Microsoft's MBS: Enterprise Applications for Sale?
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Did you read in the January Microsoft earnings press release about how well the company's enterprise applications business is doing?
Neither did I. That's because there wasn't a peep about Microsoft Business Solutions in the entire document. It's as if the home of Axapta, Great Plains, Navision, and Solomon, among others, was no longer part of Microsoft. It's as if Microsoft might be readying a sale of its misbegotten foray into the land of the enterprise. Which might not be a bad idea for Microsoft, and a welcome boon to its competitors, despite the catastrophic effect it would have on the MBS reseller community.
At a minimum there's a lot of egg on Redmond's face about this multibillion-dollar white elephant called MBS. It's the second-smallest business unit in the family -- only mobile devices is smaller -- and it's raking in the biggest losses. At least the losses slowed down a little last year: MBS only dropped $70 million in the second half of 2004, compared to a $193 million loss in the second half of 2003. Revenues are growing, though the year-to-year growth in the last quarter of 2004 was less that one-half of one percent.
Worse than the numbers is the perception. Even PeopleSoft, living under the shadow of the great warrior from Redwood Shores, was able to show respectable revenue numbers in 2004. SAP, of course, cleaned up big time. Lawson didn't do to bad until the end of the year. SSA Global kept at it. Siebel looks to be staging a minor turnaround. Only MBS looked totally anemic, all the more so because the rest of the business units did so well.
Admittedly, financial trouble wasn't MBS' only problem. The Department of Justice vs. Oracle trial saw some very embarrassing testimony on the part of MBS executives and their customers. It seems that some benchmarks were misleading, big customers were left hanging, and partners were unable to meet their obligations. In all the testimony looked more like a bad reality TV show than the confident swagger of a market leader.
Distractions and Confusion
Meanwhile, there's MBS' channel problems. The channel has been consumed with mergers and acquisitions, something that we all know can be very distracting. Further distracting the channel is the fact that Microsoft hasn't really dealt with its channel conflict problem. There's still too many partners calling on the same prospects with one or more different product lines.
The product line issue got almost comical when MBS issued a very belated migration offer for PeopleSoft customers in January. The offer, which was a good 12 months late in coming, showcased Microsoft's product line problem. Here's my favorite line from the press release: "Microsoft recommends that PeopleSoft World and PeopleSoft EnterpriseOne customers consider Microsoft Business Solutions--Axapta. and that PeopleSoft Enterprise customers in the United States and Canada consider Microsoft Business Solutions--Great Plains.. However, businesses interested in Microsoft Business Solutions--Navision. and Microsoft Business Solutions--Solomon also can take advantage of the new migration program." How's that for a clear-cut migration strategy?
Meanwhile, reports are surfacing that the new version of Axapta will be delayed by a year. This follows the ongoing revision of plans for Project Green, MBS' rearchitecting of its entire code base. Then there's the problems with supporting such leading-edge concepts as RFID and lean manufacturing. And there were hints at the last financial analyst meeting that MBS would stop enhancing one or more of its key products. The beat goes on.
At a certain point one begins to feel sorry for the MBS gang. I'm sure they mean well, and I know from my contacts in Denmark that Axapta and Navision are great products. But one really has to wonder how long Microsoft will keep plugging away at something that is clearly outside its core competence. That's why I keep thinking they're going to sell the business and get back to their knitting.
I could be wrong; it's possible that Microsoft's pain threshold is much higher than I think it is. But at a minimum I expect to see some dramatic changes this year from MBS. Really dramatic. Because muddling through is just not the Microsoft way. And 2004 was a very, very muddled year.