Microsoft Corp. is no stranger to small and midsize businesses, which account for half the software companys revenues, primarily through sales of Windows and the Office productivity suite. But the Redmond, Wash., company two years ago began a systematic effort to create software and a sales channel to serve SMB customers. In the coming months, those potential customers will see the fruits of that effort as Microsoft unites versions of its core server software for SMBs with enhanced enterprise software and a concerted effort to retrain its sales force.
Microsoft has a brand that even the smallest company recognizes, along with a sizable reseller community to evangelize the companys message and products. It can also provide a fairly complete technology stack, from an operating system and a development environment to accounting and customer relationship management systems. Many smaller businesses say Microsoft has come a long way to serve their needs, in large measure by the way it has handled its acquisitions of Great Plains Software Inc. and Navision A/S, which make business automation software for SMBs.
“Since Microsoft took over [Great Plains], theres been more and more tighter integration with the rest of [Microsofts] products [such as] Office and Exchange,” said Great Plains user David Hurwitz, chief technology officer at Super D, a music and video wholesaler in Irvine, Calif. “The system has definitely become more stable. Theyve changed the look of it in general. Its just gotten better and better because theres been a ton of money poured in.”
Microsoft is putting some serious executive muscle into SMBs. Earlier this year, the company tapped its former group vice president of the Worldwide Sales, Marketing & Services Group, Orlando Ayala, to head the Small and Midmarket Solutions & Partner Group (see story, right). The new group helps coordinate product development across Microsoft and manages sales and marketing to SMBs through thousands of partners.
On the product front, Microsoft at its Worldwide Partner Conference next month will release Windows SBS (Small Business Server) 2003 and Office 2003, versions that are feature-rich for small and midsize companies. It will expand SBS offerings with a Premium version for medium-size companies and a Standard version for small companies.
However, even with its considerable development and partner channel might, Microsoft faces significant challenges in accomplishing its goal of reaching the thousands of SMBs it says are ripe for new technologies and services. Not the least of those challenges is sorting out its tangled partner channels, integrating its enterprise resource planning product lines and persuading customers to buy its .Net architecture.
As many as four or five Microsoft resellers may compete for the same customer, with no clear direction or differentiation from Microsoft.
“Lets face it, the four [SMB enterprise software] lines were competitors, so its not all one happy world,” said John Pavain, president of MaxQ Technologies Inc. The Norwalk, Conn., company resells Solomon and Great Plains software. “Its an issue for a lot of resellers, and it does create some confusion,” Pavain said.
Straightening out the channel is crucial for Microsoft, since 96 percent of its revenue flows through partners, according to Allison Watson, vice president of Microsofts Worldwide Partner Group. For every dollar of Microsoft products sold, partners earn $6.
The company is doing its best to promote sales at the VAR level. On July 1, it instituted a change in compensation to its executives whereby bonuses, which amount to about 60 percent of their salary, are tied to partner satisfaction. That may not translate well for customers who feel they are being unduly steered toward the consulting community.
“We have a manufacturing system that we wanted to tie in to Great Plains, and we had the roughest time coming up with documentation just to get mapping,” said Matthew Lane, MIS director at RLE Technologies, in Fort Collins, Colo. “We couldnt get their database to map in, and we couldnt get any integration information.”
Lane, who switched from Great Plains to NetLedger Inc.s NetSuite in February, said that with any kind of integration he tried with Microsoft products, he was pointed to RLEs Microsoft consultants.
“It was the same with user support; manuals were very sparse. Their whole system is not well-documented, and they wouldnt give us the core information we needed,” Lane said. “I think it is 100 percent intentional. There are a number of companies in our area, and thats all they do is Great Plains—thats how they make their entire company base off that.”
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Microsofts MBS (Microsoft Business Solutions) group intends to redesign its enterprise software lines to ease integration under an effort dubbed Project Green. However, the project will be based on Microsofts .Net platform and is timed to be released with “Longhorn,” an upgrade of Windows built on .Net. Longhorns due date slipped from 2004 to 2005, and now Microsoft is not committing to a delivery date.
Still, MBS executives said they dont believe Microsoft will lose a competitive edge if Project Green slips.
“One of the fundamental motivations to build the next-generation code base is we believe the current set of technology is not yet up to par,” said Satya Nadella, MBS corporate vice president. “Thats not just a statement of our products but a statement about the industry in general. We believe there is a customization framework that allows multiple parties to come together, and we are investing heavily on that.”
Customers, for their part, are unsure of the transition.
“Well, it makes you nervous. It will be a change, but change is good,” said Great Plains user Cindy Highbarger, the controller at Mid-Continent Instruments, in Wichita, Kan. “My understanding is theres still going to be several years overlap [with products], but Microsofts focus will be on the new package. We want to make sure our programmers learn the new [.Net] language, but we dont know what it is yet.”
If Microsoft is going to succeed in wooing and keeping SMB customers, it is going to have to make customers such as Brian Nay happy. Nay, executive director of Information Systems and Technology at Stampin Up Inc., likes that he can run his IT shop cost-effectively on Microsoft technologies.
But licensing decisions Microsoft has made in the past year or two have cost his company, Nay said. For example, with Windows XP, Nay said, he was pressured to upgrade before a specified time, which he did with a significant effort. “We were enticed prematurely to act,” said Nay, who is concerned that the same thing will happen with .Net.
“This is usually how it works: [Product support] is gradual until they pull the plug and say, Were not going to support that old thing anymore, and youre pretty much forced to stay with the program,” said Nay. “Youve worked hard, and the carpet gets pulled out from underneath you. Thats frustrating. But you have to temper that with advances in technology.”