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April 22, 2003

Conquering the Middle Kingdom

Microsoft's emerging Business Solutions division hopes to change forever how small- to medium-sized businesses buy strategic applications

by Stewart McKie

Microsoft spent the 1980s securing the PC desktop with MS-DOS, Windows, and Office. It spent the '90s making serious inroads onto corporate servers with NT, SQL Server, and Exchange. And now, achieving influence over business process management looks like a key goal for the company.

In case you hadn't heard, Microsoft is now in the business of business applications. By 2000, having watched ERP and CRM leaders SAP and Siebel Systems garner $5.8 billion and $1.8 billion in revenues, the opportunity just became too good to ignore.

Microsoft Business Solutions (MBS) is the relatively new division expected to become the revenue engine in this effort. But MBS is hardly a new kid on the block. Largely assembled from more than $2.5 billion in acquisitions — including that of Great Plains Software in 2001 and Navision in 2002 — MBS has hit the ground running. Add to the mix an existing Microsoft asset, the bCentral small business portal, and a new asset, Microsoft CRM, and the portfolio becomes an imposing one. (Over time, MBS applications will also benefit from tighter integration with other key non-MBS Microsoft assets including the SharePoint portal, BizTalk process orchestration engine, and Microsoft Commerce Server; most MBS apps already use SQL Server for data management.)

MBS represents an important new addition to Microsoft's technology stack and increases its organizational footprint in a big way, especially among small- to medium-sized businesses (SMBs) — historically, its target market. (Definitions of SMBs vary, but revenues between $5 million and $500 million is a rough-cut starting point.) The current state of the MBS application portfolio suggests that Microsoft now has an application play in several business management domains: ERP (or enterprise resource management [ERM], as Microsoft prefers to call it), supply chain management (SCM; the ERM solutions generally include SCM modules), and Web services. MBS also has a big impending play in the domains of CRM and business analytics (more on that later).

In the following sections, I'll survey these domains from an MBS perspective and present an overview of the product landscape. The goal is to help IT and business managers decide whether MBS solutions are appropriate for use in their businesses.

MBS and ERM

With the acquisition of Great Plains Software, Microsoft didn't take ownership of just the GPS Dynamics and eEnterprise ERM suites; it also added the Solomon ERM suite and FRx financial analytic applications, which Great Plains had only recently acquired itself. The Navision deal added the Navision Attain and Financials ERM suites and what was formerly the Damgaard Axapta, XAL, and C5 ERM suites, as Navision had also bought Damgaard shortly before the Microsoft acquisition.

In addition, Microsoft acquired several vertical solutions, including a point-of-sale system called QuickSell, a professional services automation (PSA) solution based on Solomon and Microsoft Project 2002, an enterprise-level financial reporting and consolidation system called Enterprise Reporting, and a small business accounting system targeted at the German market called Apertum. MBS also offers Small Business Manager, a business management solution targeted specifically at the sole-trader/small business market.

Prior to their acquisition by Microsoft, Great Plains and Navision were competing for customers and reseller partners and in many of the same markets. Great Plains brought a significant North American user base and reseller channel to the table, and Navision did much the same in a European context. Despite largely similar functionality, the products are broadly complementary: Great Plains products are more suitable for out-of-the-box use in a noninternational operating context, whereas Navision products are more suitable for extensive customization and in an international operating context.