Microsoft Plays Its Hand For the $10 Billion Business-Solutions Jackpot

Microsoft has, of course, acquired high-profile, midsize business-solution vendors Great Plains and Navision, and built its own customer-relationship management applications en route to its goals. But these well-publicized activities tell only part of the story. The vendor has also introduced its Retail Management Systems (based on products from Sales Management Systems), cobbled together a Professional Services Automation (PSA) offering from existing Microsoft products, rolled out Business Portal, and moved bCentral, its small-business Web portal, into the MBS group.

The vendor is also pitching the vision for its next-generation business-solutions platform and applications. During the next three years, Microsoft's grand plan is to develop and use its .Net Business Framework to create a new set of integrated horizontal and vertical business solutions built on a single code base. In the meantime, existing customers can buy an insurance policy that allows them to upgrade to new products, as available, without incurring additional costs.

To fuel its stated $10 billion business-solutions market aspiration, Microsoft has launched a plethora of sales and marketing activities, including direct-mail campaigns, small- and midsize-business seminars, aggressive use of its Web properties and new sales incentives for channel partners.

Microsoft's MBS road map is reminiscent of a successful route it has taken in the past, with suites such as Office and BackOffice. In both cases, Microsoft has had various discrete but related products. It first moves to bundle the applications under a common brand, then eventually tightly integrates them with shared code and a single install process. Will Microsoft's formula add up again in business solutions?

In the small-business space, Microsoft's math still looks fuzzy. MBS has concentrated most of its early efforts on the midsize market, leaving it with a muddle of ho-hum, disparate small-business offerings--sold through unconnected channels. And, while bCentral has lots of traffic, it has a much smaller (and not publicly disclosed) group of subscribers to its paid services. The vendor must drive volume business against savvy, established competitors--namely Intuit. Microsoft's best route to these customers is likely through integrating its omnipresent Office suite with new online business services--not watered-down versions of Great Plains and Navision products.

On the surface, Microsoft's calculations for the midmarket look rosier. With its large installed base and channel network, Microsoft has a strong base that it can sell its new MS CRM solutions to. However, there are obstacles, such as:

• Market skepticism-The vendor must convince customers to hurry up and wait for it to execute on its grand vision.
• A new CRM playing field--Most midsize customers have already deployed horizontal financial applications, which means that Great Plains and Navision sales are likely to remain relatively stagnant. Therefore, MBS must rely primarily on MS CRM.
• Traditional players in both the CRM and financial markets--Established midmarket players, such as The Sage Group and AccPac, as well as SMB initiatives from enterprise vendors, such as Oracle's Small Business Suite, Powered By NetLedger and SAP's Business One, are lined up to give Microsoft a run for its money.
• Pesky niche application vendors--Microsoft's products--and channel partners--are ill-equipped to compete against thousands of one-stop-shop specialists.

Despite these challenges, Microsoft has some powerful cards to play. As it has in the past, it will wield its sheer branding, marketing and sales clout. And it will likely use its ownership and control of desktop and server-platform technologies to its advantage. But in this complex, fragmented business-solutions game, it will have to play its best hand to win the $10 billion jackpot.

Laurie McCabe ([email protected]) is vice president of Summit Strategies in Boston.