Coverage of
The 2002 Microsoft Stampede Conference
By J.
Carlton Collins, CPA
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Coverage of |
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Microsoft Acquires Great
Plains & Now Navision Software –
What is Microsoft Up To?
opinion/editorial by J. Carlton Collins, CPA
To a certain extent, I see Microsoft’s acquisition of Great Plains and Navision as a strategic marketing initiative. Please allow me to explain by using IBM as an example:
Over the years I have watched IBM forge relationships with various software applications such as Business Management Series BMS in 1987, Platinum Software in 1990, Lotus Development Corporation in 1994, and Damgaard Axapta in 1986, just to name a few. Historical results suggest that IBM is the “kiss of death” when it comes to software, they have proven that many times. IBM’s purpose in acquiring and/or partnering with software applications seems to be purely marketing. The reason is that few companies care about attending conferences focused on hardware platforms – big yawn right? But IBM has been able to use application solutions (such as Lotus Notes) as a “carrot” to fill auditoriums and attract thousands of businesses to large Lotus Notes conferences. Once captive, IBM is then free to promote it’s big-iron & AS/400 platforms. Because IBM is most interested in selling hardware, they tend to use their software applications as marketing gimmicks to get the foot in the door of new businesses. Using this strategy, it is no wonder that most application solutions eventually flounder under IBM’s tutelage. In the end, we all know that IBM is a hardware company.
Don't knock IBM for this strategy. This type of marketing works, and actually works well for its intended purpose. Many companies employ this strategy. In 1996, ADP purchased Peachtree Software and proceeded to use the product to get their foot in the door of small businesses in order to sell payroll services. This strategy worked very well, but after 4 years ADP found that it had exhausted much of the leverage provided by the Peachtree application, and they sold the Peachtree product line to Best Software. Today, Best Software is reaping huge rewards by using the Peachtree product to get their foot in the door of growing businesses in order to move them up to the MAS 200 and MAS 500 product lines – an incredibly successful strategy.
Likewise, Microsoft has a marketing angle to play as well. Microsoft is a technology company accordingly is most interested in promoting its technology throughout the world. However, businesses are not nearly as interested in attending a back-office or SQL server seminar as they are in attending an application solution event. For example, a few weeks before Microsoft announced the purchase of Great Plains Software, I spoke to a Microsoft employee who explained to me that they had recently held a Back Office / SQL Server Conference with Bill Gates delivering the key note speech. While the auditorium was set with 2,000 seats, I was told that only 70 people attended the conference. In the same breath this person also stated that “…if we had featured an application such as eEnterprise, we would of filled the room”. As Gomer would say, "surprise, surprise" - two weeks later Microsoft acquired Great Plains, and placed itself in a good position to use the Great Plains application solutions to get their foot in the door of tens of thousands of business to promote Microsoft technologies such as .NET, SQL Server, BizTalk, XP, ActiveX…and more. This is concept is known as "solution selling".
The Database Angle
Of course this is not the only reason that Microsoft purchased Great Plains and Navision, there are several other key benefits to Microsoft. For example, it is no secret that Microsoft is determined to establish SQL Server as the dominant database solution on the planet. 2001 figures show that IBM’s DB/2 database, Oracle’s 11i database, and Pervasive’s Pervasive.SQL database comprise approximately 65% of the marketplace while SQL Server’s share is closer to 30%. In recent years Microsoft achieved key victories as Solomon Software and Exact Software dropped support for the Pervasive database in favor of the SQL Server database. Inasmuch as the majority of the 65,000 current Dynamics customers use the Pervasive database, many have speculated that the Pervasive version of this product will likely disappear. Indeed, this is exactly what is happening. Last year’s release of Small Business Manager is a scaled down version of Dynamics on the Microsoft Desktop Engine (MDE) database (which is a scaled down version of the SQL Server database). Here at the 2002 Stampede Conference it was also announced that Dynamics (which runs on the Pervasive and C/Tree databases) would be merged with eEnterprise (which is basically a high-end version of Dynamics running on the SQL Server database) as a single product. You don’t have to be a genius to guess which database this merged product will ultimately employ. Effectively, it appears that Microsoft plans to eliminate the Pervasive option for future versions of the Great Plains product – thus Pervasive will ultimately lose market share, while SQL Server gains market share. (Note - I fully expect that Microsoft will continue to support existing customers who choose to remain on the Pervasive database platform for many years to come - I am not concerned about that. Burgum & company have always remained loyal to their customers in this regard and we have no reason to expect anything less.)
Similarly, Navision Attain had recently achieved it’s first installation on the AS/400 platform using the IBM DB/2 database while the Axapta product line had recently set a new world record benchmark record for operating on the Oracle database. By acquiring Navision Attain and Axapta, Microsoft is now in a better position to influence the future database direction of these products as well – which obviously will favor the SQL Server database. Further, approximately 90% to 95% of Navision Attain’s 30,000 customers world wide use the Navision database – and Microsoft is now in a good position to drive this customer base toward the SQL Server platform in the future.
(I do not mean to suggest that this is a wrong move for Microsoft - it is a great move for Microsoft and customers alike. The SQL Server database has proven to be a great database platform - one that I heartily recommend. My efforts here are meant to point out the database angle regarding Microsoft's acquisitions of Great Plains and Navision)
The Technology/Channel/Europe/Talent Angles
However, Microsoft’s benefits in acquiring Great Plains and Navision are not limited to marketing advantages and database leverage, there are many more benefits as follows:
There are many good reasons for Microsoft to acquire these products and the resulting synergies will help all product lines grow stronger. However, if you had to nail me down on the key motivation behind these acquisitions, my best guess would be that it is more about a database play than any other factor, followed by a marketing strategy, and ending with a diversifying foray into a new and important market.
Future For Great Plains and Navision Applications
The key question on everyone's mind is whether or not the acquisition by Microsoft will help or hurt these products in the future. While speculation has been rampant in regards to this question, after attending the conference I am confident that the Great Plains, Solomon, Axapta and Navision products will be by far superior in the years ahead as a result of the Microsoft acquisition. Ultimately the winners will be the customers of these products.
I hope you find this opinion/editorial piece interesting. If you have comments to add or offer, please do so below. Disclosure Comment: I should point out that I do own Microsoft Stock, therefore I have a vested interest in seeing Microsoft succeed. Thank you.
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