The Next Web is having "a chuckle" at the expense of customers Microsoft is catering to with its enterprise resource planning products.

And after spending an hour talking with Fred Studer, general manager of Microsoft Dynamics, and Microsoft Business Solutions Technical Fellow Mike Ehrenberg Thursday, we can say it's probably an unfair chuckle at both Microsoft and its customer base. "I bet they still use IE6," Alex Wilhelm writes in his post.

Which may indeed be true. Because something tech journalists - myself included - forget far too often is that the business owners who make everything from our lunch to automobiles don't geek out on this stuff the way we do. Small- and medium-sized businesses look at every tech purchase as an expense that eats away at the bottom line, and even the largest business, given the current state of the economy, wants an immediate return on investment.

So tech journalists and Microsoft can make declarations about the cloud being great, the place only a fool would avoid, but it's up to tech journalists and the companies that make those cloud-enabled products to show them why they're losing time and productivity by doing things the way they have always done things. And remember, Microsoft made a lot of those on-premise technologies a lot of companies purchased a decade or more ago, so they have to be extra tactful in convincing companies about what can be a radical shft.

Breaking Down The Microsoft Dynamics Strategy

At the risk of oversimplifying, Studer and Ehrenberg are tasked with anticipating problems for a wide range of businesses, then figuring out which tools from Microsoft's ample shed they can apply to solving those problems. For example, they were the ones who leaked news to ReadWriteWeb that a workplace version of Kinect would be available next month.

The two are clearly focused on Cloud-based products that are more affordable and easier to implement, but that is not all the division is working on. But they also want to introduce those products to customers with on-premise products with gentle nudges as opposed to simply demanding that they change. The strategy, as outlined by ZDNet's Mary Jo Foley, includes moving all four of the Dynamics ERP products to the Azure, offering exclusive tie-ins to other products with the cloud versions of its ERP products and eventually releasing new products on the cloud before the on-premise versions are released.

"We think our history of building on-site solutions give us an advantage. The shift isn't going to be immediate," Studer said. "People are going to exist on-premise and on the cloud for a long time to come, and that is building into the things we do well."

Studer and Ehrenberg outlined some of the problems they are addressing, some of the possible solutions and gave a sneak peak of some of the topics they'll be discussing at next month's Convergence 2012 conference in Houston.

ERP Needs To Be Better At Predicting Business Trends

Ehrenberg said ERP has been good at analyzing past business trends, but it needs to get better at predicting what will happen tomorrow. We talked about restaurants and grocery stores that still may be using a spiral-bound notebook to record daily sales and weather figures on any given day to help them make food orders for the same day the following year.

One small chain of convenience stores Microsoft Dynamics has been working with had a women who was doing just that for about 20 stores in the chain and used about two dozen data points, ranging from weather forecasts to local sports team schedules.

Dynamics was able to build a machine-learning model of the women's system and analyze 200 days of historical data. The Microsoft model was better able to adapt, finding new information to pull into the model (like a sports team's schedule that was affecting sales but not being accounted for), while eliminating other data points that didn't matter.

Other models can be tailored for other businesses. Retailers rely on foot traffic, something that may be affected by city sidewalk construction projects. A convention schedule from the local Chamber of Commerce could also be rolled into the model.

"We've done the science," Ehrenberg said. "Now we're working on ways to turn it into a product."

Giving Little Guys A Fighting Chance Against Wal-Mart And Amazon

The cloud, Studer said, will let small retailers share inventory: with other small retailers.

There's a good chance you've done something like this in the past year. You've vowed to support small, local businesses. Maybe you're buying a newly-released book or an oil filter for your car, or a set of socket wrenches. You head to the local book shop, auto parts dealer or hardware store, only to find the item is out of stock. The shop owner can order it for you, but...

You soon find yourself walking across the parking lot of a big-box retail store, or you find yourself driving home to order the item online. Chances are it's cheaper than you would have paid at the smaller store, not to mention it's in stock, and that's enough to temper the guilt you're feeling about not buying local. And maybe the next time you need a similar product, you don't even bother with the well-intentioned trip to the small store first.

That's been the plight of small retailers for more than a decade: bigger stores have bigger inventories, and online stores have unlimited inventories. Price isn't even a factor if you don't have the product to sell, but Studer thinks the cloud may offer smaller stores a novel to at least compete with bigger rivals on inventory control.

"You come in looking for a certain auto part and, using the cloud, I can look it up and say that I don't have it, but the guy down the street has what you're looking for," Studer said. "Yes, I'm sending you down the street to a competitor, but at least I'm not putting you in the habit of going to Amazon or Wal-Mart first."

The point is translating the benefits of cloud-based, ERP products into something that is easy to understand, easy to use and easy to implement for businesses outside of the tech sector. Microsoft Dynamics believes that allowing companies to choose on-premise products, if that is what they are most comfortable with, and then transitioning them at their own pace is crucial.

"There's a value in having that choice," Studer said. "We really want to provide customers with a lot of flexibility."

Photo courtesy of ShutterStock.