Microsoft, Navision Partners See Opportunity

Microsoft Great Plains Navision

"The bigger plan is very attractive and exciting," said Bill Burke, president and CEO of ePlains, a large Great Plains solution provider in Wheaton, Ill. "I think it helps Microsoft in growing the base of customers that will naturally be coming along to the .Net platform."

While there may be some initial confusion about how Microsoft will position the competing business software applications in the U.S. market, as time goes on consolidation will benefit Microsoft resellers, said Ed Kwan, president and CEO of Infogenetics, a Great Plains partner in Redwood City, Calif.

Great Plains solution providers anticipate Microsoft will take the same approach to Navision as it has with the integration of Solomon software into the Great Plains family--by maintaining both products.

"We think in the long run it will be better for our branding because, as I understand it, under the .Net scenario, Navision, Great Plains and Solomon will be merged together under one code base," Kwan said.

For the time being, however, Microsoft and Navision executives say the companies will keep both of the company's U.S. channel structures in place and product integration will occur slowly.

"This is a deal that was made in a short period of time," said John Frederiksen, president of Navision North America, Atlanta. "The current plans we have for the current companies are the ones we're executing on."

He said Navision, which sells exclusively through partners, has 215 partners in North America and has added about 50 partners over the past 12 months. The company had about $22.2 million in U.S. sales as of last June, the last time it reported revenue by region.

While both companies sell through partners, partners say their channel structures are different. Navision relies exclusively on partners to service and support customers, while Great Plains staffs a call center in Fargo, N.D., to provide customer support and for partners that sell service contracts.

Navision partners also tend to heavily customize source code for various vertical market solutions in manufacturing, supply chain and distribution companies, while Great Plains partners are strong in professional services markets and tend to be more sales-oriented, partners said.

The two product lines are complementary, each fitting in their own niches, and can be positioned appropriately, said Bruce Ciarleglio, vice president of marketing in North America for the Aston Group, Navision's largest reseller and also a large Great Plains solution provider with offices in 44 countries.

"We don't believe they compete for the exact same customers, and we just figure this will help us," he said.

He said Microsoft's main motivation was in selling more servers, databases and other infrastructure software into the midmarket. "I honestly think the reason they're doing this [is because they want to validate the .Net strategy in the midmarket," he said. "If they have the two biggest products in the midmarket, they have all the validation they need."

The acquisition also gives Microsoft a strong presence in northern Europe, where the Danish company has a stronghold and Great Plains has failed to penetrate, partners said. The reverse is also true.

Navision partners in the United States said they were looking forward to Microsoft giving Navision higher name recognition with their customers, as well as providing additional resources. "We think it's a great opportunity," said Al Adamsen, principal with KLH Consulting, a Navision partner in Santa Rosa, Calif. "One of the biggest problems with Navision is it's not very well branded in the United States."

"We think it's a very positive thing, not just for us but for the customer," said Joe Baird, president and CEO of CHB Consultants, a Navision and Great Plains partner in Irvine, Calif. "We've observed what Microsoft did for Great Plains, with the resources and the commitment, and we think the Navision acquisition will be more of the same."

One competitor, Alex Attal, CEO of U.S. operations for Adonix, a French company attempting to penetrate the U.S. market with its midmarket financial applications, also put a positive spin on the acquisition.

He said the acquisition highlights the importance of business applications in the midmarket and will help grow the market. "They will be incredibly successful if they get 20 [percent to 30 percent of this market, and I think they will, but the technology world more or less hates any monopoly so there will be a handful of players that live beside Microsoft and take advantage of the market they create," he said.

Attal also called the price Microsoft paid for Navision--about six to seven times revenue--outrageous and proof that Microsoft was more interested in selling infrastructure software than getting a return on its investment in applications.

"They don't care about selling applications; what they care about is selling infrastructure," he said. "And that's why they're willing to pay the price."