Microsoft once vehemently denied it would enter the enterprise software market - but nothing lasts forever. Its planned $1.1 billion acquisition of Great Plains Software Inc., a developer of ERP applications for the small and midsize market, may help validate Microsoft's much-hyped .Net initiative and open up badly needed new growth channels in the wake of the U.S. Justice Department's plans to divide the company. However, Microsoft's excursion into new sectors raises questions about what companies it will be competing with now.

Since its launch, Microsoft's .Net vision has been a tough sell to customers and partners. Without any actual deliverables of its own, the .Net initiative seemed like a primer on marketing jargon, involving complex plans for offering a multitude of Web services that were previously only available as packaged applications.

With the Great Plain's acquisition, Microsoft has found a way to diversify its traditional and outmoded method of delivering products. Microsoft will gain Great Plains' proven abilities in the application hosting market. (Great Plains has already signed deals with 40 application service providers.)

After the acquisition is complete, Great Plains will become the Great Plains Division, reporting jointly to Jeff Raikes, group vice president of Microsoft's Productivity and Business Services Group, and David Vaskevitch, senior vice president of the Business Application Division at Microsoft.

In addition to continuing to develop and support Great Plains' business management solutions, the new division will also provide business applications built on the Microsoft .Net platform, accessed via a variety of devices, and deployed either as hosted applications or as on-premise, locally managed solutions. Capabilities that complement Microsoft's online service for small companies, BCentral.com, are also in the works.

Although ostensibly targeting the mid-market with this deal, Microsoft's entrance into ERP apps has produced mixed reactions as to whom Microsoft will ultimately compete against.

Microsoft is looking for ways to continue to grow and profit if the government subdivides it, but even this latest solution may contribute to the problem. Although Raikes believes that the acquisition will have no problems with the government's regulatory scrutiny despite the ongoing antitrust legal proceedings, a software startup located in California's Silicon Valley (name not revealed) has already sent a letter to the U.S. Department of Justice calling for an investigation.

The startup views Microsoft's acquisition as detrimental for small and midsize companies. Some analysts have raised concerns about the impact of a huge software company entering a market in which its rivals are, at least for now, significantly smaller.

SAP America president Chris Larsen and Microsoft executives deny that they will be competing in the future, but analysts point to Microsoft's past history of aggressively smothering its competition. Furthermore, large enterprise players have been moving downstream with the ASP market - Great Plains partners have competed with Oracle for several accounts, for instance.

Darryl Praill, VP of marketing at Webplan Corp., predicts Microsoft will compete with SAP and Oracle in five years. He added that Fortune 500 companies should no longer assume that Microsoft products are not as competitive as Unix-based products.

Ultimately, despite its denials, Microsoft may begin to see competing against the enterprise big boys as attractive - if it hasn't already. After all, Microsoft has changed strategies before.