Ayala Maintains Big-Volume Ambitions For MBS

Orlando Ayala, now COO of MBS as well as leader of the company's Small and Midmarket Solutions and Partners organization, is not backing off on his belief that the company can sell CRM by the boatload.

"This is a big opportunity for not just a few people, I really believe that our mission is very different from Oracle, from SAP in one sense, we truly believe in the broadest scale deployment," Ayala told CRN at the company's Redmond, Wash. headquarters Wednesday.

What kind of volume? While he and other executives have backpedaled on the now-infamous "business-software-will-be-a-$10-billion-business-by-the-end-of-the-decade" claim, they're still talking big numbers. They still think there are potentially 40 million customers for these business applications. The most fertile ground is in small- and medium-sized companies, he said. His comments were echoed by Microsoft senior vice president Doug Burgum in his testimony at the U.S. vs. Oracle antitrust case. Oracle maintains that Microsoft has its eye on enterprise business applications.

The volume SMB message is not new, but Microsoft is getting serious about it again after at least one quarter in which it blamed a sales reorg for less-than-stellar growth. It will sound the call for bigger sales again at the company's "Velocity" worldwide partner conference in Toronto later this month.

This probably should not come as a shock to anyone familiar with Microsoft's legacy of shipping tons of software. But many long-time Great Plains and other partners worry that the volume sales model will not suit the "higher-touch" arena of business applications. Microsoft bought Great Plains and its accounting applications four years ago. It subsequently acquired Navision, a Danish ERP software maker and the fruits of those purchases now comprise the MBS product portfolio Navision, Axapta, Great Plains, Solomon, and Microsoft CRM applications. The latter now moves through the broad Microsoft channel and can be bought in volume license deals, just like Office.

Ayala understands the concern some old-time partners have about the volume push, but he insists that partners who get beyond the resale-only model, build expertise in verticals can prosper.

He cites the experience of automating his brother's small business, a hobby shop. In that situation, a partner set up Small Business Server and Microsoft's Retail Management System and other offerings.

The expertise the partner, New West Technologies of Portland, has in that vertical is reusable in like businesses, Ayala said.

"People tend to equate volume with no opportunity [but] people will pay money for extended scenarios. Just connecting the server to the Internet is not the valuebut getting web site transactions set up is valuable," Ayala said. I'm not interested in three hobby shops but all hobby shops, I want them all," Ayala noted.

Having said all that, Ayala reiterated Microsoft's pledge not to move its Great Plains, Axapta, Navision ERP products through the broader volume channel.

"Let me be very, very clear, I don't believe ERP is where you can go to open channel, it's just too complicated. [It takes] a lot of pre-sales. It would be suicidal," he noted.

Where the newer Microsoft CRM was designed from the ground up to be easy to use and deploy, the older ERP applications require a more hands-on approach to installation.

Microsoft angered many MBS partners last year when it reversed itself on the CRM channel strategy. While the product had been only available through authorized MBS partners, the latest release was put through broad distribution, meaning it is available via volume license plans and must be sourced through distribution or Large Account Resellers. That means fewer margin dollars for the MBS solution providers, who said they used to get 40 points on CRM sales.

Don Nelson, general manager of managed partners for Microsoft, said the company is still looking at margin issues with CRM and if it turns out that the margins are significantly down from what they were before, the program will be tweaked. He also maintained, however, that when margins on service and maintenance are factored in, the differential in solution provider margin is not huge.

One MBS partner agreed with that assessment but said he remains miffed. The difference is smaller but the margin "is still less in total, not equal, not more," he noted.

Nelson did say that when CRM goes through three-year license agreements, payments to partners are spread over that period and Microsoft might pay more of that money out at the beginning of the deal.