Microsoft Recasts MBS Management, Ayala Assumes COO Role

Ayala will report to Doug Burgum, a Microsoft senior vice president. Burgum will remain at the helm of the Microsoft Business Solutions (MBS) group but now will report to Microsoft CEO Steve Ballmer. Both executives had reported to Jeff Raikes, group vice president of productivity and business services.

Plans call for Ayala to retain his current title of senior vice president of small and midmarket solutions and partner group, but the goal is to more closely align that group with MBS, the two executives told CRN Thursday morning. Ayala was tapped for his current position a year ago. (see story).

MBS, which supplies accounting, finance and ERP software, is also contracting out future development and support work on Solomon products to a new company, Plumbline Solutions, lead by Solomon co-founder Gary Harpst. That operation will work out of Findlay, Ohio. Some 100 or so Microsoft employees will be affected by that move. But Burgum said Microsoft will continue to sell and support the Solomon lineup. At Convergence this spring, Microsoft committed to supporting its existing Axapta, Great Plains, Navision, and Solomon ERP lineup till 2013 and Burgum reiterated that pledge Thursday.

That menagerie of often-overlapping products, the result of acquisitions, is something of a challenge for Microsoft and its channel to handle, observers say.

Microsoft has big plans for MBS. It views the market for business applications in small and midsize businesses as a prime growth opportunity. At one point, company executives said they thought the business could grow to $10 billion by the end of the decade. Microsoft has since deflated that projection, and MBS' financial results last quarter were disappointing. For its third quarter ended March 31, MBS saw its revenue rise just 4 percent to $153 million from $147 million a year earlier. It also reported an operating loss of $65 million, down from $92 million in the year-ago quarter.

Such flat growth will mean a stiff market battle for Microsoft. The Redmond, Wash., software giant faces entrenched competition from Best Software as well as moves by business-app stalwarts like SAP and PeopleSoft to go downmarket.

Microsoft also must deal with internal cultural issues. With MBS products, the company faces a lower-volume, "higher-touch" sale than it is accustomed to, according to several MBS partners. These solution providers have said they fear Microsoft may view finance and ERP applications--with all their complexities--the same way it sees retail- or volume-oriented products like Office. And Burgum has acknowledged that there's pressure to propagate MBS applications far and wide.

"I always try to come back to the economics and the DNA. Microsoft's DNA, the way it beat IBM, is with millions of people coming up [from the low-end] volume. I need to reach hundreds of millions of businesses, not the tens of thousands we reach now," Burgum said in a fall 2002 interview with CRN.

With its channel restructuring and other plans, Microsoft is still struggling to find a balance. Many in the MBS channel suspect that Burgum, who ran the independent Great Plains and never relocated from its Fargo, N.D., headquarters to Redmond, would not be long for the Microsoft world. But he recently refuted that notion (see story).