For a conference which its organisers chose to christen ‘Convergence’ there was a surprising amount of talk about separatism at Microsoft’s recent business application event in Copenhagen.

Certainly, Microsoft was keen to talk about the convergence of its business application portfolio with the rest of its productivity software, including Office, and its collaboration suite, SharePoint. But that aside, the overwhelming message seemed to be one of segregation.

Firstly Microsoft was keen to stress the future that its range of business applications would have as distinct entities. Customers and partners it seems were spooked by previous talk of a unified product line – now Microsoft is keen to reassure them that Dynamics NAV, GP, AX, CRM all have long-term support and development lines.

Microsoft’s Kirill Tatarinov, corporate VP for its Business Solutions division still refers to a single integrated business application suite being the “magnetic North” on the roadmap, perhaps because it may be a gradually moving concept. A single code base for all its business software would help Microsoft deliver a consistent marketing message for its software, while reducing its R&D costs, currently inflated by developing for the multiple, overlapping product lines it acquired or developed over the past half-dozen years.

Sharing code 

However, Tatarinov argues that its various Dynamics product lines already share much important code, such as its integration with SharePoint and Office. At the same time, the company certainly has deep enough R&D pockets not to be too concerned about the costs, and it can portray that spend as a direct response to customers and channel partners who remain attached to the old product lines. Tatarinov even promised delegates that the company was extending the length of support it would offer for those products.

In other aspects too, Microsoft continues to espouse independence where one might expect unification. At Gartner’s Symposium in Florida in early October, Microsoft CEO Steve Ballmer outlined a vision for the future of software that would see users install some software locally, while simultaneously accessing other functionality from software delivered as a service over the Internet.

But despite a veneer of convergence between its software-as-a-service products and its traditional ‘on-premise’ alternatives at the Dynamics conference, the degree of separation between these two worlds remains stark.

A SaaS reality check 

President of its Business Solutions division, Jeff Raikes, wooed delegates with promises of delivering the best of both worlds: “It’s the combination of rich local computing capability – all of that horsepower that’s right there at your fingertips – along with all of that horsepower that’s in the Internet cloud. That combination… delivers the best experience.”

Raikes believes that mobile handsets and smartphones demonstrate the importance of being able to run software on the client, while having some functions delivered over a network. As speech recognition and VoIP become more commonplace, the importance of locally installed software will increase, he adds.

“Those companies that said software is dead are learning that users like to have power at their fingertips; they’re starting to backtrack,” claims Raikes.

Nevertheless, this does not mean that Microsoft expects businesses to have this so-called optimal combination: on-premise or on-demand is, in reality, an either/or decision, admits Bryan Nielsen, director of worldwide product marketing for Microsoft CRM. Companies make a decision up-front about on-premise or on-demand, he says, the only instances where the two models would co-exist is for short-term tactical reasons, where the ultimate move to on-premise software is the goal – for example, if a company wants all the great features in the latest CRM release, but can only afford to rent it until the next budget arrives.

The CRM product has been the poster child for Microsoft’s converged on-premise/on-demand story. Both on-demand and on-premise versions – built from the same underlying source code – have been available since its CRM 3.0 release. Microsoft has promised that this choice of delivery models will be extended to its entire range of business applications in due course.

And the company is under considerable pressure to deliver a compelling software delivery proposition: applications giant SAP recently signalled its late conversion to SaaS ideology, aiming its Business ByDesign service at those mid-market customers that Microsoft targets so closely.

But so far Microsoft has cagily refused to say how successful its combined offering has been: it doesn’t identify the proportion of its CRM licences that come from hosted sales. Nevertheless, in Copenhagen it did reveal that it would cut the licence fees hosting partners have to pay by 40%. As that might suggest, it still has some work to do to convince them of its host/on-premise strategy.