On Microsoft’s Jan. 24 earnings call, Microsoft CEO Satya Nadella said his company’s Dynamics 365 business apps are “taking share” — but if that’s the case, they’re surely not snatching any share from primary competitors SAP and Oracle, whose apps businesses are growing much more rapidly than Microsoft’s.
For the quarter ended Dec. 31, Microsoft said Dynamics 365 revenue rose 21%. Microsoft does not disclose revenue figures for Dynamics 365, but several quarters ago alluded to an annualized run rate of more than $2 billion. I’d estimate Dynamics 365 had calendar 2022 revenue of about $3.4 billion.
Nadella said on the call, “Dynamics 365 is taking share as we help businesses digitize their service, finance, customer experience, and supply-chain functions.”
But if we look at the comparative growth rates across the major providers of enterprise apps, the 21% growth rate for Dynamics 365 does not stack up very well in comparison to those of its two primary competitors.
- Oracle SaaS revenue grew 40% to $2.8 billion for the quarter ended Nov. 30;
- SAP SaaS revenue grew 31% to $2.33 billion (slide 6 of 33) for the quarter ended Dec. 31; and
- Microsoft Dynamics 365 revenue grew 21% (dollar volume not disclosed) for the quarter ended Dec. 31.
So perhaps Nadella was referring to other apps vendors — possibly Workday, which competes against Dynamics 365 in financials, and possibly Salesforce, which competes against Dynamics 365 in service and customer experience. Let’s take a look at that set of comparative results:
- Workday subscription revenue grew 22.3% to $1.43 billion for the quarter ended Oct. 31;
- Salesforce apps revenue grew about 15% to about $5.5 billion (slide 7) for the quarter ended Oct. 31 — this was tricky because as Salesforce does not specifically break out total apps revenue, so I had to extrapolate a bit; and
- Microsoft Dynamics 365 (as noted above) revenue grew 21% (dollar volume not disclosed) for the quarter ended Dec. 31.
Okay, so in looking at those numbers, Dynamics 365 definitely grew significantly faster at the end of the year than the comparable Salesforce apps, so perhaps Nadella’s “taking share” comment was aimed at Marc Benioff’s company.
And/or, Nadella could have been referring to smaller software vendors offering point solutions that business executives are finding less appealing as they strive to build end-to-end process, visibility, and data flows to meet the demands of digital business here in the acceleration economy.
There’s not a darned thing wrong with a 21% growth rate on a multibillion-dollar business like Dynamics 365. But if Microsoft and Nadella are going to claim prominently that Dynamics 365 is “taking share,” then I would think that the world’s #1 cloud vendor (at least for now) would be willing to offer a bit more transparency and credibility to that claim.
Because one thing’s for sure: They are falling farther behind major players Oracle and SAP, as well as in some cases Workday.