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SAN DIEGO—During this second day of Convergence, Microsoft’s annual Dynamics user conference, the company announced its intent to invest in five industries—manufacturing, distribution, retail, services and public sector—through OEM deals, code acquisitions and spending on the partner network.

Taking its first step in this plan, Microsoft also announced code acquisition from eBECS.

A Chesterfield, England-based company (with offices in London, Atlanta and the Middle East), eBECS develops software that adds lean capabilities to Microsoft Dynamics AX, with a full integration to the core product using Microsoft components, according to the company’s Web site.

The company also develops an Enterprise Distribution Call Center Management system for companies in the call center, warehousing, logistics and distribution markets.

eBECS started out reselling Baan software, which has since been acquired by Infor, a company whose stated purpose is to go after Microsoft in the mid-market (as well as SAP and Oracle as they work to swim downstream).

While eBECS no longer sells the new versions of Baan, it does still provide consulting and support services to Baan users in Europe.

It’s also “migrated a number of customers from the Baan System to Microsoft Dynamics AX,” according to the company’s Web site.

Click here to read more about Infor targeting SAP and Oracle in the midmarket.

As part of the code acquisition deal, Microsoft announced today the Dynamics Industry Solution for Lean Enterprises that expands the core functionality of the AX software to enable users to optimize their business processes and better connect and integrate along their supply chain and to support demand driven operations, Microsoft officials said.

The Lean Enterprises Industry Solution is slated for release by the end of this year, and will be available as a separate module that’s included with the Advanced Management edition of Business Ready Licensing.

Microsoft also plans to integrate the acquired code into the next release of Dynamics AX, and have it localized for all the Dynamics AX languages (the code will come out initially in English only).

In terms of additional code investments, Microsoft is not surprisingly a little cagey.

James Utzschneider, general manager of product marketing for the Business Solutions group at Microsoft, said there is no quantification of how much Microsoft plans to invest in the five separate industries, or where it will look to add functionality.

“We are making a series of investments to strengthen the industry relevance of Dynamics,” said Utzschneider.

“Two key areas are investments in core industry areas where Dynamics is with a strategy involving more code acquisitions, more OEMs, and taking Industry Builder and folding that into the Dynamics Industry Solutions [program]… [The second area] is to complement that with deeper investments in the ecosystem around Dynamics.”

Separately, the Wall Street Journal reported earlier March 12 that Microsoft is in talks to buy privately held TellMe Networks, a company that develops Web-based voice technology software that would help Microsoft build voice-recognition into its products.

The deal is reportedly valued at $800 million, and Microsoft could sign a deal as early as this week, the Journal said, citing people familiar with the deal.

Whether or not the TellMe acquisition would fall under Microsoft’s plan to invest in vertical industries is unclear at this point.

To beef up its partner ecosystem’s offerings, Microsoft announced on this second day of the conference a new ISV (independent software vendor) solutions certification, Certified for Microsoft Dynamics, to suss out the top 500 ISV applications that meet the needs of one of the five industries Microsoft is focusing on.

The Industry Solutions program will encompass Industry Builder and some additional partner initiatives that will offer “significantly improved benefits and revenue opportunities,” according to Tami Reller, corporate vice president of the Business Solutions Marketing Group at Microsoft.

In a blog written shortly after Industry Builder was announced in 2006, Reller described the program as a program that would have a broad appeal to ISVs, channel partners and customers.

“It is an ISV-centric program…that will give customers a piece of mind around a complete solution from Microsoft for their vertical solution,” wrote Reller.

“We will provide front line support (as well as upfront marketing) for select vertical solutions. Initially we will target about a dozen solutions. We see the program growing substantially over time.”

But the changes with Industry Builder portend issues with Microsoft’s partner strategy, an issue the company has tackled for years as it works to dampen competitive issues that have rankled partners in the past.

During a March 12 press conference at Convergence a reporter asked Reller, who has been in charge of partner programs in the past, about tensions Microsoft partners face with more margin pressure on ERP sales coupled with heavy competition from Microsoft’s myriad channel partners.

The consensus, according to the reporter, was that Microsoft partners would rather sell SAP’s Business One software where they face three or four competitors, rather than all the Microsoft partners.

“We keep a tight deal on this driven through competencies,” said Reller. “We know who are partners are, we see health [in the channel]. Partners are able to go across a very, very big opportunity—business applications is the largest, bigger than advanced infrastructure. Add on to that the fact that we’ve now rolled out global tools to build out global intellectual property.”

Reller said Microsoft sees many more drivers that are making the channel business healthier.

“Our partners’ economic growth is key to us,” she said. “We’re not seeing what you’re referencing.”

Microsoft expects the bulk of its partner channel will move to the new Industry Solutions program by July 1.

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