European ERP Express

Microsoft buys Navision in quest to grab shares of untapped ERP market

Microsoft's May announcement of its intent to acquire Navision a/s is another step in Microsoft's intention to be the leader in the ERP market for Europe and small- to mid-sized businesses. Navision is a Danish company that provides integrated software solutions. The company will become a part of Microsoft's Business Solutions Division, which was established when Microsoft bought Great Plains Software. The acquisition would come with a $1.3 billion dollar price tag, but according to analysts and Microsoft, Navision is well worth the money.

"The combination of these two strong organizations with deeply similar values and approaches makes enormous strategic sense and will create enhanced opportunities for partners and even more capable and affordable solutions for customers," said Steve Ballmer, Microsoft CEO.

Navision currently generates 86 percent of its revenue in Europe, while Great Plains gets 80 percent of its revenue in the United States. The acquisition gives Navision the branding power and financial stability to compete with SAP AG and Oracle, both also vying for the midsized business market in Europe. At the same time, Microsoft will now be able to expand its European presence.

"This acquisition is important to help us sustain our growth rate," said Microsoft's European president Jean-Philippe Courtois in a phone interview with Reuters (reported on May 7, 2002). "We need to have a real presence in Europe in the market segment, and there is great geographic complementarity between the two companies."

And although they cite the difficulties that are to come in the actual integration of the companies, Gartner analysts agree with Courtois, believing this is overall a good move for both companies. In the Gartner report "Navision Purchase Will Strengthen Microsoft in ERP II Market," Gartner analysts point out that customers of both companies will find the acquisition beneficial, especially the Navision customers who'll "gain through Microsoft's viability and more R&D to support current projects."

Gartner also contends that after the technologies eventually merge, Navision solutions will "take the lead in technology and functions by 2004," which could potentially impair the deployment strategies of Great Plains customers.

However, even with this possible drawback, most have reacted favorably to the acquisition. Nevertheless, the final outcome remains unclear until the companies get through the obstacles inherent with mergers. Once it's all said and done, Microsoft hopes that Navision will help bring the .Net strategy to small- to midsized businesses in new markets.

— Jeanette Perez

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