Microsoft Puts Stake In Midmarket Ground, Though Strategy Has Some Holes

After years of studying ways to improve the products and services that it offers to midsize customers, Microsoft on Wednesday took the wraps off a new and ambitious strategy for selling to the more than 1.2 million companies that comprise this market.

At an all-day event for customers and partners held at its worldwide headquarters in Redmond, Wash., the company showcased new plans, products and services for selling to companies that constitute the midmarket, typically organizations with between 50 to 1,000 employees and/or 25 to 500 PCs. In addition, Microsoft also updated attendees on ongoing work in the small-business space with a sneak peak at Small Business Accounting 2006 software, which could shake up the SMB accounting market.

The day was punctuated by briefings from top-level Microsoft executives, including Microsoft CEO Steve Ballmer and chairman Bill Gates. Ballmer, for one, noted in his keynote address that he has spent more time trying to understand the midmarket than any other segment during his tenure at the company. In contrast to its rivals, Microsoft has worked harder to understand the product needs, licensing concerns and other issues impacting customers of this size, he insisted.

Although the day provided several highlights and views of new technology and innovations, much of what Microsoft actually discussed was either not new or, in some cases, not ready to ship. For example, the forthcoming Centro server product, a bundle of Microsoft server tools specifically designed for midmarket customers, won't likely be available for partners to sell for at least two years. That's because it leverages the Microsoft Vista code base, which is not slated to ship in full force until 2007.

Likewise, the aforementioned Small Business Accounting 2006 product was actually unveiled this spring and is still not shipping. When it does become available, it will be sold through some 5,000 retail outlets, including Office Depot, Staples and hardware OEMs, leaving some doubt as to how much opportunity there is for VARs and other IT consultants to add value.

That said, the company went a long way toward demonstrating thought leadership for customers in this space. Partners on hand for the briefings this week were squarely behind the company's efforts and upbeat about its messages--confusion over certain details notwithstanding.

"We see the vision of creating applications that reflect the way people work and do so out-of-the-box," says Bryan Bechtoldt, vice president of information management at Inacom Information Systems, Madison, Wis.

Inacom, like other partners, is placing ever bigger bets on the Microsoft software stack. It sells both classic Microsoft infrastructure and platform products, including Office and Windows, as well as Microsoft CRM. Moreover, the company has devoted greater internal resources to selling, supporting and developing to the Microsoft stack. What Bechtoldt particularly likes about the company's new initiatives around the midsize is that the broad Microsoft platform provides value to the customer right out of the box, allowing Inacom to focus on higher margin custom-application development.

While fully behind Microsoft's efforts, the company is not waiting for Microsoft to complete all of the promised product bundling and integrations. Instead, it is borrowing a page from the giant ISV itself and melding three current Microsoft titles to create a unique solution. The products are Microsoft Small Business Server, Microsoft CRM and Office.

Another partner, Greg Carter of Iteration2 of Irvine, Calif., is also making a steep bet on Microsoft's technology. In fact, he and several colleagues left other companies that were focused on other ERP vendors' software to form a new entity specifically designed to leverage the newly branded Microsoft Dynamics business applications.

"My partners and I have bet our careers on Microsoft," Carter says.

If Microsoft delivers on all its promises, then the bet may very well turn out to be shrewd one.