Microsoft And Great Plains - A Friendship That Turned Into A Marriage
On December 21, Microsoft Corporation (NASDAQ: MSFT), the
world's largest software provider, announced it reached an agreement to
acquire Great Plains Software Incorporated
(NASDAQ: GPSI), a leading supplier of mid-market business applications.
The acquisition should create new opportunities for Microsoft and Great
Plains partners to grow their businesses by delivering and integrating
next generation solutions that take advantage of the .NET foundation
of small and medium business applications that Microsoft and Great Plains
will provide. The acquisition is structured as a stock purchase and is
valued at approximately $1.1 billion. Each share of Great Plains common
stock will be exchanged for 1.1 shares of Microsoft common stock. The
transaction is subject to regulatory review.
19 years of operations Great Plains has proved to be one of Microsoft's
most innovative partners," said Steve Ballmer, President and CEO, Microsoft
Corp. "Microsoft and Great Plains see the future of business applications
for small and medium sized companies in the same way."
combination of Great Plains and Microsoft allows us to dramatically accelerate
our vision of being the leader in providing interconnected business management
solutions to small and mid-sized customers, while staying true to our
mission of improving the lives and business success of our partners and
customers," said Great Plains Chairman and CEO Doug Burgum.
the acquisition has been completed, Great Plains will become the Great
Plains Division, reporting jointly to Jeff Raikes, Microsoft Group Vice
President, Productivity and Business Services group, and David Vaskevitch,
Senior Vice President, Business Application Division. The Great Plains
Division will continue to develop, market and support its award-winning
business management solutions.
the road, the division is envisioned to provide new capabilities that
complement Microsoft's online service for small companies, bCentral.
Additionally, the integration of technologies from both companies will
create a fully interconnected generation of business applications built
on the .NET platform, accessed via a wide range of devices (such as PCs,
terminals, handheld and wireless devices) and deployed either as web-based
services (hosted applications) or as on-premise, locally managed solutions
according to the customers business need, support requirements and customization
on December 18, Great Plains Software announced financial results for
the fiscal quarter ended November 30, 2000. Great Plains' second quarter
revenues increased 59% over the same period last fiscal year and increased
13% sequentially over the first quarter of fiscal year 2001. Revenues
for the second quarter of fiscal 2001 were a record $75.5 million, compared
to $47.4 million for the second quarter of fiscal 2000. Revenues from
services, up 100% over the same period last fiscal year, contributed significantly
to the company's growth this quarter. However, for Q2 2001, net loss,
including the effect of amortization of acquired intangibles, was $10.5
million, compared to net income of $4.4 million for Q2 2000 (See Figure
our second quarter, we continued our solid growth and performance, fueling
our leadership position in the growing and strategic business applications
market," said Doug Burgum. "We delivered sequential revenue growth, improved
operating margins and significant sequential EPS growth, while at the
same time launching into our strongest product cycle ever, Release 6.0."
TEC Reporting On Great Plains
following are the major highlights that were announced or occurred during
Great Plains' last fiscal quarter and were accordingly covered by TEC:
Plains delivered eEnterprise and Dynamics Release 6.0,
the most comprehensive release in the company's history. eEnterprise
Release 6.0 showcases significant, customer-driven enhancements in the
areas of e-business, sales and purchasing, major product series enhancements,
and multinational and international features, as well as a new user
interface and reporting functionality (for more information, see Great
Plains' Latest Product Offering - Ready to Stampede the SME Market?).
Plains released a new, hosted e-commerce solution, Great Plains eSell,
for companies needing a fast, easy and economical way to bring their
businesses to the Internet. Integrated to Great Plains' business management
systems, eSell enables both business-to-business (B2B) and business-to-consumer
(B2C) sales via the Web. The resulting web site delivers a level of
integration and sophistication commonly found in much more expensive
solutions (for more information, see Great
Plains Unveils New E-Commerce Solution).
Plains announced the availability of Great Plains eSupport, its
next-generation electronic support system for customers and partners.
Available through a dedicated support web site, eSupport provides automated
self-support solutions and efficient assisted-support solutions to Great
Plains customers (for more information, see Great
Plains Taps The Web To Deliver Product Support).
Plains announced the expansion of its Application Service Provider (ASP)
initiative. Because of growing segmentation in the ASP market, Great
Plains has evolved its ASP partner program to better meet the diverse
needs of its ASP partners and their customers. The three ASP partner
relationships include strategic ASP partners, approved ASP partners
and approved data centers (for more information, see Great
Plains ASP - Evolution, Revolution, Innovation).
had long been eyeing the business application market, with more or less
candidness. We did mark Microsoft as a potential Baan buyer, back at the
time when that was a very real possibility (for more information, see
Who Wants to Marry a Multi-Billionaire? A: Baan - Foster Care for Its
Orphans Needed As Well). Some may even recall rumors of Microsoft's
interest in PeopleSoft, also a while back, when the company was in the
64,000 question is why has Microsoft finally made the move now and why
with Great Plains. The answer to the first part of the question is diversification
and, possibly, envy of recent stellar results of applications providers,
particularly Microsoft's nemesis Oracle (for more information, see Oracle
Sails Despite Market's Low Tide: How Far Will It Go?). The desktop
technology has gone past its prime, to say the least, and the time has
come for Microsoft to venture into more lucrative areas, Web-based business
applications being one.
answer to the second part of the question is a no-brainer; we could not
think of a better back-office acquisition candidate at this stage (although
the fact remains that Microsoft could have bought Great Plains for almost
half the price a few months ago, see Has
Market Been Too Harsh On Great Plains?). Great Plains has established
itself as a leader in the mid-market business application market in the
past few years. The company, which sells its products completely through
an indirect channel of 2,000 resellers, has more than 130,000 customers
using its portfolio of products. Great Plains, on the other hand, has
also been on an acquisition spree during the last year. It acquired Solomon
Software, its main competitor in the smaller end of the market;
FRx Software, a financial analytics and reporting application
provider for the mid-market; PWA Group, a U.K.-based human
resources and payroll system maker; and BTK Software, the
developer of Apertum, a low- to mid-market front-office application
for the German, Swiss, and Austrian markets (for more information, see
Plains on a Shopping Spree and Will
Solomon Finally Satisfy Great Plains' Insatiable Appetite?).
a nutshell, Microsoft has struck a bargain for a slew of solid business
applications. Back-office systems are becoming more and more the infrastructure,
which has traditionally been Microsoft's dream game play. Moreover, Microsoft
also gains access to the lucrative Customer Relationship Management (CRM)
and Supply Chain Planning (SCP) markets since Great Plains has partnership
deals with the CRM leader Siebel Systems and SCP vendor Logility
(for more information, see Siebel:
Great Plans for Great Plains and Great
Plains Supply Chain Series To Be Powered By Logility).
also helps is the Great Plains' monogamous relationship with Microsoft;
Great Plains solely uses Microsoft technology in all of its products.
The two have also been partnering in the development of Microsoft's .NET
platform for the deployment of applications via the Web (for more information,
Plains' eEnterprise Solution 'N Sync with Microsoft's New Platforms).
acquisition portends even more for Great Plains, which has been suffering
financial indigestion from its recent acquisitions. Microsoft's thick
wallet should alleviate this problem and allow Great Plains to focus on
reaching its revenue target of $300 million for fiscal year 2001, (for
more information, see Great
Plains - An SME Market Leader, But At What Cost?). Possibly more beneficial
could be the Great Plains' leverage of immense Microsoft sales resources
to expand its global presence, particularly in the Asia-Pacific region
where the market for enterprise applications is still not largely penetrated
and where Great Plains' presence has been quite insignificant.
the acquisition is not without caveats; it may have more implications
than meets the eye. Until the acquisition, Microsoft's strategy was to
encourage applications software providers, both mighty and smaller, to
develop software that runs on the Windows platform. In exchange for this
collaboration, the software giant has pledged that it would not compete
Microsoft could run into the same problems as Oracle has on the database
side - i.e., it could find itself in direct competition with major technology
development partners like Siebel, SAP and PeopleSoft, to name but a few.
While Microsoft may try to stay at the low end of the market and, therefore,
also out of the way of its big applications developing partners, it will
not be that easy as many Tier 1 applications vendors have increasingly
been targeting the same market segment (for more information, see SAP
Claims Big Gains In The Low-End Battleground).
what about a plethora of smaller vendors that are direct Great Plains'
competitors and whose products are also Microsoft-centric (e.g., NavisionDamgaard,
Epicor, Sage, Made2Manage, etc.)? These vendors will
inevitably see Microsoft's move as predatory. While most of them will
not likely make any radical move away from Microsoft, figuring they can
continue to compete with Great Plains based on product superiority and
other order winners, some may decide to explore other avenues (e.g., porting
the product to Linux or IBM AS/400 and DB/2 platforms). In the long run,
this could benefit IBM.
also signed a deal with another CRM vendor Pivotal Software
not so long ago. Although Pivotal may be targeting larger companies, and
Great Plains only has a deal to sell Siebel's mid-market product release
for smaller companies, contesting CRM products could inevitably pose a
problem for Microsoft's sales team and complicate these partnerships.
These ramifications may become irrelevant though, if Microsoft actually
splits into several companies as ordered by the final federal judge's
ruling that Microsoft violated the anti-monopoly laws.
market should also watch how autonomous and independent from Redmond HQ
will Great Plains' division run. Despite the long-term partnership, the
companies' cultures are very different, particularly in terms of service
& support and product release quality. While there are some indications
that the business will continue to be as usual, Microsoft may eventually
decide to streamline Great Plains' diverse, possibly redundant, product
mix. Further, like in Oracle's case, while some customers will buy into
the "one-stop-shop" mantra, others may be wary of a vendor that tends
to be "all things to all people" (or jack of all trades and master of
none) and of a potential proprietary technology lock up.
Although experience teaches us to be wary of the outcome of mergers' and
acquisitions', current Great Plains' customers can be assured of their
software provider's viability. It may be somewhat different situation
regarding product development and service & support strategy. While we
believe that this merger will be successful in the long run, some growing
pains and discontinuation of redundant products are quite likely. Consequently,
until the merger is consummated, any organization evaluating Great Plains
should keep itself informed, and consider existing functionality only.
Users are advised to follow the company's new product introductions and
keep a close eye on its future strategy.
recommendations for both current and potential Great Plains'
users can be found in Great
Plains: Strong Channel and Microsoft focus for Dynamic(s) Growth and
Software: Breaking Away from Perception as "Best-of-Breed-Accounting"
Vendor, as well as in all the above mentioned TEC articles on Great