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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

Continued from Page 2

The only analytic area where MBS currently can be considered a player is in financial analytics. It owns the FRx Financial Reporter and Forecaster products that provide financial reporting and budgeting/planning solutions for midmarket businesses. It also owns Enterprise Reporting, a Hyperion-like financial reporting and consolidation system that has a useful user base spread largely over North America and Europe. This is a good foundation on which to build an overall business analytics offering that includes both OLAP and BPM capabilities, because financial analytics are a major data provider for OLAP as well as BPM applications.

MBS Challenges

MBS has significant challenges ahead of it. (Digesting two massive acquisitions is a big challenge in its own right.) Turbulence is inevitable as the organizational chart changes, people and products jostle for position, and new strategies are implemented. In this scenario, the quality of service provided to customers, partners, and prospects can suffer, and confusion about policies and procedures reign — at least for a while.

In the ERM space, the big challenge for MBS is to devise a migration strategy from its jumble of offerings to some next-generation solution based on the Microsoft .Net technology platform. It would be a massive task to build such a solution wholly from the ground up, so the smart money is on MBS to leverage an existing product as a starting point. If that's the case, the most likely candidate is Navision Axapta, the newest and most technologically sophisticated of the MBS ERM systems. It also offers the most high-end functionality set, so it includes a lot of business process knowledge already.

In the meantime, MBS won't have the ERM market to itself. The Sage Group PLC remains a strong competitor to MBS with a similar portfolio of acquired products that it sells worldwide. SAP has quietly started its own midmarket push with its Business One product, and Oracle has an online ERM system called Oracle Small Business that has grown rapidly in functional breadth and depth since its origin in the NetLedger online accounting system. In Europe, local country-specific competitors exist everywhere, including Systems Union Group PLC in the UK and Exact Software in The Netherlands. However, for SAP or any other top-tier competitor that wants to move downmarket, the only option is to adopt a top-down strategy and adapt its direct sales approach for selling through a channel. Conversely, MBS can use a bottom-up approach that benefits from an existing channel network and customer base that are second to none.

Microsoft CRM is new and not yet an international application, which is delaying its rollout into Europe. MBS is learning that rolling out an international application simply isn't as easy as rolling out a tool, where the only localization required may be to change some regional settings and translate the screens, help system, and manuals. Business applications demand a new level of localization that depends on hard-to-get, in-depth knowledge of local business processes and statutory requirements that must be built into a localized version of the global application and then maintained going forward.

The combination of bCentral and Navision VIP has a lot of promise, but to succeed, MBS needs to sell them into a market that's ready to accept the value of Web services, and with the support of a new generation of Web service providers that recognize the market potential.

From the outside, MBS analytics look like a mess right now. However, this mess may represent a massive opportunity, especially as MBS already owns the de facto standard for financial reporting in SMBs in North America, FRx Financial Reporter. If it can combine its existing financial analytic assets with some more generic business analytic offerings that spans desktop OLAP and BPM functionality, it could have a whole new line of business to tap. And with ERM, SCM, and CRM applications to service, MBS analytics have a bright future.

Finally, the ISV partner challenge may prove the most intractable of all for MBS and Microsoft partners. With MBS competing in analytics, ERM, CRM, and Web services, Microsoft has to expect some defection from ISVs that currently compete in these domains. Furthermore, will partners selling ERM systems that are competitive with an MBS ERM system use MBS analytics or CRM as an add-on? If neither IBM nor Sun nor Oracle provide alternatives, ISV partners may have no choice but to buy MBS products.

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Of course, MBS has some unique advantages. It has the Microsoft brand, which despite recent knocks still carries significant weight. It leverages much Microsoft-owned platform technology now and future offerings will leverage more in the form of the .Net platform. And it has a lot of bright people from both the U.S. and Europe. The elephant will need to learn a new, quick-step dance, but it's done that before.

Stewart McKie is an independent consultant and technology writer specializing in analytic, enterprise resource management, and Web services applications. Reach him via his Web site at www.comshare.com.