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.
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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