Microsoft is boosting its investment in Microsoft
Business Solutions (MBS) to help the group reach its ambitious goal
of becoming a $10bn (£5.4bn) business by 2011.
MBS will have an $850m budget for its 2005 financial year, which
started 1 July, Microsoft executives said at the company's
Worldwide Partner Conference in Toronto this week.
Last year, the MBS budget was between $600m and $700m.
Microsoft is bullish about the market opportunity for MBS, which
sells business applications to small and medium-sized businesses
and divisions of large enterprises.
The software supplier has predicted the global business
applications market to reach $62.1bn in 2008. More than half of
that, about $35bn, is the market Microsoft and its partners will
pursue, said Tami Reller, corporate vice-president for marketing
and strategy at MBS.
"If anything, it is a reasonably conservative estimate," Reller
said. "Microsoft and our partners will pursue together that $35bn.
We want to be and we can be a profitable, multibillion-dollar
business over time."
According to an internal document, Microsoft is aiming for a 30%
market share, based on revenue, in the business solutions space by
2011. The document became public during the US government's court
battle to block Oracle's takeover of PeopleSoft.
Microsoft held a 4.9% of the worldwide ERP market in terms of
revenue in 2002, according to data from Gartner.
MBS brings together Microsoft's Great Plains and Navision
acquisitions with its Microsoft CRM product and the small-business
offering previously called bCentral. The group's products cover
management of finance, human resources, customer relationships and
other business tasks.
With $153m in revenue for the most recently reported quarter,
MBS is the second to smallest of Microsoft's seven independent
profit and loss centres. Although still loss-making, the group is a
key part of Microsoft's strategy for growth as it looks beyond its
maturing Windows and Office franchises.
"This is not an accident that we're in the red," Reller said.
"There is deliberate investment going on."
MBS is pouring money in three distinct areas; research and
development (R&D), sales and marketing, and integration of the
various pieces the group consists of, Reller said.
"There are brand new application categories that we're entering;
those are unprofitable categories," Reller said. Examples are CRM
and Microsoft's offering for retail store automation. "We're
investing hard to get past 1.0 releases," she said.
Marketing investments are needed to let software buyers know
Microsoft is an option for their business software. "There is not
enough awareness by any measure that Microsoft is in business
applications. We have got to get the word out, and that costs
money," Reller said.
Microsoft faces stiff competition as it tries to gain share in
the crowded and highly coveted market for business applications for
small and medium-sized companies. Rivals include large suppliers
moving down into the space, such as Oracle SAP and PeopleSoft, and
smaller suppliers already there, including Salesforce.com, NetSuite
and Intuit.
Microsoft is expected to share more details about its
expectations for MBS at its financial analyst conference later this
month.
Joris Evers writes for IDG News Service