MIcrosoft already offers hosted CRM to customers as a Software-as-a-Service (SaaS). But Microsoft Dynamics CRM Online is not yet hosted on Azure, the company’s much-touted cloud platform which has been available, at least in part, since early last year.

This week at Convergence 2011 in Atlanta, Microsoft is expected to talk about how and when it will deliver ERP via a subscription from its own servers.  Ideally, the company would like to offer versions of Dynamics NAV, GP, AX (that would be Navision, Great Plains, and Axapta to English speakers) from Azure, and is working to do so but it’s unclear whether that will be the case or whether they will run on some non-Azure environment. [UPDATE 4/13/2011: The cloud-enabled ERP products will run on Azure, Microsoft said this week.]

ERP would be a great opportunity for Microsoft to pick a code base (probably Axapta) and go with it while continuing to support legacy customers on the other lines. That way the company could resurrect its late, lamented “Project Green” plan that promised a unified ERP product.  The Project Green idea was similar to Oracle’s Fusion applications plan announced years later. Oracle Fusion apps (still underway) would take the best features from multiple business applications and knit them altogether in a “greatest hits” of application code.

Instead, Microsoft is lugging three out of four somewhat elderly client-server code bases into the cloud era. Hardly the most efficient model and that news stunned onlookers and that really spells  the end of the Project Green promise.  

Microsoft is expected to soften the blow to its channel (100% of Microsoft ERP sales now go via authorized Dynamics partners) by mandating that initial sales of Microsoft-hosted ERP be sold by Dynamics partners.

This is a huge commitment by Microsoft to its installed base but also represents a huge hindrance.

Moving three ERP lines instead of one to Microsoft’s cloud is “like racing in the Americas Cup while dragging a parachute,” said Paul DeGroot, founder of Pica Communications, via email. “For everything that the competition comes up with, Microsoft gets to triplicate the effort.”

Others say Microsoft is a victim of its own success and must tread carefully so as not to leave its installed base behind and/or lose them to younger more cloud-oriented players like Salesforce.com or NetSuite. Microsoft has to hope that most of its Dynamics customers are really not ready for the cloud yet and that by the time they are, Azure and Microsoft-hosted ERP will be waiting for them. Analyst Ray Wang of Constellation Research said Microsoft might get lucky on that front. Research he did last year showed that the bulk of the Dynamics installed base was not eager to make the cloud leap.

Still, Microsoft has signaled that it is “all in” for the cloud trip and now has to match up overlapping and confusing product and service time tables to make good on that promise.

“The tools required to run Dynamics [applications] on Azure are not ready. Azure is still a work in progress but the future and direction has been set by Microsoft so partners have to straddle the reality of Azure not being ready,” said Wang.

The constituency most at risk here are the Microsoft hosting partners that already offer Dynamics ERP. “The problem for them is that Microsoft has such huge scale in its cloud facilities that very few hosting partners will be able to compete,” Wang said.

That’s very bad news for Microsoft hosting partners. But the bad news for Microsoft is that its already confusing and redundant multiple-ERP effort will continue from today’s client-server realm right into the cloud.

Let us know what you think about the story; email Barbara Darrow, Senior News Director at bdarrow@techtarget.com.

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 Jeff Edwards, Microsoft’s director of partner strategy, told Scott that there are now about 950 such partners in the U.S. while Microsoft needs just 300 to 400 stronger partners. Scott’s post came out Microsoft Convergence 2010 in Atlanta this week.

Sources have said over the past year that Microsoft is trying to weed out non-productive partners.Microsoft also wants  to build a small network of very profitable, strong ERP VARs to take on Oracle and SAP in upper midmarket accounts.

This is part and parcel of Microsoft’s new partner programwhich will try to address the proliferation of Microsoft Gold VARs who are Gold in name only. Because there are so many Microsoft Certified and Gold VARs competing for deals, margin erosion is a persistent problem.

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(List price for new users had been $59 per user per month for the”Professional Plus” edition or $39 per user per month for plain, ol’  Professional Edition–although I’m not sure cheaper introductory pricing announced  two years ago ever lapsed. That was $39 per user per year for Professional.)

Also new, as announced this morning by Microsoft Business Division president stephen Elop are new tools that VARs can use to tie Microsoft-hosted Dynamics CRM Online into other cloud based services running on Microsoft Azure. Unclear from the release whether there are tools to tie into non-Microsoft clouds.  

Also promised: “Seamless” integration with Dynamics GP 2010, due out May 1.

It seems that Microsoft spends an awful lot of its time these days developing integration between its own offerings. But given that Dynamic CRM is, by most VAR accounts, the product that is selling well (both in on-premises and online forms) it makes sense to link the ERP products to it as closely as possible.

Convergence 2010, for users of Microsoft’s CRM and ERP products,  kicked off Sunday morning bright and early in Atlanta.

Microsoft is offering NetSuite shops $850 per user  in credit to move to its ERP lines.  The money goes to end users–presumably the partner benefit would come from implementation work  involved in geting those customers on Microsoft Dynamics  GP, NAV or SL in those shops. UPDATE:  Dynamics AX is not covered by this offer.

 Just weeks ago, Netsuite said it would offer select VARs 100% margin on the first-year of NetSuite selling into Microsoft or Sage Software ERP shops. It was unclear how many VARs would be invited to NetSuite’s “invite only” promotion, but any VAR worth its salt has to look at anything with 100% margin.

NetSuite was a trailblazer in SaaS-based ERP. Microsoft is late to that party but does offer partner-hosted offerings whereas NetSuite customers must run on NetSuite infrastructure.

Here’s more on the Microsoft Rightstep promotion.

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At Sage he works with Jodi Uecker-Rust a former Microsoft Business Solutions executive who had joined Microsoft via its buyout of Great Plains Software. Uecker-Rust was named president of Sage Business Solutions last year.

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HP wants all its parters to comply with the U.S. Government Foreign Corrupt Practices Act by year’s end. And said compliance will set them back $120 which they will be required to front on their credit card upon registration.

The goal is to make it “easy and affordable..for our channel partners to comply,” according to HP. The problem is, the FCPA is for “U.S. firms seeking to do business in foreign markets” and many of the affected HP partners are not authorized to sell HP products outside the U.S.

Well, at least they can charge it. Microsoft ERP partners were unpleased to learn that, starting in November, tehy won’t be able to fund their software license purchases with credit cards–corproate or otherwise. The reason? Microsoft was sick of the associated charges so now VARs must pay by check or PO.  The news was first highlighted in Bob Scott’s Insights last week. 

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EDS today called itself the world’s largest Microsoft CRM  hosting partner. With 180 data centers supporting untold numbers (really, they’re untold) of hosted Microsoft CRM customers. Overall, EDS says it oversees 3.3 million Windows desktops and 100,000 Windows servers.

The CRM news isn’t shocking, given that a year ago pretty much to the day, EDS called itself Microsoft CRM’s enterprise partner of choice. But Monday’s press release brings up Microsoft Business Solutions’ conundrum. In the early years of MBS, just after Microsoft’s 2001 buyout of Great Plains and then Navision, the company was careful to position itself as an ERP-then-CRM provider to SMBs. Later it refined that message to appeal to departments of larger companies and the spokes of hub-and-spoke organizations.  Much of that was out of respect to ERP partner (and at one point merger target SAP.) After that proposed deal fell through, Microsoft started being more open about its enterprise ambitions. EDS, which typically serves big companies, helps there.

Microsoft  could use Convergence 2009 this week to launch a more aggressive enterprise foray. What better time than this crappy economic downturn to point out the costs of Oracle and/or SAP ERP and CRM implementations? On the other hand, rivals could argue that the full Microsoft stack—required for its business apps—really isn’t so cheap at all.

An interesting aside on this EDS thing: The Plano, Texas-based services giant is now part-and-parcel of Hewlett Packard. HP was once a huge Lotus Notes shop. I don’t recall the sequence, but suffice it to say, IBM acquired Lotus, IBM competes with HP in hardware and services, and an HP executive last week actually asked if Lotus Notes/Domino was still on the market. The independent EDS also had a huge Notes practice. Keep that in mind when you hear of these massive vendor alliances. They’re usually transient at best.

It’s always good to watch the shifting allegiances of VARs and their vendor partners.

Take SAP for example. Last week, the ERP giant, trying to boost its midmarket cred, blasted out a press release touting the migration of companies and VARs from Infor to SAP Business One.
Infor has ruffled channel feathers with its requirement that its partners be exclusive to it. You can’t be an Infor partner and an SAP partner or a Microsoft ERP partner, for example. 

Infor and its expectations of partner loyalty thus makes a fascinating channel tale. Based in Alpharetta, Ga., Infor is Computer Associates-type borg in enterprise apps. (Well, mini-borg if you’re comparing it to Oracle.) It buys  (or bought) lots of  small companies and assimilated them—for better or worse. Then it expects the VARs who sold and supported those often-specialized ERP packages to be 100% true blue to Infor. In return it promises advantages.

Now back to the press release. Some of it checks out fine. Navigator Business One Solutions evolved out of an Infor partner into one (as its name implies) fully in the Business One camp.

Navigator CEO Grant Fraser said  his old business, Alpine Systems was a Lilly Software partner and when Infor bought Lilly, became an Infor partner. That was fine for awhile but then he started to look around.  “We had about 700 customers on the Infor product but decided to look around,”  He said the issue was uncertainty over whether Infor would truly continue to improve and support all the code bases it had acquired. “I mean, if the Oracles and the Microsoft’s of the world can’t do it, how could Infor do it alone and Infor had a grand vision of two superset products, one for Java one for .NET,” Fraser said.

The upshot is he decided to form another company to sell Business One and keep Alpine for Infor. When Infor found out, it wasn’t happy and Infor ended up buying out Alpine.

Other Infor partners have had harsher words for Infor. Off the record two other then-current Infor partners told me in the last Infor exclusivity go-round  that the company’s demands for 100% exclusivity were draconian and they both wanted to switch to Business One. Neither partner returned phone calls this time around although one’s website makes it clear it’s in the SAP camp now.

The flip side is a Midwestern Infor partner that two years ago started a move to SAP but has ended back with both feet firmly in the Infor fold. This partner said Business One turned out to be a big disappointment. “SAP got all hot and heavy in SMB market then pulled back. It has no clear vision,” this partner said.

He and others point to the SAP’s enterprise ERP roots—and its related legacy direct-sales focus. These partners said that the struggling Business ByDesign effort was a mess that didn’t help matters.

But the larger question of vendor exclusivity remains. Focusing on one vendor eases training and certification issues—and can save money. But it also restricts customer choices. Very few VARs recommend a total commitment to any one vendor and that’s the problem Infor will continue to face.