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November 8, 2005 5:19 pm

Dynamics brand will spearhead move into SMEs market

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Microsoft has taken the wraps off its long-awaited strategy to sell application software to small and medium-sized businesses. Under the Dynamics brand, it plans to sell a revamped range of financial, customer relationship and supply-chain management software for SMEs.

The first such product, Dynamics GP – the successor to Microsoft Great Plains – is due to be launched this month.

Unlike Microsoft’s current line of business applications, which are mostly inherited from acquisitions, the Dynamics range will share modern technologies, tight integration with Microsoft Office, and a role-based approach to software design. The aim is to make it as easy to run a payroll or check inventory levels as it is to use a spreadsheet. “Enterprise software solutions are still too complex for SMEs,” says Orlando Ayala, senior vice president for SME solutions.

It will take another year before all Microsoft’s applications are updated to reflect the Dynamics thinking, but analysts like what they have seen so far.

Judy Sweeney, research director at AMR Research, describes the initiative as a long-overdue move by Microsoft to clarify its rather hazy enterprise software strategy – and it comes at a good time. “We are seeing some growth in budgets and SMEs are now looking at standardising their business software,” she says.

According to AMR’s latest research, 71 per cent of SMEs in the US plan to increase spending on ERP software in 2006. While this means more SMEs are planning to purchase business applications, the vendors that serve this market are rapidly consolidating – the latest merger was between Lawson Software and Intentia.

Ms Sweeney says SMEs are wary of dealing with second-tier vendors that have traditionally served this market because of fears over their long-term future. That puts Microsoft in a good position. “After all, Microsoft already owns the desktop,” she says.

Of course, heavyweight vendors SAP and Oracle, also have eyes on the SME market. But their software suffers from the perception that it is too pricey and complex for SMEs. “SAP and Oracle simply offer SMEs cut-down versions of their big systems,” says Mr Ayala.

Microsoft is a relative newcomer to enterprise software and entered the market only in 2000 when it bought Great Plains Software. Two years later, it acquired Navision, a Danish software group. Its portfolio now comprises five products of which only one, Dynamics CRM was developed in-house.

Through an initiative originally dubbed Project Green, Microsoft has spent over two years rewriting these applications so that they work with Office and other Microsoft technologies.

Microsoft has often been criticised for not moving faster in shaking up its loss-making business applications division.

“One of the lessons we learned from our acquisitions of Navision and Great Plains is that you need to integrate product lines, but you cannot integrate too soon or too late,” says Mr Ayala.

It will take another two to three years before the new applications are fully integrated and share a common software base.

A key aspect of Project Green was to improve usability by looking at how users interact with business software. The result is role-based user interfaces tailored to the needs of different types of user – for sales people, the interface leads them straight to Microsoft Outlook, for example. The first new product, Dynamics GP, will support 20 roles.

SAP the largest enterprise software vendor, is also trying to make its software more user-friendly. Like Dynamics, SAP’s Mendocino project lets users access SAP software via a familiar Microsoft Office interface.

Ironically, SAP is working closely with Microsoft to achieve this goal and the two companies jointly announced Mendocino with much fanfare earlier this year.

Jeff Raikes, president of Microsoft’s Business Division said then that he did not see a contradiction between Microsoft competing with SAP in the enterprise software market while also collaborating on Mendocino.

 

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