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Microsoft Makes Overtures to Mid-Size Businesses

Analysis of News Events
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Last Wednesday, Microsoft launched several initiatives to help it become the software vendor of choice to medium-sized companies. In a Business Summit that it hosted at its corporate headquarters, the vendor unveiled a strategy for tailoring its products to the needs of such firms. Microsoft also pledged to create programs and tools that make it easier for mid-sized businesses to manage their relationships with the software giant.

At the summit, Microsoft Chairman Bill Gates and CEO Steve Ballmer discussed two major challenges that are common among mid-sized businesses. First, while these companies contend with business and IT complexity levels that are nearly as great as those faced by larger firms, they must do so with IT staffs and budgets that are far more limited than those of their enterprise counterparts. As a result, their IT systems often lack the integration and manageability needed to give these firms a competitive advantage.

Second, there is a big difference between how most employees of mid-sized businesses work and how their software supports their work. When such companies try to use IT to support end-to-end business processes that include workers, they cannot easily do so because their desktop productivity software and business applications run in separate silos.

At the summit, Microsoft stated that it would address these two challenges with products that it will design with mid-sized businesses in mind. To address the first challenge, the vendor will create an integrated server infrastructure solution that bears the code name "Centro." The solution will combine the "Longhorn" generation of Windows Server with a next-generation release of Microsoft Exchange, enhanced security technologies, and a framework of management services that will be drawn from Microsoft Operations Manager. By tightly integrating management services into Centro, Microsoft intends to significantly reduce administrative overhead for Windows systems.

To address the second challenge, Microsoft will dramatically improve the integration of its Great Plains, Navision, Axapta, and Solomon lines of business applications with its Office family of products. As I discussed in an article last month, Microsoft will create for all of its business applications a common user interface that is based on its SharePoint Portal Server. The workflow technologies in this product will integrate the business applications with Office, enabling users to work together on business applications and data using their desktop productivity tools.

To mark this architectural change, Microsoft will ship the next major releases of its business applications under a new brand name: Microsoft Dynamics. The new brand will gradually replace the old brand names and, in the process, prepare customers for the ultimate convergence of the product lines under Project Green. For instance, the next major release of Great Plains will be known as Microsoft Dynamics GP, while Navision will become Microsoft Dynamics NAV.

While Microsoft's new branding is more style rather than substance, the vendor will also make substantive changes to how it works with mid-size businesses. These changes include a streamlined Open Value program that enables companies to finance software licenses over three-year periods. Now that it sports a simplified contract and a greater likelihood of credit approval, Open Value should become a more attractive purchase option for many companies. In addition, Microsoft has created a Midsize Business Center on its Web site that provides tools and resources designed for the needs of such organizations. Later this year, the new site will host a guide to at least 10,000 software products from Windows software vendors.

A Delayed Epiphany?

While Microsoft's efforts to reach out to mid-size businesses are laudable, it will be several years before customers can enjoy many of the fruits of those efforts. For instance, Centro will take at least two years to develop because the Longhorn version of Windows Server will not ship until 2007 at the earliest. In the meantime, Microsoft is offering a Centro surrogate in its Windows Server System Midsize Business Promotion. The product bundle combines three copies of Windows Server 2003, one copy each of Exchange Server 2003 and Microsoft Operations Manager, and 50 client access licenses. The bundle is priced at up to 20% off Open License prices for the separate products.

Though it will take time for Microsoft to turn its vision into reality, it is encouraging to see the software giant take the needs of mid-size companies seriously. Of course, that is what IBM's iSeries Division has been doing for years. Indeed, Microsoft's latest announcements underline the truth of what iSeries General Manager Mark Shearer has said for months: that the market is moving over the sweet spot that the iSeries has long occupied. Last week's announcement indicates that Microsoft is moving over that spot and responding to it. In doing so, the vendor may try to emulate much of what is good about the iSeries. For instance, Microsoft's pronouncements about Centro's "integrated management experience" sound eerily similar to IBM's statements about the iSeries' ease of management.

That said, it will be interesting to see if Microsoft tries to compete with the iSeries on turf that the latter system has dominated for years. If it does, I doubt that the competition will pose much of a threat to the venerable server as long as IBM continues to invest in it. Indeed, Microsoft could inadvertently increase the market's awareness of the iSeries and its strengths. After all, imitation still is the highest form of flattery.

Lee Kroon is a Senior Industry Analyst for Andrews Consulting Group, a firm that helps mid-sized companies manage business transformation through technology. You can reach him at This email address is being protected from spambots. You need JavaScript enabled to view it..

Lee Kroon is a Senior Industry Analyst for Andrews Consulting Group, a firm that helps mid-sized companies manage business transformation through technology.


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