Microsoft is touting the size and growth rate of its Salesforce rival Dynamics

Microsoft inactive isn't disclosing the size of its Azure business, providing lone the maturation complaint for the unreality concern and leaving investors guessing however its gross compares to Amazon and Google.

But successful its overmuch smaller Dynamics business, which includes bundle for salespeople, marketers and customer-service agents, Microsoft has abruptly opted for greater transparency.

In its annual report to investors past week, Microsoft disclosed Dynamics gross successful a array alongside different products for the archetypal time.

Dynamics contributed $5.44 cardinal successful gross successful the 2023 fiscal year, which ended connected June 30, increasing 16% twelvemonth implicit year, according to the filing, oregon treble the maturation complaint of Microsoft arsenic a whole. Dynamics expanded faster than immoderate large merchandise oregon work offering different than Server Products and Cloud Services, a grouping that contains Azure. It present represents 2.5% of Microsoft's full revenue, up from 2.2% 2 years ago, the filing said.

While Dynamics is dramatically smaller than Microsoft's ascendant Office oregon Windows franchises oregon the younger Azure business, CEO Satya Nadella has opted to commencement emphasizing it more. Nadella, who erstwhile led a unit that included Dynamics, talked astir the advancement during the bundle maker's net telephone past week.

"Dynamics surpassed $5 cardinal successful gross implicit the past fiscal twelvemonth with our lawsuit experience, work and concern and proviso concatenation businesses, each surpassing $1 cardinal successful yearly sales," Nadella said.

Microsoft's main rival erstwhile it comes to Dynamics is Salesforce, whose concern is importantly bigger. Technology manufacture researcher IDC estimates that Salesforce controlled astir 23.8% of the marketplace for lawsuit narration absorption applications successful 2021, much than immoderate different provider, portion Microsoft had 5.3%. Both companies had gained stock since 2019, portion Oracle and SAP mislaid share, IDC said.

Nadella highlighted the instauration of generative artificial quality assistants for the cloud-based Dynamics 365 services. He besides noted that Microsoft Sales Copilot, a instrumentality susceptible of penning business-oriented email drafts, integrates with Dynamics arsenic good arsenic Salesforce's software.

Partly motivated by Microsoft's AI capabilities, immoderate companies are switching to Dynamics from Salesforce, said Manny Medina, CEO of income bundle startup Outreach. Dynamics tin outgo little money, and the underlying exertion has improved, Medina told CNBC successful an interview, adding that the maturation is apt to continue.

"I'm seeing much requests to integrate into Dynamics, and much of my customers asking maine to bring immoderate of the things I person for Salesforce to transportation implicit into Dynamics," Medina said. "I've seen a spike successful the past year." Some of the momentum Outreach is seeing could beryllium due to the fact that the institution began moving upmarket past twelvemonth to service larger companies, helium said.

Meanwhile, Salesforce has deed immoderate velocity bumps successful the past year. Bret Taylor, who concisely served alongside Marc Benioff arsenic co-CEO, near successful a astonishment move. Revenue maturation slowed astatine the institution and activistic investors announced ownership stakes. Salesforce responded by widening its adjusted operating borderline earlier than planned and managed to debar a proxy fight.

"Salesforce lawsuit restitution numbers are astatine a grounds precocious and consistently inclination supra manufacture standards," a Salesforce spokesperson told CNBC successful an email. "Industry analysts continually fertile Salesforce up of MSFT successful each categories related to Dynamics."

The spokesperson said elements of generative AI, which creates realistic substance successful effect to quality input aft being trained connected ample information sets, are disposable successful the Sales Cloud and Service Cloud products, and they're being tested successful Marketing Cloud, Commerce Cloud, the Salesforce Platform and Slack.

As a brand, Dynamics predates Salesforce. It began successful 1993, erstwhile North Dakota-based Great Plains Software released client-server fiscal absorption bundle for medium-sized businesses. Great Plains went nationalist successful 1997, and Microsoft bought the company for $1.1 cardinal successful 2001. Doug Burgum, who was CEO of Great Plains astatine the time, is present North Dakota's Republican politician and a candidate for president.

Microsoft isn't conscionable pushing Dynamics to investors. The institution has been much assertive successful selling the merchandise this year, said Adam Mansfield, a signifier pb astatine consulting steadfast UpperEdge, which helps companies negociate with bundle vendors. He said Microsoft is offering subsidies to prospective customers who are already committed to Salesforce, and Microsoft is much consenting to assistance clients with the costs of consulting services to assistance with implementation.

"Microsoft is beauteous overmuch coming successful and going, 'We'll marque it arsenic inexpensive arsenic you want,'" Mansfield said.

Microsoft declined to remark connected pricing.

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