Microsoft Stakes Out Business Apps
The software behemoth is hatching plans to enter virtually every sector of business software, from ERP and CRM to professional services automation (PSA), according to company executives and industry observers.
The stakes are huge. Though Microsoft dominates the desktop application business with its Office productivity suite, even its top executives concede that the company would be hard-pressed to maintain its historical 20 percent annual growth rates for that product. In an interview, Microsoft CEO Steve Ballmer called Office "one of the best businesses in the history of the world" but said that it was "not realistic" to expect the company to uphold that growth rate.
"The Office and Windows businesses aren't going to grow 20 percent a year," Ballmer said. "We'd have to grow a whole Oracle database business in a year to get 20 percent."
That realization has led Microsoft to stake out new markets such as business applications, where SAP and Siebel Systems dominate the enterprise, observers said. But to avoid conflict, Microsoft is targeting the SMB market, company executives said.
"Our intention is not to compete in the enterprise space. But if [those vendors come down and we're going up, we will brush up against them," said Don Nelson, general manager of North American channel sales for Microsoft's Great Plains Business Solutions Group, which is spearheading the push.
So far, however, the jury is still out on how Microsoft will integrate its Great Plains applications with overlapping offerings from Navision, a $1.3 billion acquisition that Microsoft expects to close in August. Observers said that Doug Burgum, president of Microsoft's Great Plains unit, is a good choice to lead that effort, since he championed the Navision acquisition and, as head of the independent Great Plains, engineered the first successful Windows accounting product.
It's also unclear how Navision's low-end Attain product, slated for an upgrade this fall, will be positioned vs. MS-CRM, Microsoft's homegrown CRM product due out by year-end. "I wish I had a good answer for that," said Todd Bergeson, Navision's Attain product manager.
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'Our intention is not to compete in the enterprise space. But if [those vendors come down and we're goig up, we will brush up against them'. --Don Nelson, Microsoft
Microsoft's business application push hasn't gone unnoticed by key ISV partners such as SAP, Siebel and other enterprise players. Ballmer acknowledged it will be tricky for Microsoft to evangelize .Net as a software development platform for third parties while also devising .Net applications that might compete with third-party products. Still, Microsoft must demonstrate .Net's viability, he noted.
"When you come out with a new platform, it's really hard to get anyone else to bet on it until you bet on it yourself," Ballmer said. "And it's hard to demonstrate why the new platform is such a good thing unless you build applications that show that."
Not all solution providers, however, think Microsoft will walk away with the business software market.
"Everyone in the industry should know by now not to buy a Microsoft 1.0 product," said Adam Honig, president of Boston-based Akibia Consulting. "Great Plains was a good company with a good reputation. However, being good in customer satisfaction is about being customer-focused. What does Steve Ballmer care more about, Xbox or CRM? Which did [Microsoft spend $2 billion developing and $500 million marketing? I'll give you a hint: It has an optional DVD player. Is business application software a marginally interesting extension of the Office business, or is it a real focus?"
Other solution providers say Microsoft is doing what it takes to succeed. "If you're the largest software company in the world and have the resources, I see no reason why Microsoft can't do set-top boxes, Xboxes, and cell phone and enterprise applications," said Richard Warren, chief software architect at Internosis, Arlington, Va.
Yet Jay Fruin, president of New York-based Leveraged Technology, said he doesn't expect MS-CRM to be a factor out of the gate. "But do I think it ultimately will be a competitor? You bet your bippy," he said. "By 2004, not only MS-CRM but also Microsoft's back-office and front-office lines will be pretty serious apps for enterprises to be looking at."