Know Your ERP Series : Microsoft Dynamics AX


Dynamics AX is Microsoft’s flagship ERP solution for core and upper mid market, as well as lower, enterprise organizations. The majority of live operations comprises customers with a few hundred users; but as Dynamics AX has grown its functional footprint, so too has its applicability to increasing sizes of organizations. Today, some customers are approaching $5 billion in revenue with thousands of users globally. AX incorporates financials, human resources and operations management, plus capabilities for industries such as retail, manufacturing, services industries and public sector. Partners extend it to other industries including financial services.

Microsoft’s ERP business grew 6% in the last year. While the vendor does not disclose product revenue, it has publicly communicated that Microsoft Dynamics AX was a key new license contributor in the past calendar year, achieving double-digit revenue growth. The increased frequency and focus of Gartner inquiry calls indicates validity in this claim.

The newest release is Dynamics AX 2012 R3, generally available to customers since May 2014. It adds increased warehouse management system (WMS) and transportation management system (TMS) capabilities, both originally built by Dynamics’ partner Blue Horseshoe (then called Warehousing for AX [WAX] and Transportation for AX [TRAX]). AX for Retail, designed to support end-to-end retail needs, gained differentiating additions in support of omnichannel retail, including enhanced point of sale (POS) flexibility, plus a new retail channel call center.

AX 2012 R3 is also the first AX release that can be hosted on Azure (AX IaaS), a critical steppingstone in the product’s development toward a full cloud model, expected in its next significant release, some time in 2015. AX is based on the SQL Server database, the latest version of which (SQL 2014) offers in-memory capabilities comparable to those of SAP Hana. Dynamics has yet to leverage these capabilities in the form of new business-related application functionality.

Information gathered from Gartner inquiries shows a significant portion of new AX opportunities coming from companies with an excess of $1 billion in revenue. This drives requirements for improved systems and project management capabilities, which Microsoft calls its Dynamics Lifecycle Services (LCS). These have been further enhanced with AX 2012 R3, and can be used in combination with the SureStep or other project implementation methodologies.

Microsoft’s biggest challenge remains its constrained ability to service new opportunities with experienced direct or partner resources, especially for larger customers that expect industry and process depth and comprise extensive and complex requirements. Microsoft Dynamics is slowly improving on this weakness by re-engineering its training courses and supporting documentation to enhance partner and customer enablement, and building on its direct sales and presales teams. Microsoft claims that more than half of its AX revenue is now generated directly. Despite a number of complaints from customers of poor partner support, plus Microsoft’s narrow (and reportedly expensive) consulting services capabilities through its Microsoft Consulting Services team, the overall picture has slightly improved since the last Magic Quadrant. Together, these factors confirm Dynamics AX’s position in the Visionary quadrant of this Magic Quadrant.


  • Dynamics has continued its strong execution of the partner product innovation strategy that resulted in the WMS and TMS additions to AX 2012 R3, similar to its retail and process industry additions over recent years.
  • Customers consistently comment about the intuitive nature of the Microsoft Dynamics AX UI over other solutions they examine. They also applaud its flexibility and its integration to other products in the Microsoft portfolio.
  • Product quality and scalability are consistently high, given the significant developments added to the product in recent years. That said, customers say that premier support, Microsoft Dynamics-enhanced support, is an important inclusion now that AX has grown in complexity and stature.
  • The Microsoft Dynamics Lifecycle Services being incorporated and enhanced at each release provide valuable IT performance data and trends. Further enhancements of the services are expected toward the latter part of 2014. To date, Dynamics has not made the use of these services mandatory, but Gartner recommends that every customer adopts them. Customers say that the process maps are useful for business process redesign, and the task recorder is a valuable addition.
  • The CRM capabilities in Dynamics AX and Dynamics CRM show some overlap, but can also support each other well.


  • Customers seeking global (international) deployment will find few partners to support their venture and little action by Microsoft to help customers identify those partners that can deploy globally. Customers say that the partner-led structure and the current size of most partners often isn’t strong enough for the enterprise space.
  • Microsoft SureStep still lacks the embedded key performance indicators (KPIs) that should drive it, though visibility of technical KPIs can be drawn from the Lifecycle Services solutions. Customers should seek stringent KPI statement and tracking through the inclusion of business-led KPIs within every step of the statement of work, especially when multiple partners are involved.
  • Microsoft has a vertical-industry strategy and is rolling out a successful approach from the U.S. to subsidiaries worldwide. The new industry team (vertical-industry team unit) is nascent and presents itself in much stronger shape than previous incarnations. While Microsoft can direct local business units to follow its recommendations or best practices, it has no means to do this with partners. Since it can only indirectly influence partners, its ability to positively impact individual customers may be limited.
  • Customers seeking to use Dynamics AX alongside Microsoft CRM will find that the two are not yet well-enough-aligned, and have substantially different UIs and processes. They are, today, not built as a single, yet modular, end-to-end solution. As AX extends further into the enterprise layer, Microsoft must address this issue.
  • The WMS and TMS capabilities presented in AX 2012 R3 are comprehensive for most midmarket needs, but Microsoft did not acquire the rights to the complete Blue Horseshoe product set, nor did it embed them as received. In some cases, parts were rewritten, and efforts were restricted to wider, industry-agnostic functionality. This is relevant for customers expecting the full industry depth of Blue Horseshoe’s WAX and TRAX extensions when licensing AX.

 More detailed information can be reviewed at Gartner page below:  


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