Microsoft wants to make its Dynamics business applications more immediately relevant to customers in five vertical markets -- manufacturing, distribution, retail, services and the public sector.

The vendor is due to announce its Dynamics Industry Solutions initiative Monday at its Convergence conference in San Diego.

Microsoft will build in additional vertical capabilities to its ERP applications through a combination of internal development, small-scale acquisitions and a deepening of its Industry Builder partner incentive initiative, according to James Utzschneider, general manager of Dynamics marketing at Microsoft. Future industry-specific offerings codeveloped by Microsoft and its partners can be stand-alone offerings or independent software vendors can build on top of them, he said.

Utzschneider doesn't see the vendor's increased vertical interest as an issue for its existing partners. "If anything we're strengthening opportunities for our partners," he said. "We're clarifying where we're going to play."

Previously, Microsoft tended to rely on its partners to add on industry-specific functionalities to its Dynamics software.

That situation was problematic for customers in particular industries, according to Yvonne Genovese, vice president and distinguished analyst at Gartner. Those users were largely dependent on code developed on top of Dynamics often by very small ISVs and that code wasn't backed by Microsoft. Going forward, users will have a better comfort level around guarantees of Microsoft and its partners working together.

As an example of the kind of relationship Microsoft will engage in around specific industries, Utzschneider pointed to the strategic alliance the vendor recently struck with public-sector information management software vendor Tyler Technologies Inc. With its headquarters in Dallas, Tyler has more than 6,000 customers, mostly in the U.S. local government sector. The company has 1,500 staff and annual revenue in the order of US$200 million.

In January, the two companies announced they'd work together to jointly develop public-sector accounting functionality for Dynamics AX suitable for out-of-the-box use by governments worldwide. The enhanced version of Dynamics should appear in the latter part of 2009, according to John Marr, Tyler president and CEO.

The IDG News Service is a Network World affiliate.

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