Ballmers Three Amigos

By Joseph C. Panettieri  |  Posted 2001-02-26

Ballmers Three Amigos

Many high-tech takeovers are negotiated in board rooms or exclusive hotel suites. But Microsoft was willing to make an exception when it came time to corral its most recent acquisition, Great Plains Software.

The $1.1 billion stock deal, which is expected to close this spring, was nearly a year in the making. Informal talks between the two companies began on the banks of the Missouri River last summer. At the time, several Microsoft executives trotted out to Fargo, N.D., to join Great Plains top brass for a horseback riding excursion. The galloping discussions included Microsoft partner VP Ian Rogoff, Great Plains CEO Doug Burgum, COO Jodi Uecker-Rust and CFO Tami Reller, among a dozen other top executives.

Both sides saw real business synergies before they even left the stable. "We werent looking to be sold," says Uecker-Rust. "But the strategic fit was pretty obvious from the get-go. We had a shared vision in the small and midsize business space."

Find a Thoroughbred

Find a Thoroughbred Microsofts decision to lasso Great Plains comes at a critical time. Faced with a saturated PC sector, CEO Steve Ballmer knows he needs to ride herd into fast-growing markets.

Enter Great Plains, which develops HR, accounting and other apps for small and midsize businesses (SMB). Founded in 1981, Great Plains annual sales are nearing $300 million, up from $42.3 million in 1996. Microsoft hopes to build it into a $500 million-plus operation within the next few years.

Under the pending merger plan, Burgum will run Great Plains Software as a Microsoft division, which will report jointly to Microsoft group VP Jeff Raikes and senior VP David Vaskevitch.

Who has the Reins? Burgum, Raikes and Vaskevitch are getting most of the press, but sources on Wall Street say another trio—Microsoft VP Russ Stockdale, and Great Plains COO Uecker-Rust and CFO Reller—is managing much of Great Plains transformation into a Microsoft division.

"Russ [Stockdale] will be assigned to Great Plains as a business unit for the next year," says Uecker-Rust. "He has really immersed himself in the job. Hes our connection into Microsoft; hes been there 10 years, so he really knows his way around."

To be sure, Stockdale is a savvy software veteran. He was one of the core players who drove Exchange Server to the top of the messaging market. Now, Stockdale has to serve two masters: a demanding Microsoft management team that wants to dominate the SMB market, and a Great Plains division that needs to retain its top talent in order to maintain its rapid growth.

Its impossible to predict future employee turnover, but Stockdale has three factors working in his favor: CEO Burgum has been with Great Plains since day one, while COO Uecker-Rust and CFO Reller each have been on board for more than 15 years. That track record should inspire loyalty within the ranks, assuming the deal doesnt hit any major bumps.

Stockdale and his Great Plains counterparts will face close scrutiny over the next few months. From Microsoft CEO Ballmer to thousands of partners, a lot of people are counting on a successful business combo.

Just ask SEI Information Technology, a Chicago-based integrator. "Were a Microsoft partner and a Great Plains partner," says Marivel Long, director of enterprise solutions at SEI. "Were looking for Great Plains to really embrace Microsofts .Net strategy."

Under the guiding hand of Microsoft chairman and chief software architect Bill Gates, the .Net strategy will push Microsoft beyond its PC heritage to embrace wireless handhelds, Internet terminals, network appliances and other non-PC platforms.

Many Microsoft allies will examine Great Plains .Net plans during Convergence, an annual user conference that kicks off March 14 in Orlando, Fla. Burgum is expected to discuss some general plans during his keynote speech at the event. Firmer details about the business combo—including branding strategies—will likely surface in late April or early May, after Microsoft finalizes the Great Plains deal. A newly polished alliance strategy wont likely materialize until Oct. 3, when Great Plains kicks off its annual Stampede partner conference in Fargo, N.D.

To the casual observer, Great Plains is an ideal fit for Micro- soft. Burgum knows Ballmer from their days at Stanford University, and Burgum has been taking careful notes from his Microsoft counterpart ever since. Burgum bet on Windows NT and SQL Server long before most companies jumped on Microsofts server bandwagon. And Great Plains, much like Microsoft, drives virtually all of its sales through loyal channel partners. The companys flagship products include:

> Dynamics, a platform for midsize companies that includes financial, distribution, accounting, HR, payroll and fixed-asset software;

> eEnterprise, a business-management package for the midsize markets top tier. Its similar to Dynamics but much more extensive in scope, offering additional components like manufacturing applications;

> Great Plains Siebel Front Office, a CRM suite developed jointly with Siebel Systems. The suite is fully integrated with eEnterprise and Dynamics, and

> Solomon IV, a low-end suite that Great Plains acquired in mid-2000.

Home on the Range


Home on the Range? Despite Great Plains strong product lineup, analysts say the company faces several cultural challenges. For starters, its unclear how Great Plains management will react and perform under Microsofts firm guiding hand. Rivals note that Great Plains has been an indepen- dent company for 20 years; some employees could experience culture shock under Microsofts win-at-all-costs management style. "Youre talking about a massive Metropolis buying a small-town company," says the CEO at one Great Plains rival.

Its a bit like New York City Mayor Rudy Giuliani trying to govern Walnut Grove: Sooner or later, the residents are going to revolt.

Microsoft is aware of the risks and plans to be a gentle giant—at least for the next few months. Much like IBMs handling of its Lotus acquisition, Microsoft will position Great Plains as a nearly autonomous software division. The Great Plains division will develop, market and support its own software, while embracing Microsofts .Net strategy.

Great Plains partners welcome that approach. Just ask Shared Healthcare Systems (SHS), a Windows NT and SQL Server software developer that is integrating its products with Great Plains software suites.

"Great Plains has been a wonderful partner so far," says Mike Raymer, VP of products at SHS. "But one of our long-term concerns was Great Plains ability to move from client/server to .Net. Now, after the Microsoft deal, I cant help but think theyll be a poster child for .Net."

Thats certainly Microsofts plan. As the so-called Three Amigos focus on Great Plains day-to-day operations, look for Microsofts Raikes to act as a .Net intermediary between Ballmer and Great Plains Burgum.

Sources say Raikes was one of the key drivers behind the Great Plains buyout, and hes no stranger to Fargo, N.D. "Jeff [Raikes] has been out to Stampede—our partner conference—a few times," says Great Plains Uecker-Rust. "And he was with us the day of the Microsoft [buyout] announcement."

Raikes, a 20-year Microsoft veteran, has a knack for being at ground zero during key industry events. The night Microsoft released Windows 95 to the public, Ballmer was riding shotgun in Raikes BMW in downtown Seattle. The duo was visiting retail stores to gauge early Windows 95 sales. Surely, Raikes will have Ballmers ear as Microsoft brings Great Plains into the fold.

Back at the Redmond


Back at the Redmond Ranch In some ways, the Great Plains buyout represents the lesser of two evils for Microsoft. Sources say Microsoft wanted to enter the enterprise app market, where companies like Siebel enjoy triple-digit sales growth. But jumping into the high-end arena would have alienated Microsofts closest Windows 2000 allies, including PeopleSoft and SAP.

The Great Plains deal, by contrast, is an SMB play that gets Microsoft into the applications market without upsetting the companys enterprise partners. Ballmer drove that message home during a recent meeting with Craig Conway, CEO of PeopleSoft. Conway says he left the meeting quite comfortable that Microsoft wont attack PeopleSofts enterprise business.

Some of Microsofts smaller allies arent quite so lucky. Sources say Navision, Sage and several other Great Plains rivals are less than pleased by the Microsoft buyout. "Once a sector of the software industry shows really big potential, Microsoft buys its way into that market and destroys the niche players," says a marketing VP from one accounting software maker. "This time, were going to be the victims."

At least one company, IBM, is extending an olive branch to Microsofts estranged partners. Steve Mills, senior VP for IBMs software strategy, likens the Microsoft-Great Plains deal to Oracles move beyond databases into enterprise applications. The move alienated some of Oracles application partners. Some of those allies went on to more tightly embrace IBMs DB2 database. "The same thing could happen with the Microsoft-Great Plains deal," says Mills. "Great Plains competes in a highly fragmented market. Well greet their rivals with open arms."

Of course, Microsoft and Great Plains hope to corral the SMB landscape long before IBM can send out the cavalry.

Jerry Rosa contributed to this article.

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