Microsoft Keeps on Rounding up Its Business Solutions Part One: Event Summary

Event Summary

At the beginning of October, during the annual conference of the American Production and Inventory Control Society, APICS 2003, in addition to Microsoft Corporation's (NASDAQ: MSFT) initiative to avail a majority of its Microsoft Business Solutions (MBS) division's enterprise resource planning (ERP) offerings with long needed pieces of product lifecycle management (PLM) functionality through an extension of the existing relationship with Autodesk, Inc. (see Autodesk To Bring Microsoft Business Solutions Closer To PLM), Microsoft also made other announcements pertinent to enhancing and supporting its current line of ERP business solutions and service offerings. Namely, to help its small, mid-market segment and even certain large corporate customers improve the effectiveness of current ERP solutions, Microsoft Business Solutions announced the general availability of Microsoft Business Network, and the upcoming delivery of two demand planning modules.

Microsoft Business Network (MBN) is a combination of on-premise software integrated with Microsoft Office, Microsoft Business Solutions applications (albeit currently only with MBS Great Plains) or Microsoft BizTalk Server, and hosted Web services. MBN was designed to help businesses more easily and effectively work with their trading partners (suppliers and customers) through a fully automated Microsoft .NET-connected solution, thereby increasing efficiency with a deep degree of integration throughout their business and desktop applications and lowering the total cost of business-to-business (B2B) collaboration. In other words, MBN uses the messaging and collaboration facilities of Microsoft Outlook and the integration facilities of BizTalk Server, to solve the supply chain connectivity part of the overall supply chain management (SCM) puzzle.

As for the underlying pieces of the vast SCM functionality, to help businesses improve customer satisfaction, maintain optimal levels of inventory and reduce operating costs, Microsoft Business Solutions announced that it will deliver demand planning modules that enhance its Axapta, Great Plains, and Navision products, and that should help existing and prospective customers strategically plan for future demands and adjust their daily operations accordingly. The feat will come from a non-exclusive worldwide distribution agreement that has been signed between MBS and TXT e-solutions ( ), an Italian provider of content management, supply chain and customer management software, relating to TXT's Demand Planning solution, which consists of two modules: DP Power User and DP Collaborative. Contrary to the above-mentioned Autodesk alliance, MBS and TXT seem to be much clearer with regard to the delivery roadmap. General availability of MBS Demand Planner for the Axapta and Navision solutions is expected in November 2003, while MBS plans to announce general availability of the Great Plains module in early 2004. The integrated software will be distributed by MBS internationally through its network of more than 6,000 partners and resellers. On the other hand, TXT, which specializes in SCM largely for the consumer goods and fashion industries, will receive license royalties for each sale, and will provide paid services to MBS' partners and resellers.

The above moves come on the heels of the August 18 announcement of the availability of an enhanced release of the Microsoft Business Solutions Business Portal (Microsoft Business Portal), its Web- and roles-based portal application for two of its ERP solutions, MBS Great Plains and MBS Solomon, which should in the long run become the primary user interface (UI) for all MBS' enterprise applications. The idea behind Microsoft Business Portal is to extend an organization's ERP solution to provide business intelligence (BI) and processes to all employees, helping companies reduce information support costs, providing greater access to information, and enabling users to complete common tasks more easily.

To that end, the new HRM Self Service Suite for Microsoft Business Portal 1.2 is designed to help employees review their HR and payroll information and complete common tasks, such as filling out and approving timecards, submitting requests for time off, reviewing paycheck and benefit information, and more easily changing their employee profile information. The HRM (Human Resource Management) Self Service Suite consists of five modules: Employee Profile, Employee Pay, Time and Attendance, Recruitment, and Skills and Training, and it works with MBS Great Plains US payroll and human resource applications.

The new KPI module offers executives and other decision-makers at-a-glance access to the key business metrics they need to help them quickly assess the health of an organization and take action when conditions change. Key performance indicators (KPIs) can be expressed in graph or chart form and can include green, yellow and red alert conditions to identify critical areas of concern. The module enables executives to drill down into the underlying data for further analysis, and is available for both MBS Great Plains and Solomon. Microsoft Business Portal 1.2 also includes the ability to deliver reports created with MBS Analytics—FRx through the portal, so users can easily access the financial and business reports they need to accurately gauge financial conditions and make better-informed decisions.

This is Part One of a two-part note.

Part Two will discuss challenges and make user recommendations.

Market Impact

Given the immense development undertaking, which began at MBS even before its strategy was espoused in 2002 (see Microsoft Lays Enforced-Concrete Foundation For Its Business Solutions), the incremental approach towards building a more complete SCM product portfolio seems logical, if not the only possible option. The embedment of a simplified version of TXT's Demand Planning as an integrated module in MBS's ERP solutions is the last of MBS's recent and somewhat tepid incursions into the SCM market.

The partnership should mutually fill functional voids within the two parties' current product offerings and should enlarge both vendors' opportunities. The products' technologies are quite compatible so integrating the products will not be terribly complex, as indicated by the speed of the expected integrated solutions delivery. MBS's aspirations to capture the manufacturing and supply chain/distribution mid-market have been known for some time (see Microsoft 'The Great' Poised To Conquer Mid-Market, Once and Again), with much noise and visibility coming from MBS's Manufacturing Division of late, particularly through its strategy of targeting individual divisions of large corporations and presenting its case for lower total cost of ownership (TCO) compared to a standardized corporate-wide implementation of a tier one product. In a somewhat simplified manner, the division has been positioning Axapta for engineer-to-order (ETO) environments, Solomon for project-based and service-oriented businesses, with very basic manufacturing and distribution functionality, Navision for a variety of mixed-mode discrete and batch process manufacturing environments, and Great Plains as a tightly packaged "out-of-the-box" solution for mainstream discrete manufacturing environments.

However, the feat has not been exactly a pushover, for various reasons. One would be the fact that the MBS ERP product lines, with a possible exception of Navision and Axapta, have not been the landmark SCM/distribution-oriented products, at least not within markets that need more than basic demand planning and forecasting requirements. Indeed, to date Navision has only had production forecasting as a built-in module, while Axapta might have had deeper forecasting software, but not sophisticated enough to support collaborative inter-departmental processes. While forecasting might have had a poor reputation in manufacturing, recently there has been an increased awareness that with good collaborative planning and forecasting software, which would support collaborative sales and operations planning (SOP) processes, many manufacturers could improve their business performance. Like with the production planning, manufacturers need to remain on top of forecasting by leveraging much shorter review intervals than traditional quarterly updates. By taking forecasting more seriously and supporting it with smart, interactive tools, all the parties within the manufacturing businesses should be on the same page at the end of the day, which should result with agility.

On the other hand, enriching MBS applications by acquiring a pure-play SCM vendor with a full-fledged broad SCM functional footprint would only burden the MBS product development staff that is already up to their gills working frantically towards Project Green, which will supposedly feature all MBS products on a single, global code foundation built on the Microsoft Business Framework and .NET Framework, some time in 2006, when Microsoft is also aiming at coordinating the delivery of its next-generation Longhorn platform too. For the reasons above, and given the time-to-market urgency, the alliance with TXT seems a logical move. TXT's demand planning and forecasting technology has been well-known in Europe, and existing and prospective MBS' ERP system users should benefit from new capabilities in the near future. Operationally, the software will import data out of MBS ERP systems, run its modeling algorithms to generate the forecast, and update the respective master production schedules (MPS) within these systems.

The distribution agreement with MBS will potentially increase TXT's visibility beyond local European markets (MBS has over 250,000 customers in over 130 countries worldwide), and will provide it with a possible formidable indirect sales channel. The deal might also give TXT additional opportunities to sell not only demand-planning software but also other modules in TXT's Supply Chain & Customer Management (SC&CM) suite down the track. Similar to the Microsoft CRM product (see Microsoft Paints CRM Landscape On Lately A 'Still Nature' Business Applications Scenery), the appeal of which has largely been within its Outlook-like interface, MBS's customers should benefit from the familiar Excel-like interface of the TXT demand-planning solution and at a reasonably low price.

Not coincidentally, the MBS product too will facilitate system-to-system communications via XML, traditional value-added network (VAN)-based electronic data interchange (EDI), or Internet-based EDI (on the AS2 standard), whereby using secure extensions to Outlook or Excel, small and midsize companies linked to MBN will be able to exchange purchase orders, acknowledgements, advanced shipment notices (ASNs), and other business documents germane to SCM transactions, all with minimized (if not completely eliminated) manual data entry and paper-based processes.

Mid-market manufacturers, which have been overwhelmed by the huge scope and complexity of ever-expanding SCM processes, might want to start initially from enabling the convergence of marketing and manufacturing/distribution by balancing consumer demand against shelf life, appropriately planning production resources/constraints initiated by trade promotions, and determining the demand quantities for new product introductions. In the consumer products goods (CPG) sector, which happens to be one of TXT's sweet spots, this is of key importance, since marketing drives demand through the use of promotional activities advertising, deals, point of sale promotions, etc. The supply chain must stay in sync with marketing and marketing must stay in sync with the supply chain for the generated demand to be fulfilled. The demand driven supply chain requires a single, consistent, demand-based plan that optimizes marketing, inventory and replenishment decisions.

The messages of enabling customer satisfaction and retention, freeing-up working capital by reducing inventories, increasing returns on trade promotions, bringing new products to the market faster than competitors, and achieving top-line growth by reducing stock-out situations, as the first manageable SCM initiatives, should strike a chord with the risk-averse target. The objectives of end-to-end supply chain visibility are better plans, better service, increased inventory turns, and higher profit margins, where MBS Demand Planner might answer most of their requirements.

This concludes Part One of a two-part note.

Part Two will discuss challenges and make user recommendations.

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