Pat Fitzhenry has been a friend of mine since the late 1980’s. Pat has always had a special place in the hearts of the many of us that have loved, sold, and supported Dynamics SL. Pat was the one that wrote the PC Magazine review in 1985 that “put Solomon Software (Dynamics SL now) on the map”. Pat was working for Price Waterhouse and those PC Magazine reviews meant everything to software developers at the time. If it weren’t for Pat, I would probably still be living in Pennsylvania rather than Minnesota- doing accounting related work in some capacity. Pat joined Solomon Software in 1987 as Western Region Vice President. He held a number of roles during his 13 years at Solomon including VP of CPA Programs and Relations, Independent Developers Programs, Mergers and Acquisitions, and finally Senior VP Sales & Marketing. Pat was instrumental in the Great Plains Software acquisition of Solomon Software and the merging of the sales and marketing organizations once the acquisition was complete. Great Plains (Dynamics GP) was acquired by Microsoft in 2001. Pat is now in his 11th year with Microsoft.

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Jack Boyer:  Pat your job now involves recruiting and enabling Independent Software Vendors (ISVs) in order to enhance the Dynamics AX product line. In Good to Great, Jim Collins says that great companies put their best people in their biggest opportunities. Having experienced, as a partner, the dominance that Microsoft Dynamics GP experienced in this ISV area, is this perhaps something that Microsoft is trying to emulate with Dynamics AX?

Pat Fitzhenry:  Dynamics AX 2012 was developed to be not just an ERP Business Application, but also an ERP Application Development Platform. We’re finding more and more vertical ISVs who see financial applications as a commodity to which they can’t really add much competitive value. These same ISVs also see much of the common industry functionality as something they don’t add value in creating. With the Dynamics GISV Program we are identifying vertically-oriented ISVs that have significant customer bases on their current legacy product. We are then providing them with a great path to their next generation solution. Very modern technology, significant horizontal and industry functionality, and strong development platform. ISVs are finding that the AX Application and Development Platform provides them with 70% to 80% of their solution right out of the box. The ISVs can then focus entirely on the vertical aspects of the total solution. Moving forward they only have to maintain and develop on the 20% to 30% of the total solution rather than the 100% they are maintaining now.

Jack Boyer: What is so special about the Dynamics AX developer toolkit?

Pat Fitzhenry: First off, it’s a layered architecture that allows for significant customization. The core execution code (source code) for AX is stored in the System Layer. This source code can’t be modified, but it can be copied for customization in one of the other 6 layers. Those layers include (from the bottom up) the Globalization Layer, Fix Layer, SL Layer, ISV Layer, Customer Layer, and User Layer. When code executes it executes from the top down, so first the system looks to see if there is an executable in the User Layer, if not it looks at the Customer Layer, and so on down to the System Layer. If there are no customizations for a given routine, it will execute the core code in the System Layer. The ISV Layer is used by our vertical ISVs. The Customer Layer is used by VARs (and some sophisticated customers), and the User Layer is used by the customer for specific users.  When customizations are created the core source code in the System Layer is never touched, so the core source code is never in danger of being modified or damaged. When a new version of AX is released there is a tool that examines all changes made to the Systems Layer in that release and evaluates all customizations that have been implemented in the customer’s system. A report is generated that identifies exactly which pieces of customized code need to be re-evaluated and tested for proper function.  This provides for a very smooth transition from one version of AX to the next without having to redo all of a customer’s custom code.  It saves time and money, and allows customers to migrate from one version of AX to the next at a significantly lower cost than most other customized products would require. The customer can get the tailored solution they want with AX and still have the ability to smoothly migrate from one version to the next.

Jack Boyer:  Are there any other benefits that vertical ISVs get by developing their next generation application on top of Dynamics AX?

Pat Fitzhenry:  As mentioned before, vertical ISVs get a full set of high-functionality financial applications including: GL, AP, AR, Fixed Assets, Financial Reporting, Consolidations, Cash/Treasury Management, Travel & Expense, Cost Accounting, etc. They also get Payroll, HR (including: Workforce Management, Talent Management, Recruiting, Compensation & Incentive Management) and a lot more. From an industry perspective AX provides applications for Manufacturing (Process and Discrete), Supply Chain (Inventory, PO, Order Processing, Warehouse Management, Returns, Quality Management, etc.), Public Sector (Encumbrance, Fund Accounting, Grant Management), Retail (POS, Store & Terminal Management, Promotion and Assortment Management, etc.), Professional Services (Time & Billing, Proposal Management, Resource Management, Engagement and Knowledge Management). And, at the system level (the platform) AX provides multi-language (40 of them!), multi-currency, multi-company, workflow, alerts, report writing, dashboards, BI cubes, and a robust customization framework. You have to ask yourself if you are a vertical ISV, “Do I really want to build my own platform and all of this ERP functionality again from scratch? Or, do I want to license all of this from Microsoft and have Microsoft maintain 80% to 90% of my application while I focus on the 10% – 20% that is shear vertical and truly adds value for my target customer?”. The vertical ISVs we work with truly see the value here and want to take advantage of what we have created for them to build their next generation application on.

Jack Boyer:  I’m afraid to ask, but are there any other benefits to the ISV, OR to their customers?

Pat Fitzhenry:  Actually yes… I left out one very important thing. We’ve found that ISVs tell us that approximately 20% of their total R&D budget goes to maintaining and updating their application to work with new versions of underlying technologies including Windows, MS SQL, MS SharePoint, MS Office, Active Directory, etc. By building on the Dynamics AX platform, Microsoft takes care of all of these multiple product version upgrades in core Dynamics AX. When Windows 8 is released, we support it in the current version of Dynamics AX on the date of the Windows 8 release… Same thing for all of the other MS products. So, the typical ISV never has to worry about MS platform technology maintenance again. Good for the ISV, and GREAT for the customer!

Jack Boyer: You landed Smith, Dennis & Gaylord (SDG) as the first, and most impressive, ISV for the Dynamics SL product line years ago. SDG was then acquired by Solomon and became the Project Series that has made Dynamics SL such a project-centric product over the past 15 years. Have you brought into the Microsoft fold any similar products-products that appear so good that they could help define the market for the whole product line?  What are some of the more interesting ISV’s you have brought to Microsoft and can you tell us some success stories about them?

Pat Fitzhenry:  There are two ways to look at that.  First, I mentioned above that Dynamics AX provides a robust set of industry functionality for Manufacturing, Distribution, Retail, Professional Services and Public Sector (Education & Government). Some of this “industry-enabling” functionality was acquired from Dynamics AX ISVs. In all of these cases the product code was then enhanced to meet all of the Dynamics AX coding standards and in most cases the code was de-modularized and built directly into existing Dynamics AX applications. This is all of the systems layer code that makes up the Dynamics AX application.  The second way we’ve created global, vertical opportunities for Dynamics AX is by creating strong partnerships with Global ISVs.  These are the vertical ISVs we’ve been talking about above, but these are the very large ones who already have global presence.

Jack Boyer:  Can you tell us a little bit about one of these Global ISVs?

Pat Fitzhenry:  Sure, the very first one we signed was LexisNexis International.  They are based in London, publish and provide Practice Management Software to Law Firms. The target market for their current legacy product is law firms with anywhere from 25 – 250 fee earners (lawyers and paralegals). They were introduced to Dynamics AX and determined that was the perfect platform for their next generation application. They’ve found that Dynamics AX does about 85% of the functionality lawyers need right out of the box. They are creating the other 15%… what they call the “legal wrapper”. Before finding Dynamics AX they had expected that the creation of their next generation platform and application was going to take them 3 – 5 years. With Dynamics AX they are going to deliver their new LexisERP product to market in March 2012, just 13 months after they began.  They believe that building on Dynamics AX has cut their time to market by two thirds, and will reduce their future product maintenance costs by 50%. That’s pretty powerful stuff.

Jack Boyer: Dynamics AX seems to be a product that lends itself to more “verticalization” or industry focus than GP, NAV, and SL. Do you agree with that and if so why or why not?

Pat Fitzhenry:  Actually, all 4 of the Dynamics ERP products have excellent customization capabilities. The thing that is a bit different is how much vertical capability they each deliver out of the box. As you mentioned above Jack, Dynamics SL is awesome in a project-centric environment. Dynamics GP and Dynamics NAV have robust, mature feature sets of their own. Dynamics AX is a bit different in that it has strong baseline industry functionality for 5 major industries: Manufacturing, Distribution, Retail, Professional Services and Public Sector. So, it might appear that Dynamics AX “lends itself to more verticalization” because those 5 industries make up about 65% – 70% of the businesses in the world.

Jack Boyer: Talk about Dynamics and Professional Services in the middle market. Is Dynamics AX right for this market or is Dynamics AX really more of a manufacturing and distribution product mainly for firms of $50 million in sales and up?

Pat Fitzhenry:  Dynamics AX is very scalable. It’s interesting, I just met with some of my teammates from Brazil.  They only sell Dynamics AX and Dynamics CRM in Brazil.  They have Dynamics AX customers with as few as 5 users. I think there are three things that make a product scalable in the customers eyes. 1. Is it easy to install, configure, learn and maintain? 2. Does it deliver the functionality I need for my business? 3. Does the total cost of ownership allow me to get a strong ROI? With Dynamics AX we have small customer sites with just 5 users and large, complex customer sites with over 5,000 users. So yes, it is VERY scalable from an implementation size perspective (user count). Dynamics AX 2012 vastly enhanced the simplicity and ease of use of the product (including setup wizards and other tools that allow our VARs to pre-configure a customer’s solution in an affordable manner). And finally, with Dynamics AX 2012 we announced new pricing based on User Types that allows the customer to buy just the functionality they need for each individual user. This can provide a big cost savings when the site has a low proportion of power users and a high proportion of data entry and inquiry users.