Jukka Niiranen

Tag: Customer Insights

  • Microsoft FY20 Q2 earnings and the rise of CDP

    Microsoft FY20 Q2 earnings and the rise of CDP

    Yesterday, January 29th, Microsoft reported on their earnings for the Oct-Dec 2019 quarter, which is Q2 in their fiscal calendar. It didn’t come as a huge surprise that the cloud revenue keeps growing at an impressive pace everywhere you look. 12% growth for Dynamics products and cloud services revenue is nice, and 42% for Dynamics 365 is… even nicer!

    What I find more interesting than these financial numbers is the earnings call transcript, where we get the opportunity to hear CEO Satya Nadella and CFO Amy Hood describe how they see the Microsoft business evolving. Picking up the terms and products from here should give us a better understanding of not just the past (i.e. the quarterly revenue and operating income) but especially the future outlook of what the company considers to be the shining stars in its portfolio. So, in the spirit of Thinking Forward, here’s a summary of what I though was relevant in that earnings call from a Business Applications perspective.

    Power Platform

    “We are empowering not only professional developers but those closest to the business problem – from citizen developers to business decision makers – with no code, low code tools so they can create apps and intelligent workflows that solve unique needs. Today, 2.6 million citizen developers use our Power Platform to make better decisions using self-service analytics, build a mobile app, automate a business process, or even create a virtual agent – all with no coding experience.”

    The new type of market for app makers that previously could have only been app users is of course a very critical area of success for Microsoft. Low-code development is one of the hottest games in town, where also other tech giants are looking to grab a seat at the table. A couple of weeks ago Google acquired AppSheet to provide no-code/low-code tools for their customers. Almost right after it, they announced that their in-house equivalent Google App Maker would be shut down within less than a year. Google cited low usage as the reason for running down App Maker, which gives us an indication that you can’t succeed here merely by having just any citizen developer tool available out there.

    Meanwhile, Microsoft is investing heavily into ensuring Power Apps plays nice with their whole productivity stack. Satya especially highlighted the platform effect that Microsoft Teams carries with it, so expect this to be the UI through which the broad user base will discover Power Apps and Power Automate. At the same time, Power Platform’s role as the shared extensibility model for both Microsoft 365 and Dynamics 365 is also of high strategic importance:

    “There’s no such thing as a canonical business, and no such thing as a canonical business over time, right? Business processes change. The question is how rapidly can people and domain experts keep up with the change. And that’s where Dynamics 365 absolutely shines.”

    Dynamics 365

    Even though many XRM professionals have shifted into blogging and talking more about Power Platform these days (myself included), that doesn’t mean the role of Dynamics 365 in Microsoft’s product portfolio would have decreased one bit. No, of course Dynamics 365 is not “dead” – it just isn’t the platform product anymore. The rapid launch of new first-party Apps under the Dynamics 365 brand is a key source for revenue growth, as described by Microsoft CFO Amy Hood:

    “The Dynamics 365 excitement we have, when I think about the comment I made around adding workloads, what’s so important about what Satya just talked about is how this reaches into new budgets for us, new opportunity for us in terms of being able to tap growth that we had not been able to access before.”

    Many of these new workloads are about going beyond what the traditional CRM + ERP suite of Dynamics 365 covered. While I suspect that we haven’t yet seen much actual license revenue come in from this next generation of business applications, Satya firmly believes that the new opportunities in this field will rise out of the not-so-secret magic ingredient: data.

    “We are very excited about what’s happening with Dynamics 365, in particular, because when I look at what the world needs is it needs a business application suite that is more comprehensive that can turn what is the real currency of this next era, which is data, into predictions, insights, and automation without boundaries.”

    Customer Data Platform

    Now we get to the interesting, forward looking part, which I believe hasn’t yet been fully grasped by the general tech media. What specific products and technologies is Microsoft using as the spearhead for getting the message across when they talk about data and AI being brought into business applications?

    “The competitiveness of every business going forward will be defined by their ability able to harness the full value of their data. Dynamics 365 enables organizations to move from reactive, siloed transactional processes – to proactive, repeatable, and predictable business outcomes. Dynamics 365 Customer Insights, that’s layered and built on Azure Synapse, is the only Customer Data Platform operating at scale today.”

    Let’s highlight the CDP part first. What is it, to begin with? Well, we don’t have time to dig into the dirty details here, but in short: a Customer Data Platform is about creating a unified customer profile from a number of structured and less structured data sources, deriving new insights from it and then performing smarter (automated) actions towards the customer as a result of this. It’s not a single relational database like CRM, it’s more like a database of databases, ad-hoc data sources and APIs that change rapidly over time. The common use cases for CDP have mostly been in the marketing space, but the concepts and scenarios are evolving fast into other areas, too. As Satya Nadella points it out:

    “There is a new category, in fact, and a new race starting with CDP, and we’re leading.”

    Why is Microsoft so confident about being a leader in CDP already? Yes, we’ve seen Dynamics 365 Customer Insights being demonstrated at every MSFT event for the past half a year already, but is it really such a revolutionary application in its own? The real source of Microsoft’s competitive advantage is found from within their Data Platform in the cloud, and how all the new Insights products in the Dynamics 365 family are leveraging the very latest Azure tech. Looking at the earnings call transcript and the order in which the different categories were addressed during the session, before Satya even mentions Power Platform or Dynamics, he highlights the importance of Azure Synapse:

    “Azure Synapse is our new limitless analytics service. It brings together big data analytics and data warehousing with unmatched performance, scale, and security. In concert with Power BI, it enables data scientists to generate immediate insights from structured and unstructured data, and build custom AI models.”

    These are some of the cornerstones in how Microsoft envisions it can enable organizations to “build their own digital capability and tech intensity”. You can find a recent example from the Dynamics 365 product team blog about how the Customer Data Platform story fits in with the shifts in the retail industry: it’s not just about capturing the customer’s email at the checkout counter but rather offering a comprehensive solution to manage signal data from social channels, chatbot interactions and even augmented reality.

    So, if I were to summarize what’s happening here in a simplified formula, it would be:

    Azure Data Platform + Dynamics 365 = Customer Data Platform

    jukkaniiranen.com

  • Year 2019 in Microsoft Business Applications

    Year 2019 in Microsoft Business Applications

    For the past couple of years I’ve done a “top 3 themes” post at the end of the year, to reflect back on what were the key topics that shaped the coming direction of Dynamics 365. Just because this is no longer a “CRM blog” doesn’t mean I should give up on that tradition, so let’s do some exploration on what has happened in the past 365 days.

    One year ago I described 2018 as the year of the platform and listed the top themes to be 1) Power Platform, 2) One version, and 3) AI journey. What will 2019 be remembered from? Just like before, it was fairly easy to select three bullets that I think have been most impactful on the Business Applications ecosystem:

    • Low-code movement
    • Licensing confusion
    • Data story evolved

    Let’s discuss what happened under each of these themes in 2019 and do some forward thinking on why they’ll continue to be relevant in 2020.

    Low-code movement

    This first topic is a much broader phenomenon than just Microsoft’s Power Platform offering. During 2019 we’ve seen the general tech media and industry analysts give plenty of attention to the rise of low-code/no-code development and how organizations are exploring its possibilities to augment (or even replace) traditional software development methods when it comes to internal app development. Microsoft receiver recognition from both Forrester in March 2019 and Gartner in August 2019 for its position as a leader in the low-code application platform market.

    The term “citizen developer” had of course been used already much earlier in Microsoft’s description of the target group for Power Apps (earlier “PowerApps”) and Power Automate (formerly known as “Microsoft Flow”). However, it’s safe to say that the general interest on low-code is rising much faster, if you look at what people are googling:

    What has propelled Microsoft to the top right corner in the analysts’ charts is not just the functionality aimed at everyday information workers / power users in these tools. Making their low-code offering enterprise ready has been a clear goal for Microsoft, as can be seen from how the pro developer audience is being presented Power Platform + Azure as the platform for every developer. On the IT administration side the efforts to put together a Center of Excellence (CoE) toolkit for Power Apps are showing Microsoft’s commitment to providing a governance story to address both the common admin needs of organizations as well as adapting to the varied support needs of the new breed of app makers.

    There is a wealth of functionality that’s still just in the MS product team’s pipeline to land sometime in 2020 which will make the Power Apps development process much more like “real” app building. Built-in tools like Power Apps App Monitor will be the go-to place for debugging formulas, analyzing performance and in general taking a peek under the hood of what the low-code declarative app development studios actually produce. The coming Power Apps Test Framework will allow the authoring and execution of proper test cases, to ensure the app quality doesn’t erode as new features and platform functionality are introduced. There will be Power Apps telemetry data available in a similar way as Azure Application Insights provides to custom apps today.

    All these platform investments together with the growing interest from customers (and presumably partners, too) should mean that low-code app development will become increasingly mainstream in 2020. This will boost the awareness of different vendors in the category and may well steer us a bit further away from the ever so familiar head-to-head comparison of Salesforce vs. Microsoft that’s founded in their CRM product offering. Dedicated low-code players like OutSystems or Appian may start to appear more frequently on the radar, as well as companies like ServiceNow that are running towards the citizen developer territory from a slightly different background. Oh, and you should definitely expect there to be even more heated debates ahead on the possibilities, limitations and roles of no-code, low-code and pro code!

    Licensing confusion

    This second theme is in part related to the growing pains of how the Power Platform tools are turning into self-sustained products rather than just an extension method for Office 365 and Dynamics 365. Yes, they are still very much the toolkit for how you customize applications in the aforementioned suites. However, building extensive custom apps with the full low-code platform capabilities is no longer something that “comes with Office” when looking at the latest licensing terms. Citizen developers can still easily get started with the “seeded” plans in Office 365 for their personal productivity explorations, but for the organization wide deployment of low-code solutions, customers should prepare to purchase dedicated Power Apps and/or Power Automate licenses.

    In 2019, removing the earlier included rights from Office 365 seeded plans to use custom connectors, HTTP custom actions, on-prem gateway, Azure SQL was understandably something that irritated those early adopters who had dived deep into building Power Apps and utilizing flows on a wider scale in their organization. While I bet many had suspected there would eventually be limitations designed to drive customers towards the paid plans, it might have been a surprise that minimum price point for the required Power Apps user license was kept at $40/month. From the Office 365 point of view, this can sure look like quite a “cliff” for taking app development further.

    Another big surprise was the way how Microsoft introduced a new $10 per app pricing model as an option for basically any custom apps built on top of Power Platform. With rights to full feature set of CDS, Model-driven apps and pretty much everything that you’d need for running an app that looks like the native Dynamics 365 apps, it seemed almost too good to be true – if you’re coming from the Dynamics side of traditional CRM style business applications where the enterprise apps cost $95. A great example of the two different realities clashing, when Power Platform can simultaneously be seen as crazy expensive or dirt cheap, depending on the frame of reference.

    The policy of licensing the low-code Power tools from Microsoft via primarily a per-user model with upfront payment requirement is sometimes challenging when talking about the business cases for an application platform that would be gradually adopted for more and more app scenarios. There’s no pay-as-you-go option like with raw Azure resources, because Power Platform is a value-added abstraction layer that should remove any direct dependencies to those resources. However, in 2019 we saw MS take things towards capacity based licensing, with the introduction of explicit Power Platform API request limits per user license type, plus the option to purchase additional capacity if needed. Although MS has stated that normal users should be well within the included API quota, there have been many concerns raised from developers on how custom apps and integrations will be impacted. The fact that these new consumption based limits were announced before any metrics were made visible to customers for evaluating their existing scenarios didn’t exactly help in alleviating concerns.

    I’ve never spent as much time investigating the details of Microsoft licensing as I did in 2019, and honestly I hope that 2020 would be at least a bit lighter on the licensing changes side. Seeing the rate at which the product portfolio of Microsoft Business Applications is growing, though, I’m not sure if it’s realistic to hope for the size of the licensing guides to shrink anytime soon. We’re also still waiting for some of the October 2019 licensing announcement details to be finalized, like the promised API usage metrics in Power Platform Admin Center, or the updated list of restricted entities requiring Dynamics 365 license. Oh, and I bet in 2020 we’ll see the launch of technical enforcement for the types of apps that each license holder is able to use (1st party, custom, Team Member etc.).

    From the customer and partner perspective, the licensing of Power Platform is often perceived as its most complex part, based on feedback from various community members. Although many of the recent changes have been undoubtedly necessary to align the very different Power Apps and Dynamics 365 licensing models into a coherent and future proof platform licensing model, unfortunately the continuous adjustments on what these services actually cost to run has clearly eroded the customers’ trust on being able to predict the operating costs of their solutions built on top of Microsoft’s cloud. After shaking things up on the licensing front in 2019, let’s hope that 2020 would see less drama. Who knows, Microsoft might actually study their own data on how the latest licensing and pricing decisions have impacted service consumption and calibrate the model on those areas that could be better balanced to drive greater adoption of the platform and the apps.

    Data story evolved

    Basing business decision on larger and larger pools of data, gathered from an exponentially growing number of sources, processed closer and closer to real time is the Digital Feedback Loop story that Microsoft has been preaching in basically every Business Applications themed event for the past couple of years. The underlying message is that you must have applications so well integrated with one another that you can establish such a loop in real life – which of course the products in Dynamics 365 and Power Platform portfolios promise to deliver.

    Back in 2018 we saw the birth of many “AI for X” products that have since then been rebranded as “[something] Insights”. I called this out as the start of the business AI journey in last year’s summary blog post, since we hadn’t yet seen much of these new intelligent features find their way into actual customer environments. Based on my observations today, it’s still fairly rare to find these premium Dynamics 365 licenses for Sales Insights or Customer Service Insights deployed in real life scenarios (let alone Market Insights that’s still a bit of a mystery product in its preview state). So, it appears that at least these core CRM processes didn’t just magically get transformed by adding some AI frosting on top. A big practical blocker seems to be lurking in the availability of clean enough data in large enough quantities that these packaged AI features could show concrete results to business decision makers in customer organizations.

    What 2019 did deliver is a set of new products that are aiming to leverage business data in a way not previously covered by Microsoft’s business apps offering. In the second half of 2019, the headline Dynamics 365 product demonstrated in all MS events was Customer Insights. Built as a Customer Data Platform (CDP), its purpose is to enable marketing users to combine customer and transaction data from numerous different sources, to form a 360 degree profile of that customer and use it in better segmenting offers and providing personalized service. Pouring data into Azure Data Lake & CosmosDB is designed to be effortless from any source, be it Microsoft’s or other vendors’ solutions, with intelligent matching algorithms generating “keys where keys don’t exist”. While it can be used with Dynamics 365 apps, there’s no requirement for the customer to have a specific CRM system in place. It’s also not a black box like some of the earlier Insights products, since the built-in templates like churn prediction can be replaced with custom Azure ML models to take advantage of machine learning models built and trained by your own data scientists.

    Another similar data intensive new product launched as preview in 2019 was Dynamics 365 Product Insights. The origins of this application lay in Microsoft’s own telemetry data management systems, where services like Xbox, Skype, Bing and Office have been sending up to 25 million events per second to be processed by the same technology that’s now offered as a Dynamics 365 SaaS product to customers. Yes, you could use Azure Event Hub to push all that product telemetry data into the PI service, but there’s a Signals SDK for Java, Objective-C or Python, too, if and when the whole product architecture of the customer organization isn’t based on MS technology. Insights derived from processing the signal data could be consumed via Power BI or embedded inside Dynamics 365.

    These kind of new services that are aimed at exposing business users to data that previously used to exist outside the reach of the Digital Feedback Loop sound a lot more transformative than the earlier “AI for X” products. Sure, there’s also value in bringing predictive opportunity scoring into the traditional sales funnel management in CRM. However, those kind of features will likely become the new norm for the type of smart business apps that users will expect to be interacting with everywhere. The customer specific implementation of solutions based on Customer Insights or Product Insights, on the other hand, have the potential to be a source of true differentiation if organizations can learn unique ways to use their data for proactively serving their customers. It also aligns with the ambitions that Satya Nadella has on how organizations can break traditional data processing barriers with the help of Azure:

    We are building Azure as the only cloud with limitless data and analytics capabilities across our customers’ entire data estate, bringing hyperscale capabilities to our relational database services.

    Satya Nadella, September 2019 post on LinkedIn

    New services like Azure Synapse will naturally be the toolkit for creating highly specific, cutting edge analytics solutions on the MS data platform, but I can imagine the SaaS style Dynamics 365 products to follow pretty close by when it comes to covering repeatable business scenarios for big data – with the same underlying Azure tech, of course. In 2019 we already saw CDS data export to Azure Data Lake becoming available both via Dataflows as well as through a standard feature (preview). The traditional relational world of business application data is intermingling with the less structured analytical data systems at a rapid pace, with Microsoft building these services that blur the lines of what specific type of data is being used in which business scenario. Is 2020 going to be the year when Dynamics 365 professionals must step out of their comfort zone of having everything in one database and start connecting to all these strange new services, to deliver those much sought after actionable insights to their business user audience? We’ll know that in approximately 365 days!

  • Spring in The Dynamics 365 World

    Spring in The Dynamics 365 World

    The recent Business Forward event with a keynote from Satya Nadella served as the launch event for the Spring 2017 wave of Dynamics 365 product functionality. If you didn’t catch the live stream, you can see the recordings of the various presentations here. Of if you just wants some snacks from the event, why not take a look at my Storify collection of tweets shared on the event backchannel:

    Let’s explore some of the most exciting pieces of news that we know about the upcoming release.

    I’d Like To Add You To My Professional Network on LinkedIn

    LinkedIn is naturally a big focus for Microsoft, after paying some seriously big money for the network. The first commercial offering from MS on the sales side seems like more of an evolutionary step in bringing the LinkedIn Sales Navigator product closer to Dynamics 365 Customer Engagement. The familiar iFrames will still be how LinkedIn content is displayed in the context of accounts and opportunities, but now also the activities from LinkedIn will show up on the standard Social Pane of Dynamics 365 entities.

    If you think of the old “democratizing social” message we’ve heard with capabilities like Microsoft Social Engagement offered at no extra charge, LinkedIn won’t follow exactly the same pattern. The bundle of Sales Navigator + Dynamics 365 Sales App (not Plan) now called Microsoft Relationship Sales solution still comes with a price tag that will not lead into everyone having unlocked LinkedIn tools and network data at their disposal. Not a huge surprise, since why would you give away this “new oil” for free to customers who’ve just bought the car from you? Those target groups who see value in these sales acceleration tools may still find this to be a better deal than the earlier offers.

    The other new product seems to be a bigger step forward as MS enters the Human Capital Management (HCM) game with their Dynamics 365 for Talent app. Again, the foundation here is sure to have a lot of the LinkedIn recruiter functionality covered in a new coat of Dynamics paint, but at least based on the Business Forward live demo this looks like quite a thorough paint job. The sales guys will apparently still be kept largely in the familiar LinkedIn territory in terms of the user experience, but Talent seems like an “authentic” MS app following their design language.

    There probably won’t be so much beef in Talent for the XRM people, but the ERP integration with existing AX/Operations HR features surely has great potential.

    It’s The Insight That Counts

    Talking about other Dynamics products outside of the XRM platform, one new entrant into the scene that has been popping up quite frequently on the recent slides is Dynamics 365 Customer Insights. Judging by what MS showed to the industry analysts at the BF event, there will be some UI changes from the current Preview that will bring this closer to Dynamics and further away from the initial “Azure Customer Insights” version that we saw last fall.

    It’s been a bit difficult to evaluate the true capabilities of the Customer Insights application up until now, since actually connecting it with Dynamics 365 data hasn’t been possible earlier. Once all the Azure Data Lake and other elements that this application depends on are fully available across different regions, perhaps we’ll soon get some hands-on experience to contrast with all the big words that have been associated with Customer Insights so far. At least all the segmentation and visualization features appear to be much more targeted towards real life CRM scenarios than some of the more generic analytics capabilities in products like Power BI.

    Speaking of which: I almost missed this announcement, but Power BI now as a connector to Customer Insights, which opens up some new scenarios. If the various analytics options didn’t have your head spinning yet, then the new Power BI Premium with on-prem server deployment options might just do the trick.

    What About XRM?

    Looks like there are shiny new applications coming for the Dynamics 365 product portfolio, some of which are leveraging the Common Data Service (CDS) as the backbone. It makes a whole lot of sense to use the latest technology for brand new apps, but that doesn’t mean the XRM platform would have been forgotten. To get a glimpse of what the Spring release will be introducing on this front, you can head over to the Dynamics 365 Roadmap site and pick an XRM based app like Sales, then see the “In Development” lane. Below are a few examples of the items currently listed:

    • Virtual Entities. “With Virtual Entities, System Customizers and Developer have the power to build complex business applications to view external data in Dynamics 365 at runtime without having to make multiple copies of the data.”
    • Portal interaction tracking. “Track your customer’s interactions with your Portal and funnel it to Dynamics 365 Customer Intelligence to plot a 360 view.”
    • Support Azure AD-B2C for Portal authentication using a single sign-on (SSO) configuration.
    • Source code for Portals. “A one time release of Portals code will be released to the Microsoft Download Center under MIT license for developers to download. This feature enables Portals to be deployed to Dynamics 365 on-premise environments, and allows developers to customize the code to suit their specific business needs.”

    Expect to see the list grow as we move closer to the planned release date. A lot of great features have already been presented in MS events, like in-context Flows in Dynamics 365, or improvements to the user experience. If you want to be the first to gain access to the upcoming features, then be sure to check out the recently announced Dynamics 365 Insider Program.