With a new services industry practice, HSO targets broader Dynamics 365 opportunities

January 31 2021

HSO announced its acquisition of SAGlobal's Americas unit last week, a deal that includes a team of consultants and a portfolio of industry-focused solutions built on Microsoft Dynamics 365. The company has established HSO ProServ as the new brand for the vertical IP and expertise gained through the deal.

HSO has grown its US presence significantly thanks to both ProServ and the August 2020 acquisition of New York-based AKA Enterprise Solutions. The deals have vaulted the company into a prominent position in the North American Microsoft business apps channel. The firm now has approximately 300 US-based resources and revenue of $100 million, officials say.

HSO serves mid-size to large businesses globally, and company CEO Peter J. ter Maaten told MSDW in an interview that the larger US presence advances several of the firm's strategic goals.

With large US customers, even though we are a big company and people know HSO with lots of people and millions in revenue, we were relatively small. As a European company, we were at the table most of time [in other regions].

The US has a big impact because there is no one bigger in terms of size. We look at industries in terms of taking a … market-leading role and making sure we claim it in other countries in which we operate.

[In the US] we were not always viewed as credible for a customer doing billions in revenue. The [larger size of the US team] helps us not just serve more clients but get on display for larger clients that we have no problem serving out of Europe and Asia, but not equally strong in the US. It really adds to that perspective as well.

Whit McIsaac

Whit McIsaac, who joins HSO from SAGlobal to lead HSO ProServ, told MSDW that his team US-based organization has seen a growing number of large deals originating outside the US. For example, the team's biggest sales in 2020 for their legal industry solution were based in Frankfurt, London, and Auckland, all deployed as part of global Dynamics 365 rollouts.

"We need the depth and experience of HSO to capitalize on that global momentum," McIsaac said.

Microsoft's interest in the professional services space is growing, ter Maaten believes. And he foresees industry-focused business increasing in HSO's revenue mix in the next three years. He explained:

A continuously growing portion [of HSO's business] will be industry driven. It is difficult to say if it will be 100 percent, but 50 percent or more is already industry driven, where it is the entry point.

If you look at Microsoft's sales methodology, it is to connect partners to opportunity as early as possible in the process. So that is the main go to market model, especially in the US. In Europe you can have industry specialization, but if you don't speak the language of the country, it doesn't matter. So the primary dimension in US is industry, but in Europe the primary dimension is country, language, then eventually industry [is a factor].

For McIsaac, who joins HSO ProServ as global industry director as part of the acquisition, the deal represents the next step in a vertical solutions journey that started in 2004. Back then he was involved with creating CRM4Legal, a product built on Dynamics CRM. That solution was acquired, and McIsaac moved on to lead the team that purchased c360 from CDC Software, which offered a range of CRM-related add-ons and utilities. In collaboration with Microsoft, c360 developed AEC360. It was joined by Legal360 as a successor to CRM4Legal once non-competes from the previous acquisition expired. C360's work on AEC software led to the acquisition by SAGlobal's US organization in 2018, which was also keenly focused on that vertical.

"We're excited about joining HSO and have been working for six months to get it orchestrated," he told MSDW in an interview. "We were looking for a platform [for] our professional services IP - AEC360, Legal360, and Accounting360."

Accounting360 has been "red hot" in the last six months, he added. And the company is launching a new solution, Consulting360, in partnership with Microsoft.

A push for AEC market share

McIsaac says his team is targeting some key AEC competitive opportunities this year. Specifically, they are aiming for Deltek and BST Global, who together have a majority of the industry's ERP customer base.

[Delteck are] trying to transition clients to new cloud solution and, to our benefit, and they've announced they have a limited time to transition on-prem to cloud. We launched a 'Microsoft loves AEC' campaign and we have introduced the full stack of Dynamics as a viable alternative to these companies running Deltek Vision on-prem or BST's on-prem. And we thought it would be a fun science experiment. At this point, we have nine Deltek to Dynamics migrations in process.

It's brand new white space for Dynamics and we didn't know how successful it was going to be. We invested heavily in Deltek migration and features built on Dynamics 365 F&O and it's gone way better than anticipated.

The HSO ProServ team tends to self-deliver their vertical solutions with a team that covers development, consulting, and operations, all with a focus on the industry involved. He explained that he believes this "vertical SI" format aligns with their clients' needs.

For us [these firms are a good fit]:  multi-workload Dynamics 365 [including] F&O, Talent, Customer Engagement, and lots of Power Platform functionality. And these groups need help from the outside. They are wide open to a joint venture implementation, our team educating theirs.

And McIsaac says the company will pursue other industry rivals, too. HSO's AKA team has solutions for nonprofit, public sector, banking, and finance IP that complement the 360 Solution Group's portfolio. They plan to use it in pursuing more white space for Dynamics 365. For example, the HSO team is looking closely at DealCloud, a competitor in capital markets verticals.

[DealCloud] haven't been pushed by Dynamics competitors. Now we're aligned to compete against them in banking and finance.

A vertical partner to Microsoft: What it takes today

ter Maaten sees most system integrators in the Microsoft channel benefiting from a disciplined industry strategy.  

Every partner doing $40 million today [can] start growing from there, and what we try to do is to put industry businesses in place that can grow independently from each other and do not lose their industry flavor because they are part of one company.  And that's hopefully what differentiates us from any of the [largest partners]: that we are keeping the industry focus as closely as possible. And that is why [clients] have chosen us and why we want to continue providing best choice to keep [our clients] with HSO.

He also believes that scale is a greater barrier to entry in the Microsoft channel than ever before.

The problem for newcomers in the space is that, whereas ten or fifteen years ago a team of forty or fifty people would be a decent partner, today you don't count. You can't have all the [delivery] capabilities today at that size. We are talking Dynamics 365, Azure capabilities, data capabilities. And I think clients are not looking to have a partner for each specialization. They want one, and that has changed over the last few years.

The marketplace is still consolidating. A lot has consolidated out already. [Regarding smaller partners,] personally I think it is difficult to become a Microsoft partner at this point. You are either in the space already and know how to deal with Microsoft and maybe you can expand. And if you're successful, maybe there is a company to pick you up. That is true and will continue to be true. It continues to be an interesting marketplace.

The company's decision to receive funding from private equity firm The Carlyle Group in 2019 stemmed from their growth aspirations. ter Maaten explained:

It is an investment to grow. We had a big ambition to grow US operations. That is one reason to choose Carlyle, one of biggest [private equity firms] and US-based. So far it is working out nicely. They bring capabilities we may not have had like an M&A machine and we're leveraging that. That is working out as I hoped.

McIsaac added that he sees vertical sector investments accelerating in the new organization thanks to the backing of Carlyle.

The goal is to grow strategically in our vertical markets, not try to be all things. We'll remain aligned to vertical sectors and we're going to grow the business. We are not interested in staying where we are, we want to leverage what we've built with Microsoft, our industry IP and best practices. We've done it for the last 6 to 7 years. I think having the HSO platform beneath us just accelerates that.

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About Jason Gumpert

As the editor of MSDynamicsWorld.com, Jason oversees all editorial content on the site and at our events, as well as providing site management and strategy. He can be reached at jgumpert@msdynamicsworld.com.

Prior to co-founding MSDynamicsWorld.com, Jason was a Principal Software Consultant at Parametric Technology Corporation (PTC), where he implemented solutions, trained customers, managed software development, and spent some time in the pre-sales engineering organization. He has also held consulting positions at CSC Consulting and Monitor Group.

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