Great Plains acquisition puts Microsoft in ERP driving seat

Microsoft is getting serious about application software - again. The software giant built an industry-focused marketing team in...

Microsoft is getting serious about application software - again. The software giant built an industry-focused marketing team in the mid-1980s and then never did anything with it.

With the April 2001 acquisition of Great Plains, Microsoft is serious this time. Microsoft has formed a new venture called Business Solutions, which is comprised of Great Plains and bCentral, its Web services portal for small businesses.

Great Plains' product line consists of four suites: eEnterprise for the high end; Solomon and Dynamics, which both target companies with up to 500 employees, and the newly formed Small Business Manager, for businesses with under 25 employees.

All but Small Business Manager are integrated with a Siebel-based Customer Relationship Management (CRM) product that Great Plains calls Front Office. Small Business Manager will be available in November and will be integrated with bCentral.

In July, Great Plains formed an alliance with Clarus, through which it will provide an e-procurement system called eProcure for users of eEnterprise. Clarus already had a relationship with Microsoft and is traditionally too pricey for the lower mid-market.

But like Siebel and Logility, with whom Great Plains partners for a supply chain system, the partnership provides Clarus with a channel to reach the low end of the market, which would be too costly to build, and gives it another product considered hot in today's market.

All change
Even though Great Plains targets companies with between 500 and 5,000 employees with eEnterprise, where it claims to compete with Oracle, Lawson, PeopleSoft, and JD Edwards, there is a practical
"With the April 2001 acquisition of Great Plains, Microsoft is serious this time"
Source: AMR Research
limit to the type of business which Great Plains can support.

Companies with revenue of $50m (£34m) or more are likely to be stretching the limits of product functionality, vendor experience, and distribution channel support.

And Microsoft's senior management will not jeopardise its very lucrative infrastructure business by competing directly against those enterprise application partners that leverage billions of dollars worth of server sales.

For companies with less than $50m in revenue, the large distributed channel and broad range of product pricing will allow Microsoft to score big. Its competitors - Intuit, Computer Associates' ACCPACC, Peachtree Software and many others - are sitting ducks.

Considering the fact that most companies at this level have already standardised on the Microsoft platform and desktop products, why wouldn't they also choose to use a Microsoft product to manage the books and run the shop floor (which is probably in Microsoft Excel already)?

Great Plains doesn't focus on any particular industries but is in the process of integrating partner-written, industry-specific functionality into its products. Solomon has been very competitive with its project accounting software in Professional Services, but overall past revenues from the existing product line come from a diverse range of vertical markets.

It is undeniable that Microsoft owns the desktop, with strong corporate brand equity and associative user loyalty. Microsoft has sold office products to operations managers, and technical systems to technology managers. Now the company is getting into mission-critical space - where it didn't have credibility before but has gained it with Great Plains' more than 130,000 customers.

It is expanding the channel from the current 2,000-plus partners, putting significant resources behind the product lines and preparing some aggressive marketing. This is all good news for users considering Great Plains products.

Great Plains is a viable ERP vendor for smaller enterprises, from which more than 65% of Great Plains' revenue is derived, or for those companies with highly distributed corporate structures. If you have revenue below $100m or are interested in a relatively inexpensive distributed product, you should consider its products when selecting an ERP system.

Large companies with complex supply chains and business process requirements should consider the ERP vendors with products and channels better suited to support those needs

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