Microsoft unit key to new strategy

Vista may be late, but Microsoft's business software division is on schedule and ready to tackle services.

DALLAS--In recent years, Microsoft's Convergence conference has served as the stage for unveiling the latest shift in the company's business software strategy. But at this year's show, Microsoft had a surprise: No big shift.

"In a sense, there is no news at this conference," said James Utzschneider, general manager of marketing for Microsoft's Dynamics business. "We've delivered what we said we'd deliver."

No news is good news for the company these days. While its Windows and Office units grapple with delays, its Business Solutions group is touting a software plan--remarkably similar to last year's plan--that calls for all four of its enterprise resource-planning products to be updated over the next year.

The money-losing Microsoft Business Solutions unit is also rounding the corner financially. Last quarter, it turned its first-ever profit as well as a 17 percent rise in sales. The company expects it to dip back in the red for a little while longer, in part because of a new $50 million ad campaign, but hopes to continue the sales growth.

"I want to abolish any artificial distinction in how customers deploy the technology."
--Brad Wilson, Microsoft

And, as Microsoft continues to formulate its business software services strategy, MBS is poised to play a starring role.

That's a dramatic shift from five years ago, when Microsoft started its midsize-business applications push with the purchase of Great Plains Software. The company now has four separate ERP (enterprise resource planning) products--all gained via acquisition--along with a homegrown CRM (customer relationship management) product.

For years, the Convergence conference has been marked by angst among Microsoft's resellers and customers.

"There was a lot of confusion," Utzschneider said, because customers were unsure of Microsoft's long-term plans and worried that the company would cancel one or more of its product lines.

The company is moving to unify the products, but has scaled back its original plan to rapidly integrate the four ERP products--"Project Green"--in favor of a more evolutionary approach. Now, much of the work in the coming years will focus on ensuring that the four products have a common look and feel, as well as have links to Microsoft's other software programs and its Visual Studio development tools.

Forrester Research analyst Ray Wang said that the MBS unit is starting to operate as a single team, even as it continues to support all four versions of the Dynamics ERP software. With much of its development resources concentrated, he said, Microsoft can focus its work on adding ties to Office, SQL Server and other Microsoft products as well as integrating Web services support.

"That is a credible threat," Wang said. Over time, Microsoft still faces choices of which parts of each product to maintain and what its common data model will look like. For now, though, partners and customers are happy with Microsoft's plans, he said.

Big, but how big?
It is unclear just how far Microsoft's ambitions stretch. Until now, the company has stuck to the notion that it is focused on the midmarket.

In a 2004 videotaped deposition, given in the government's attempt to block the Oracle-PeopleSoft deal, Microsoft senior vice president Orlando Ayala said the software maker did not plan to enter the market for large corporate customers in the near future.

"These are sales that take a lot of time and resources," Ayala said. "Even for the midmarket, you don't enter them overnight...It will take years for us to be big in the midmarket."

Now, however, the company's ambitions seem larger.

Our products "can scale up to cover a super, super high percentage of all businesses in the world," Chairman Bill Gates told CNET this week. "When (companies) want to pick a new software application base, we will be in there competing in 95 percent of the cases."

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