Microsoft Focuses On Its Enterprise-Applications Business

While no specific deals are in the works, the company has a strategy going forward that will include buying other applications companies, if the right opportunity arises. The main objectives are to bolster its offerings for vertical industries as well as help Microsoft penetrate larger corporate accounts and the enterprise space, according to Tami Reller, corporate vice president of marketing for Microsoft Business Solutions (MBS), the division responsible for its enterprise applications business. Applications areas that are of particular interest to Microsoft include those for manufacturing and life sciences.

Just how serious the company is came to light two weeks ago when Microsoft disclosed that it has been in discussions to buy the mother of all enterprise applications players, SAP, a deal deemed "too complex" in the end, Reller admits. That dalliance, notwithstanding, Microsoft has no plans to stop looking elsewhere.

"Our eyes are always open for widely accepted applications," says Reller, who briefed VARBusiness in Redmond earlier this week. An example of this lies in Microsoft's most recent acquisition. A few weeks ago, the company purchased Encore, an ISV that sells an accounting suite tailored specifically for nonprofit organizations. That level of niche granularity moves Microsoft beyond pure horizontal offerings to very specific functionality that puts it in even greater competition with other apps vendors, including some partners.

Since its entrance into the applications business, partner conflict has been a lightning-rod issue for Microsoft. Partners who sell SMB packages of accounting and CRM software understandably fear that they will be driven out of business by the much more formidable rival. For its part, Microsoft has been encouraging such ISVs to build "add-on" applications that customize and/or verticalize Microsoft's horizontal offerings. To date, 2,004 ISVs have committed to develop such add-ons, with many expected to ship later this year, Reller says. The company is also looking to add significant numbers of partners to the MBS fold in the coming year. With millions of customers for its stable of enterprise apps and only several thousand partners, the gap is staggering.

"We need many more partners selling our solutions, and as we expand our footprint into other industry segments, we will need even more partners," Reller says. "We see a need to add capacity in certain geographies and product lines."

Upcoming this year are new releases of all four of Microsoft's ERP product lines. The company is already putting additional marketing investment into promoting those launches, according to Reller. MBS marketing, in general, is up 20 percent from fiscal year 2004 to fiscal year 2005, which begins July 1.