The Directions North America event started fifteen years ago as a Dynamics NAV partner conference. At the time, partners could run a profitable business focused almost entirely around deploying ERP. Many of those business owners remain in the Microsoft channel and still attend the event. But the landscape – as well as the event -- has changed, bringing new faces to the community along with challenges, questions, and concerns from the veterans.

" Can we do this?" was the existential question for some Microsoft partners after hearing Microsoft's latest pitch for the Dynamics 365 Business Central opportunity at last week's event. With deal sizes tripling and sales increasing, many partners with a basis in Dynamics GP and NAV say they feel good about the future of ERP in the Microsoft channel. But some also remain hesitant – or have already made up their minds to head for the exits.

Buying, selling, or merging a Microsoft partner business was one the favorite topics among Directions attendees this year. The conventional wisdom around which firms are in play comes down to a few key points.

  • The older business owners, especially those eyeing an exit in the next five years, are most likely to look at selling now. That's because the transition from GP and NAV (on-prem) to Business Central (SaaS) will require a traditional VAR to invest several years before any hopes of a full transformation to a profitable new operating model. It's like a river, one CEO remarked. Once you start crossing, you can't stop in the middle or you'll drown. Also, some believe company values in this segment could be at a high point. 
  • Whether this is the peak in terms of valuations, sellers' asking prices are often wrong today (read: too high), which is keeping the acquisition market more sluggish than it could be.
  • The spottiness of Business Central's success so far has some partners concerned. Today the Business Central channel seems to be in a feast or famine situation, with some partners reporting increased deals in the most recent quarter and an even better pipeline. But others have said they believe there is a large segment of partners treading water with only a handful of small deals so far and an uninspiring forecast.
  • The GP partner community is split on what to do next. GP VAR presence grew at the NAV-centric Directions event, but even among those on hand, some appear unconvinced about whether Business Central is the right cloud ERP to rep. Hearing from the pessimists, it can be hard to parse their bitterness about GP's stagnation from legitimate concerns about Business Central as Microsoft's cloud ERP of the future. Other more optimistic GP veterans have reached the opposite conclusion and are enthusiastic about Business Central's promise.

Business survival: Buyers, sellers, and entrepreneurs perk up

With the prospect of GP and NAV-focused partner firms becoming attractive acquisition targets in the near future, high performing mid-sized Dynamics ERP VARs, larger system integrators, and private equity firms all have their eyes on the space.

One of the most interesting debates around the future of the Microsoft SMB ERP channel is what types of buyers are most likely to succeed. For pure resellers (i.e., those without much repeatable IP) with sizable NAV or GP client bases, at least three profiles have the potential to yield a good deal outcome.

A NAV partner buying a GP partner

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