Problems in Microsoft MBS Land

Of Microsoft's seven business units, its MBS division needs the biggest jump-start right now. Here's why.

Microsofts hefty legal expenses arent its only financial challenge. If you peek behind the Redmond earnings curtain, it quickly becomes apparent that all is not rosy in Microsoft Business Solutions land.

Microsoft Business Solutions (MBS) — the Microsoft division comprised of the Great Plains, Navision, bCentral and Microsoft CRM teams — is Microsofts small and midsize business (SMB) unit.

For Microsofts FY 2004 Q3, MBS had $153 million in revenues, down from $190 million in Q2. MBS is the second smallest (revenuewise) of Microsofts seven business units. (The only one thats smaller is mobile and embedded.)

Microsoft execs on the companys Q3 earnings call this week acknowledged that MBS results are nothing to crow about. They attributed the weak showing to too many new district sales folk in the U.S., as well as a slow start for the companys merged MBS/corporate sales team. (Microsoft officially merged the teams as of July 1, 2003.)

In fact, the only real bright spot for MBS in the quarter were strong Navision and Axapta ERP sales outside the U.S.

MBS has other challenges on its plate, too, which it didnt detail during this weeks analyst call:

  • Dampen the chilling effect of Green: After spending countless hours talking up its long-term ERP strategy (Project Green) a year ago, MBS officials are now doing their best to distance themselves from it. Instead, MBS execs this year made a point of emphasizing all the interim Great Plains, Solomon, Navision and Axapta releases the unit plans to roll out before Green comes to fruition. MBS needs to assure customers they wont have to wait three-plus years for Green in order to get new features/functionality.
  • Clarify which of its ERP products makes sense where. How is a customer supposed to choose from among MBS four seemingly competing ERP products? MBS needs to do a better job explaining the distinctions between Axapta, Navision, Solomon and Great Plains (if there really are any, beyond the arbitrary).
  • Broaden the MS CRM customer base: MBS has 1,600 MS CRM customers, according to Microsoft. But the majority of these are in the "upper midmarket." Microsoft needs to find a way to make MS CRM more appealing and affordable to the much larger SMB customer base.

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