Why are Pharmaceutical Organizations considering Dynamics 365 over SAP?

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When SAP R/3 was introduced 25 years ago, it was a milestone for business systems that established Enterprise Resource Planning (ERP)  in the marketplace. SAP R/3 was a powerful solution, broad and deep with business capabilities. SAP continued to add capabilities to R/3 and its successor products, however, SAP R/3 was not an easy solution to implement. Initially SAP targeted only enterprise customers with large budgets and built a reputation as an expensive and risky solution to adopt. Over the years, SAP has attempted to make their ERP solutions more attractive to smaller organizations, but those solutions are still best suited to enterprise customers.

SAP’s competition has been busy since the launch of R/3, bringing ERP solutions to market, targeting enterprise customers (such as Oracle) or pursuing mid-sized customers and developing additional capabilities, making the technology suitable for enterprise customers. Microsoft’s Dynamics ERP strategy fits this category, as they focused on developing Dynamics 365 for Finance & Operations, Enterprise Edition (formerly Microsoft Dynamics AX) to scale for enterprise customers by adding comprehensive capabilities for target industry segments.

Microsoft Dynamics 365 Enterprise now provides a solution that pharmaceutical companies are looking for in an ERP product, and offers many advantages over that of an SAP equivalent. Let’s look at two of the key differentiators – business process functionality and cloud enablement.

Business Process Functionality

SAP is no longer alone among enterprise level ERP providers to offer broad and deep business process capabilities for pharmaceutical companies, and SAP’s competitive advantage has eroded in this respect.

Microsoft has made significant R&D investments over the past several years to include pharmaceutical industry processes in the core Dynamics 365 Enterprise solution, through both in-house development and the acquisition of partner solutions such as the Fullscope (Edgewater) Process industry solution. Microsoft Dynamics 365 Enterprise now offers deep capabilities for pharmaceutical companies, including:

Formula Management – Percentage-based formulas, active/potent ingredients, version control including change management, co- and by-products, bulk and packaging order management, including lot inheritance.

Inventory Management – Lot attributes and tracking, lot dispositions, lot traceability, product recall, lot advice and expiry and residual shelf life, FEFO and single lot picking, catch weights, commodity pricing.

Production management – Full deployment of the formula and inventory management capabilities described above, production campaigns, product containerization.

Audit and Controls – Role-based security, electronic signatures, workflow, database log, quality management, approved vendors.

Microsoft has also done a better job than SAP at developing its partner network to build integrated industry solutions, further enhancing the capabilities for target industries such as pharmaceuticals. For example, the AXOQCS Quality and Compliance solution built for Microsoft Dynamics 365 Enterprise extends standard functionality to cover global quality and compliance requirements.

 Cloud deployment

Software as a Service (SaaS) cloud deployment of an ERP solution offers many potential advantages over a traditional on premise deployment. Initially, it eliminates up front server and license costs, reducing ongoing maintenance and upgrade expenses, reducing deployment times, taking advantage of enterprise level security and compliance, providing high availability, rapid scalability, and allowing remote access. For a small and nimble pharmaceutical company, adopting a cloud-based solution is often the best choice.

SAP’s cloud strategy has been a phased release of SAP Business Suite functionalities onto their cloud platform; SAP’s S/4HANA 1610 cloud solution was released late 2016, lagging behind the launch of competitor enterprise cloud-based solutions, and is still missing some key business process functionalities and industry capabilities. SAP is a relative newcomer to enterprise cloud deployments, and they are not currently providing information on user adoption or challenges with the early implementations. Offering a true cloud service requires a technical architecture redesign, often necessitating a different approach to user access and authentication, third party integrations, productivity tools, analytics, workflow, database and management. SAP had to move quickly to acquire and/or develop the tools, technologies and resources to enable their cloud ERP solution, and it is unclear whether it will be a success.

By contrast, Microsoft Dynamics 365 Enterprise was launched in early 2016 (at that time called AX 7), leveraging their own multi-year cloud investments. Dynamics 365 Enterprise is deployed on Microsoft’s own Azure cloud platform, which offers more data centers and country regions than the #2 and #3 cloud service providers combined. Azure is the most compliant cloud provider, with passed certification in areas such as ISO 27001, HIPAA, FedRAMP, SOC 1/2, as well as country-specific standards like Australia IRAP, UK G-Cloud, and Singapore MTCS. The database is run through Microsoft’s Azure SQL Server, a proven mature enterprise-grade technology, and user access is streamlined through most major HTML5 browsers. Third-party integrations are through industry standard RESTful APIs; productivity tools integration is provided by Microsoft Office 365; workflow is provided using both Microsoft Windows Workflow Foundation (WF) and Microsoft Flow; analytics are provided by Microsoft’s Power BI, the Gartner Magic Quadrant leader for data analytics.


While SAP had a competitive advantage deploying on premise ERP solutions for pharmaceutical companies following the launch of SAP R/3, much has changed in the ensuing 25 years. Microsoft’s strategy of industry focus, partner enablement, and cloud first, has resulted in Microsoft Dynamics 365 for Finance & Operation, Enterprise Edition becoming a mainstream option for pharmaceutical companies, which goes head to head with SAP in many situations, and is the emerging ERP of choice for many organizations.

Download: Microsoft Dynamics 365: Gaining the ERP Edge

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