Never Fade Away

Amid mounting concerns about under-performance and customer confusion, Microsoft assured customers that
its Microsoft Business Solutions (MBS) would not
wither away, but rather would see some enhancements within a year.

The Redmond giant acquired Axapta, Great Plains, Navision and Solomon,
the four products that make up the MBS division, along with
their sales channels, partners and, to some extent, their staffs. The quartet
provides enterprise resource planning (ERP) functions, including financial
management, supply chain management, customer relationship management, project
management and business analytics, often with considerable overlap.

But sales have lagged.
In the company’s last earnings call
to discuss its third-quarter results, CFO John Connors was surprisingly blunt
about the division’s disappointing performance — and he blamed the sales channel.

“We aren’t having good U.S. execution, and the majority of it is
a function of us having a lot of new people in district positions
over the course of the year,” Connors told analysts. He added that the
company’s relations with MBS partners were less effective than a year ago.

“This division is certainly not alone in losing money over at Microsoft,
but it has more baggage than some of the other divisions,” said Jupiter Research
analyst Joe Wilcox. “The company has been struggling to integrate the products
into its own product line, and also, the sales channels into Microsoft’s broader
partner strategy.” Jupiter Research and are both owned
by Jupitermedia.

Microsoft has promised MBS customers full support through 2012. However,
while it continues to push MBS, Redmond also continues to work to make it less
relevant. One example is Project Green, the code name for an initiative to
create a next-generation ERP offering. Project Green will consolidate
business-management functions available in the various MBS offerings on the Microsoft
Business Framework platform and tools, which will be built atop the .NET Framework,
according to research firm Directions on Microsoft.

Rob Eggemeyer, head of the services organization for MBS reseller ePartners,
said he looks forward to Project Green. “It will help us to have to put in only
two packages instead of four or five,” he said.

His sales team will adapt as
Microsoft builds Office into a front end for back-office software, because it’s
already authorized to sell Office. He sees Microsoft’s strategy of ever-increasing
interactivity between desktop, server and business software as a good way to
keep customers. “They’re getting their claws deeper and deeper into the
desktop and the back office,” he said.

While Project Green is alive and well, according
to Directions on Microsoft analyst Chris Alliegro, Microsoft hasn’t
said much about it. “No doubt, they’re concerned about creating a situation
where, say, potential Great Plains customers are sitting on the sidelines
waiting for the next big thing rather than investing in ERP software today,”
Alliegro said.

Adding to the confusion about Microsoft’s ERP strategy was the news
that the company had considered a merger
with SAP, the German business software giant. The company said it ended
these “due to the complexity of the potential transaction and subsequent integration.”

Given the difficulties it’s had integrating the MBS acquisitions,
digesting SAP might have choked Microsoft. In any case, the news made
analysts wonder what other ideas about ERP Redmond might be dreaming up.

Great Plains 8.0 is scheduled to be available this month; Solomon 6.0
is expected in July. Navision 4.0 will ship later this year, and
Axapta 4.0 scheduled for some time next year.

This official upgrade schedule is the latest in a series of nudges
Redmond has given its balky enterprise software division. In May,
the software vendor announced a yearlong
to bring its Business Solutions channel partners into the Microsoft Partner
Program global framework.

Microsoft brass said the move would eliminate the diverse program terms
and discount schedules of the various sales channels Microsoft acquired
along with the software.

Then, in June, it reorganized
the chain of command, placing division chief Doug Burgum directly under CEO
Steve Ballmer, a move observers said was designed to let Ballmer keep a better
watch on sales.

At the same time, Orlando Ayala, who was responsible for the
sales channel and strategy for small and medium-sized businesses, was made
division COO of MBS, reporting to Burgum. That shift helped consolidate
the sales channel.

Finally, Microsoft essentially spun out Solomon. It announced that it had
outsourced the upkeep of Solomon to Plumbline, a new company comprised of Solomon’s
founders and 70 percent of recently fired MBS employees.

The jettisoning of the Solomon team from the mother ship could be an
indication that Microsoft doesn’t see it as core, Alliegro said.

But MBS partners were sanguine about the prospects for the product line.
“It’s a fact that Microsoft has several different product lines, and their
long-term goal is to unify all those different strengths into one code base,”
said Gary Harpst, co-founder of Solomon Software and chairman of Plumbline.
“But that’s several years away.”

He said Plumbline already is working with
Microsoft on the next Solomon release, which would be significant.
“We’re doing a lot of platform work and making sure it has a long future,” he said.

Harpst admitted there was confusion in the marketplace, but said it’s
normal as next-generation products evolve.

“Any time there’s a transition
period, like going from DOS to Windows, the current generation of products is more
feature-rich than the next generation, because they’ve been worked on for 10 or 15 years.”

He tells customers that if they want functionality and stability, they
should buy a current-generation product for the next several years.

“As the functionality of the next generation becomes more real, there will
be a tipping point where it makes sense to buy it.

“When I was in the Solomon business, we sold Solomon 3.0 for
seven or eight years after Solomon 4.0 was out. This is normal.”

That advice may make good sense to customers, but it’s not so great
for Microsoft.

“MBS needs to drive sales of its existing products now,” Alliegro said.
“Not create buzz about what’s coming in two or three years and risk paralyzing
the market today.”

The official promise of MBS enhancements could buck up the
troops and get potential customers off the dime and into Redmond’s arms.

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