InformationWeek

Microsoft paid $1.5 billion in stock for Visio, a leading supplier of software for plotting flow charts, organizational charts, computer network diagrams, and other professional drawings. Visio has stayed clear of the market for computer-aided-design software controlled by the likes of AutoDesk Inc., choosing instead to build an installed base of more than 3 million IT and general business "power users" who regularly draw on the job.

Nearly all those users also own Microsoft Office, according to the vendors; now, Microsoft and Visio seek to increase sales of the Visio 2000 application through license agreements while tightening an already close technical relationship between the two products. Customers could end up reaping the benefits.

"Microsoft had no fully featured, component-based drawing tool-PowerPoint isn't it," says John Dunkle, president of market research firm Workgroup Strategic Services. Microsoft estimates some 34 million Windows users require professional drawing tools at work. Those who aren't running Visio use "anything and everything" instead, Dunkle says, including the simple drawing tools in Word and PowerPoint-none of which were designed for technical use, he says.

In recent months, Visio has been dogged by the same problem that faced Microsoft's Project software, which also targets high-level "knowledge workers": Microsoft was having trouble demonstrating the product's value to customers. "We weren't focused on that market," says Morris Beton, general manager for marketing in Microsoft's newly created business tools division.

So Microsoft group VP Bob Muglia, who oversees the company's knowledge-worker products-including Office, Exchange, and the Back- Office suite-abolished the Visio division and in March created the business tools division, which also includes Project and Microsoft's PhotoDraw software.

Beton says Visio was always "a showcase example of a Windows-compatible application"-the product's look and feel resembles Office, and Visio's component model lets Office users easily embed drawings into their Office documents via drag-and-drop capabilities. For the first two months of Visio's life as a Microsoft product, it generated "a fair amount of revenue without a tremendous amount of attention," Beton says.

A Microsoft spokesman says the vendor is now educating its sales force about how to pitch Visio and Project as add-on tools to Office that can enhance the suite's usefulness. And Microsoft will sell Visio as a standalone application, not as a component of Office. "Visio would get diluted there," Beton says.

More important, Microsoft plans technical updates to Visio in the next release, due next year, that incorporate Web services. For example, many IT managers already use Visio to automatically discover and diagram the computers and communications equipment on their network.

Visio 2000 includes vendor-supplied templates that illustrate the panel of a Cisco router, for example. Under development is a feature-arguably a "next-generation Windows service"-that lets Visio users tap a database of networking gear on the Internet from within their local application.