the end of September, Microsoft Business Solutions (MBS), an enterprise
applications division of Microsoft Corporation (NASDAQ: MSFT), the largest
software company in the world, fleshed out the contents of its seemingly well
crafted and diligently thought-out product and services strategies aimed primarily
at the small-to-medium enterprises (SMEs) applications market, consisting of
many intriguing value propositions such as an indication of simplified no-frills
pricing and enticingly mitigated financing. A central component of Stampede
2002, MBS' annual event for global partners and value added resellers (VARs),
the two-hour session, showcased MBS' recent extensive development efforts across
its new and existing business applications.
is Part Three of a four-part note.
One detailed the announcements concerning MBS.
Two discusses the Market Impact, and
Four will make User Recommendations.
Microsoft's huge organization size and a likely greater ambition will be its
greatest challenge, as the company is concurrently experiencing another almost
disruptive technology transition similar to the transition from character-based
DOS to graphic-based Windows OS platform on the PC-based infrastructure
of early 1990s. Nowadays, it is about the transition from Windows to .NET, using
Internet rather than PCs. While the company has been engrossed in a gigantic
task of transforming Internet from a presentation-only to a programming medium
as well by promoting open standards based Web Services (see Liberty
Alliance vs. WS-I; J2EE vs. .NET; Overwhelmed .YET?), its applications competitors/partners
have solely been focused on their core competencies (i.e., product functional
footprint). Therefore, given their access to the same technologies, it is no
wonder that many other vendors have delivered their products leveraging .NET
and other Microsoft technologies much sooner than MBS, Epicor, Frontstep,
and Best Software being only some examples.
MBS has solved many recent soul-searching dilemmas, one knows that there is
a large time bracket from concept to actual materialization. With the addition
of Navision's array of applications, some of which had long been direct
competition to the incumbent Great Plains products and with many products
still leveraging proprietary toolsets, the division will have a challenge to
figure out how to leverage the installed base and how to avoid impending products/geographies
conflicts in over 4,000 combined partners, which have been savvy enough to know
that customers do not migrate just to please their software provider.
the idea to enable the R&D team to gain economies of scale by leveraging .NET
Framework to build common application components as commodities that can be
deployed within the entire product portfolio is tempting and promising in a
very long run, the flagship back-office product lines will have to remain on
separate tracks for some time to come, owing to their disparate proprietary
technologies and large user bases that are still using these (e.g., Great Plains
original Dexterity environment and support for Pervasive database, Navision's
proprietary integrated development environment C/SIDE, which includes
a proprietary Navision Server database and a proprietary 4GL programming
language; Navision strong analytical features using Sum Indexed Flow Technology
(SIFT); and the proprietary MorphX graphical development suite for Axapta).
leveraging additional e-business and e-collaboration initiatives for all flagship
products should be expected, MBS Enterprise Portal and Microsoft CRM
being good examples. Douglas Burgum, the MBS division president, likely the
best person to lead it given his veteran status within the industry and an intimate
knowledge of the market and its needs, shrewdly pointed out that the company
is still supporting customers on Great Plains' original DOS-based accounting
package nine years after Dynamics was introduced as its replacement. One could
only imagine the magnitude of complications to keep abreast of concurrently
dealing with the above-mentioned plethora of technologies, not to mention a
steep learning curve for current VB 6 developers into a true object-oriented
paradigm of C# language within .NET.
While MBS gets distracted by its efforts to execute on a clear and concise product roadmap for partners and prospects, as to neutralize significant overlaps in the applications and a hefty cost to maintain and enhance the products, as well as still a remaining danger of the brand dilution/confusion to prospective buyers, other vendors will use that time to perfect their functional differentiations and give MBS yet more homework to do. It is not that inconceivable that the competitors will sooner come up with their products' Outlook and Office integration (which is current Microsoft CRM strong selling feature) while further establishing their expertise in some vertical industries.
while small enterprises desire products and services designed, priced and delivered
from vendors that understand their needs and are focused in that regard, MBS
would definitely not be the only one that fits the picture. Indeed, the functional,
process, and integration requirements of a small-to-mid-market company can be
just as sophisticated as those of a large enterprise, particularly if it is
a multinational entity. While mid-market companies incline toward effectively
packaged applications that are easy to use, require less skilled resources,
and are reasonably low priced, the idea that these companies should settle for
a pure-vanilla implementation has increasingly become a fallacy. Since many
Tier 1 applications vendors have increasingly been targeting the same market
segment (see SAP
Tries Another, Bifurcated Tack At A Small Guy) one should expect the bar
to be ever raised.
could even more be the case of PeopleSoft, which has lately avoided a cookie
cutter' implementation approach for SMEs, as each of its mid-market solutions
is preconfigured to reduce cost and complexity, but also allows for available
extensions based on each customer's need. This combination might make a differentiating
trait, since the company has also developed industry templates for each solution,
these could keep cost, complexity and risk down (see PeopleSoft
Internationalizes Its Mid-Market Forays).
MBS is both a threat and an opportunity for the most nimble vendors, and such
mid-market CRM vendors as Onyx, Best Software (including SalesLogix),
Pivotal, Kana, and E.piphany as well as many mid-market
Microsoft-centric ERP vendors (e.g., Epicor, Frontstep, Made2Manage,
SoftBrands, Syspro, Lilly Software, Scala, Exact
Software, etc) might have thereby acquired another lease of life extension
in the medium term to redefine their value proposition, especially given that
some have recently secured new funds and/or found solace in a partnership with
The market should also watch how autonomous and independent from Redmond HQ will the MBS division be. Despite the long-term partnership, the companies' cultures have been much different, particularly in terms of service & support and product release quality reputations. MBS knows well that enterprises have got used to having an account executive who has an ongoing relationship with their top management and helps them with their IT strategy and planning, and is in charge of problem resolution. They also often require substantial services (e.g., consulting, outsourcing, systems integration) as part of their relationship with major vendors, and have very unrealistic expectations about support, although they often get miraculous problem solutions from obliging vendors. Moreover, they expect any product they buy to be supported until they lose their interest in using it, the above-mentioned DOS-based product being a case in point.
Contrary to these, the Microsoft parent, having often the prerogative of being a monopolist, has gotten used to creating policies that customers/consumers will have to put up with (Is there anyone out there that has never experienced a frozen application and a consequent dreaded message "our support team will come back to you as soon as they have an answer to your problem" or so?). It has thereby earned a reputation for delivering bug-ridden software and making virtue out of necessity by making the outside world of users virtually ironically collaborate in helping Microsoft identify and eliminate bugs for a series of product service packs' until the eventual stable version.
as MBS knows that enterprises expect software to work immaculately and vendors'
accountability to rectify the problems and be groveling apologetic goes without
saying, former Great Plains and Navision have been well-reputed for putting
its software through its paces in the labs before the general availability.
One is to hope MBS will be able to twist its parent's arm given a tight dependency
of Office applications performance (i.e., MS Word crashing will make
the customer assume that e.g., MBS Great Plains crashed as well). Also, for
the CRM product, Microsoft will have very little users' feedback so far, whereas
MBS' VARs that will implement it, although being numerous, will not have many
CRM experts and CRM implementation experience. Further, 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 potential proprietary technology lock up.
brings us to another fuzzy area of proverbially poor market sentiments the company
of its stature and attitude has also long earned. Microsoft had long signed
a deal with CRM vendors Onyx and Pivotal Software, and has recently announced
its CRM software. MBS Axapta, however, offers native CRM, on top of its alliance
with Siebel (see Siebel
Has Done It Again - This Time with Navision). Enter former Great Plains'
partnership deals with the CRM leader Siebel Systems, e-procurement vendor Clarus,
ERP vendor Kewill, and supply chain vendor Logility (for more information, see
Great Plans for Great Plains, Microsoft
Great Plains Procures eProcure At Last, Kewill
And Microsoft Great Plains To Further Mutually Complement and Great
Plains Supply Chain Series To Be Powered By Logility). All of the above
vendors were noticeably absent from the exposition floor at Stampede 2002.
what about an army of smaller vendors mentioned earlier that are now direct
MBS' competitors and whose products are also Microsoft-centric? At least now
these will inevitably see Microsoft's move as predatory, although most of them
will not likely make any abrupt radical move away and will continue to compete
with MBS based on a particular vertical focus and other order winners. But,
on the other hand, as this remains the most fragmented market Microsoft has
ever pursued, there is the success story of Trinity. Some other vendors like
eWorkplace Solutions (for its BatchMaster product), JAAS Systems,
Jobscope, MAI Systems (for its CIMPRO product) still have
an ongoing partnership by filling MBS' gaps in the process and complex discrete
manufacturing, and hoping to follow Trinity's steps. The irony is that many
of the above competitors will have also long OEM-ed some pieces of MBS' arsenal,
particularly FRx financial reporting and budgeting solution. The time
has come for many to either show their backbone and persevere or vanish while
MBS has not caused the predicament, it might have well sped it up.
vendors may also explore other avenues such as porting the product to reliable
and inexpensive Linux platform (like in case of QAD and MAPICS),
J2EE platform, or to IBM iSeries (formerly AS/400) and DB/2
platforms. Some vendors, like SSA GT and Infinium have renewed
their vows to the iSeries. In fact, IBM and Linux resellers may benefit in the
long run, becoming bigger nightmares for Microsoft as Linux might become a greater
Mircrosoft's paranoia, than, e.g., the contest between .NET and J2EE frameworks.
Also some VARs might be in a quandary to justify selling a Microsoft CRM, or MBS products at a low price with minimal integration, if they could be tempted to sell more substantial and complex products. Since for smaller VARs it may not always be viable to sell Microsoft business software much of the time, there might be some convert VARs itching to work with the likes of SAP or IBM. Also, as Axapta runs on UNIX and an Oracle database (in addition to Microsoft's platforms), it will be interesting to watch how Microsoft will handle the support for these adversarial technologies under its roof.
addition to the likes of SAP, Oracle, Siebel, and PeopleSoft, which are still
above MBS' radar screen (Microsoft is not to be blamed for their lower-end of
the market recent aspirations), endangered vendors exceptions though might be
the vendors with established integration with back-office systems that also
feature strong functionality in certain manufacturing industries (see Mid-Market
ERP Vendors Doing CRM & SCM In A DIY Fashion, J.D.
Edwards Finds Its Inner-Self Within Its 5th Incarnation, and SalesLogix
and ACT! Officially Branded As Best Software). Still, no one should be too
relaxed, as MBS will breathe down their necks sooner or later. One thing is
for sure, the enterprise market will never be the same after Microsoft's intrusion
concludes Part Three of a four-part note on Microsoft's strategy for its MBS
One covered recent announcements,
Two discussed the Market Impact, and
Four will make User Recommendations.