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Microsoft is now one of the leading vendors of ERP systems. If you exclude the target group of sole proprietors and small businesses, Microsoft is represented in most tenders conducted in the Swedish market. This trend became clear already 10 years ago, based on many organisations applying a "Microsoft strategy", i.e., regardless of how the application landscape changed, Microsoft was the technical infrastructure of choice.
Since Microsoft acquired Navision, the previous systems NAV and AX (today Business Central and Finance and Operations) have been regarded as the younger and older sibling respectively, with partly different target groups. Although the original companies Navision Software and Damgaard were founded at the same time in the early 1980s, Damgaard was considered to have applied a more modern architecture.
After Microsoft acquired the merged NavisionDamgaard, it was unclear for a long time whether both products would continue, as Microsoft had quickly acquired several ERP systems. However, it soon became clear that both NAV and AX sold well and gained rapid international spread. And even though NAV was considered built with an older architecture, the product sold so well that Microsoft believed there was room for two systems: one covering the lower segment and one that could be pushed up towards the higher customer segment. When we sum up the situation nearly 20 years later, we can note that today's Business Central and Finance and Operations have established themselves among the top best-selling and most widespread ERP systems of all time. Finance and Operations has approximately 20,000 customers globally, and Business Central has around 220,000 customers with distribution to over 150 countries and more than 40 languages.
Microsoft has made very large investments in both products as well as in its technical platform, and we can state that Microsoft is stronger today than ever before when it comes to "Business Solutions." A consequence, however, of Microsoft's investments and the substantial increase in functionality of both products is that their respective target groups have gradually shifted and are still shifting upwards in terms of customer size. The reason is that increased functionality and flexibility lead to a greater effort during implementation. Today's versions of Business Central and Finance and Operations require on average more consultants and more hours for implementation compared to the situation 15 years ago. The consequence is that the total cost of implementation has increased for both products.
Looking back to the years 2002-2010, the then Navision's main target group was in the segment of 5-20 users, and Axapta was in the segment of about 25-100 users. Today, current Business Central is in the segment of 20-200 users, and Finance and Operations has moved up to the segment of 200 users and upwards. At the same time, there are now quite a few examples of customers with several thousand employees using Business Central, and customers with only 20 users using Finance and Operations. Hence, there is today an overlap in the existing customer base. And a consequence of both products moving upwards in customer segments is that many customers who previously used Axapta have now chosen to switch to Business Central, which has a better fit for the smaller company.
It is not entirely fair to compare Business Central with Finance and Operations, as they deliberately target different customer groups, but it is still worth noting that Business Central shows a faster expansion. Over the past 10 years, Finance and Operations has increased its number of customers by around 100% on a global level, while Business Central has increased its number of customers by roughly 300%.
From previously competing with the smallest ERP systems, Business Central today competes successfully against, for example, Jeeves, Epicor, Sage, and Monitor. At the same time, Finance and Operations has stepped up and today competes successfully with the very largest ERP systems such as Oracle, SAP, Infor, and IFS.
Both Business Central and Finance and Operations are moving towards being offered exclusively as cloud-based offerings with Azure as their natural home. Thus, they join the rest of the market, which today mainly offers subscription-based cloud services. Previously, Business Central was considered to target smaller operations without corporate structures. This is no longer the case. Although Business Central historically had limitations with corporate structures and internal trade, this is no longer a major obstacle. For both Business Central and Finance and Operations, the availability of additional functionalities via partners is virtually unlimited, making it often possible to find functionality for almost every conceivable industry. What does limit the possibility, however, is that Swedish partners do not always have the network or experience required to offer add-ons for all industries.
Sticking to the Swedish market, which has around 45,000 companies with more than 10 employees, of which 4,000 have over 100 employees, Business Central has the greatest potential in terms of numbers. Business Central currently has about 5,000 customers in Sweden, and Finance and Operations about 800 customers. For both applications, there is potential to double within the next 10 years, while competition from other vendors has significantly increased in recent years. Not least competition from SAP Business ByDesign, which is now growing quite fast in the Swedish market.
There are still reasons for Microsoft to offer both Business Central and Finance and Operations because they cover partly different customer segments. At the same time, we are waiting for when Microsoft will release a product for the very smallest organisations. As a result of the earlier Navision being pushed upwards in the market, the target group of companies with 1-20 employees has been taken over by new challengers of cloud-based applications. It has been speculated that Microsoft will package a simpler version of Business Central as a fully integrated part of Office365 with the aim to cover also the micro-segment of companies. This is not unlikely to happen, but only after they have established a fully developed cloud offering.
