Microsoft is offering financial enticements to customers of on-demand ERP (enterprise resource planning) vendor NetSuite to switch over to Microsoft's Dynamics family of business applications.

NetSuite customers will be credited up to US$850 for each user who converts to Dynamics GP, NAV or SL. The promotion is in effect until June 25 and available to customers in the U.S.

Microsoft's announcement has a ring of familiarity, as NetSuite itself has made a string of similar marketing efforts in the past against other vendors.

No single ERP deployment method, whether on-demand or on-premises, will be appropriate for every business, Microsoft said in a statement. Microsoft offers Dynamics as an on-premises application or it can be hosted through partners, but it has not moved to the multi-tenant SaaS (software as a service) model used by NetSuite.

With multi-tenancy, many customers share the same instance of an application, with their data kept private from other customers. The model saves computing resources and makes version or feature upgrades easier, since all customers can be served at once.

Microsoft's ERP strategy also includes a series of on-demand extensions for Dynamics.

NetSuite didn't immediately respond to a request for comment Thursday.

Microsoft's announcement raises questions, such as how SaaS vendors like NetSuite can counter vendors who can provide a range of deployment models, said 451 Group analyst China Martens via e-mail. "Will the SaaS pure-plays end up turning to partners to turn their SaaS into on-premises apps as well?"

Meanwhile, the fact Microsoft has singled out NetSuite as a rival should be music to NetSuite's ears, Martens said. "It's more validation for NetSuite."

Indeed, the announcement was met with welcoming words from NetSuite CEO Zach Nelson.

"It's only gong to make our installed base bigger," Nelson said in an interview. "At the end of the day Microsoft just said, 'Here's the competitive offering you should look at.' I want to thank Microsoft for all the extra marketing they gave us today."

Nelson added, "It's kind of the last gasp of a dinosaur," made in support of "Stone Age software."