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Getting prepared for the Microsoft Dynamics 365 Business Central subscription eruption

by James Crowter
Managing Director, Clever Dynamics
March 22 2018

Microsoft Dynamics 365 Business Central launched last week at Directions Asia in Bangkok. As promised in the autumn of 2017, Microsoft will be delivering ‘full fat' NAV in the cloud from 2nd April. All the talk I've seen since focused on the name (I think it's good, a lot better than the previous efforts and I'm not nostalgic for keeping old names), product (pretty much what I described in my What is Tenerife article except the new interface which was under NDA) or the availability (we get it in the UK so I'm happy, my condolences to those whose countries weren't included but look for W1 in July).

But there has not been much focus on the pricing and licencing in the chatter, and I find that strange because I think it's the biggest change and challenge for the partner community.

CSP Subscription & Named User Only.

Its only available via cloud service provider licences which is pretty logical for a SaaS service. No perpetual option, with its big upfront fees and annual licence. No concurrent user pricing, this is named users only.

As a reseller, you've got to invoice and collect the money monthly from every client for which you're the partner of record. You've got to transact each month with Microsoft if you're big enough to get direct status or indirect via the likes of a Master VAR or any other CSP distributor if not.

This is the year subscription takes off? Heard it before...

Comments to that effect were made under that last article and I have sympathy, after all it's ten years since NAV became available on SPLA and the ...

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About James Crowter

I'm passionate about how businesses can improve their efficiency by getting process optimal more of the time. For the last twenty five years I've worked to help organisations of all sizes and types implement the ERP & CRM software that typically they decide they need when things are going wrong. I've seen that work unbelievably well and enabled those organisations to rapidly grow but I've also had some hard projects over that time where it's felt more like warfare at times.

Since 1996 (and version 1.01) I've been working with a small Danish product called Navision that's now become Microsoft's Dynamics NAV and I've also been using and consulting around Microsoft CRM since 2005. As managing Director of one of the longest established first Navision and now Microsoft Dynamics partners I've been involved in the complete history including numerous product councils and system design reviews. It's my privilege to know many of the key Microsoft executives and product designers and have insight into both where the products are now and their future direction.

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Submitted by ajansari on Thu, 03/22/2018 - 13:20 Permalink

The Perpetual vs. Subscription crossover chart was a good visual, but as you stated in the following paragraph, it moves even heavier in favor of Subscription when you consider SQL, platform / hosting fees, etc. I predict that in the next 3-5 years, more than a few of the mom & pop VAR owners will cash out and the sizable VARs will grow larger through M&As. And I don't think that will bother Microsoft much. For some time now, their partner strategy has been focused on working closely with larger VARs than smaller ones. -AJ Ansari

In reply to by anonymous_stub (not verified)

Submitted by Joaquim Ferreira on Thu, 03/22/2018 - 15:16 Permalink

Great article as usual James, there is one thing to take in account in those calculations. In most if not all the customers, they will have to subscribe a lot more named users than the concurrent one's. Joaquim Ferreira

In reply to by anonymous_stub (not verified)

Submitted by stevejj on Sun, 03/25/2018 - 09:36 Permalink

Great article, but where do the numbers come from? Perpetual license $3,000 + 16-20% per year so worst case $600 Subscription $100 per NAMED user at 70% utilization = $140 per month x 12 = $1,700 per year, shows break even in about 2.5-3 years not 8 as in your chart. At 3 years I have Perpetual $4,800 Subscription $5,200 At 8 years I have Perpetual $7,800 Subscription $13,700

In reply to by anonymous_stub (not verified)

Submitted by Greg Titus on Mon, 03/26/2018 - 17:56 Permalink

To be fair, to compare to a $100 license add in the $10,000 for the Extended Pack plus $1,600 for maintenance and that helps. In my experience so far I have not seen clients who appreciate the difference between concurrent and named, and they generally will have me price both with the same number of users. Clients struggle to come up with how many will be on at the same time, but they are comfortable with how many named users so to me it mitigates a buying risk -- and if they need more down the road it is easy to add. Anyone done the math on converting an existing client to D365BC? The cost for an existing client who only pays annual maintenance is low compared to transitioning the licenses to D365BC, even with the transition discounts. I don't expect many to move initially, but over time if they do you will probably be better off margin-wise. If a client is not on maintenance, this is pure upside, and subscription is a much easier conversation than paying catch-up fees. Personally, i like having both options. Sometimes the math tilts more towards one model or the other, so we let our clients decide which is best. And i like the new price points, but that's just my personal opinion.
Submitted by james.crowter on Tue, 03/27/2018 - 02:22 Permalink

Perpetual is $3000 for licence and $480 for annual maintenance which is payable for first and subsequent years. Subscription is $70 per month at standard level so $840 dollars per year. That make subscription $360 more than maintenance. Divide the $3000 up front licence fee by that $360 and you get the 8.333 years. I just used the one user to keep it simple, I'm not convinced that concurrent moving to named is going to make that much difference outside of team and device licences. For most of my clients they are in NAV more than 70% of the time, closer to 90%. In fact even on vacation their management are using the phone app which counts. Try convincing a CFO into perpetual based on concurrent utilisation rates especially when you add on the SQL and platform costs. Like I said in the article, feel free to carry on selling perpetual, I and the others will welcome competing with you.