deployment option on top of the NAV 2013 Windows client (formerly known as the RTC client), the web client, and the SharePoint client. 

Azure hosting by partners ought to be a popular topic of discussion next week at WPC 2013. The clear early benefits like boosting sales and adding a hosting revenue stream sound appealing, but it is still early days as partners and Microsoft work through understanding the long term duties of maintaining a range of Dynamics ERP customers, from the low customization rapid adopters to the risk-averse, upgrade-averse, customization-heavy laggards.