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6/18/2004
12:42 PM
Bob Evans
Bob Evans
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Business Technology: Beyond Microsoft's Business-Apps Play

Can Microsoft be a major player in the complex and sophisticated market for high-end enterprise applications? Bob Evans thinks Microsoft's recent and huge emphasis on weaving business-process expertise and flexibility into its code and its services is proof that the company has very ambitious plans in this $25 billion market.

"The problem today is that many business processes are supported by code that's written specifically for those processes. If the process changes, it can be time-consuming and expensive to rewire the application. To address that, Microsoft over time plans to introduce new workflow tools and model-driven programming capabilities for its [application] suites."

Most analyses of Microsoft's prospects in the enterprise-applications space have focused almost exclusively on the company's dalliance last year with SAP, and on its current focus on offering those applications to small and medium-sized businesses. And, to be sure, the revelation of the merger discussions does open up lots of room for fantasizing about what-ifs--could the intensely strong cultures of each company be integrated, could the combined company define a clear and consistent set of value propositions to customers, would customers look elsewhere out of concern that the New Microsoft was too big and too powerful? At the same time, there's no question that for all of its recent growth in the applications space, Microsoft's current product roster limits the company's reach into the lucrative sector of global corporations.

But the point people often overlook about Microsoft is that whatever the company "is" at any one moment in time isn't at all like what the company will be two or three years down the road. A few years ago, it had no ERP-type products; today, it's got sales of half a billion dollars and a pretty steep growth rate. A few years ago, it had only a smattering of vertical-market expertise in-house; today, it has hundreds of employees with domain expertise in specialized sectors. A few years ago, Microsoft lacked the underlying tools to attempt such a move; today, it has .Net and other development and integration technologies that give it at least a chance to convince large customers that it has the capabilities to scale with them. A few years ago, businesses of all sizes looked at Microsoft in precisely the way Microsoft defined itself: a platforms company that also happened to have a lock on the desktop-apps market; today, they see it as a serious applications player that in all likelihood will become much more serious.

So I don't think the issue is really whether Microsoft will continue its march into the enterprise application space--that deal was sealed a couple of years ago. Rather, the question is how--will it reopen discussions with SAP? Will it be the white knight for PeopleSoft, and counter Oracle's bid with an offer PeopleSoft's board and shareholders can't refuse? Will it continue to buy smaller players to complement its existing fleet--for example, last week two suppliers of enterprise apps for the retail sector with combined revenue of $340 million joined forces as JDA Software Group acquired QRS Corp. for more than $100 million. Or will Microsoft extend its shopping list outside of the software field and look to acquire a services company with deep industry expertise, such as Accenture ?

If this is a subject you'd like to know more about, here are some additional sources: our own Windows Tech Center, which includes links to all of John Foley's outstanding Microsoft coverage plus our Windows Enterprise Newsletter and our Windows Weblog; or TechWeb's Enterprise Apps Pipeline, featuring an InformationWeek story with a quote from SAP CEO Henning Kagermann saying he wouldn't be concerned even if Oracle succeeded in its bid to acquire PeopleSoft: "Honestly, if they were to become a really strong No. 2, then I could be concerned, but that is not the case"; or a recent New York Times interview with Kagermann where he leaves the door open to future discussions with Microsoft or even a rambling but occasionally interesting analysis from the Wharton Business School that has one professor concluding--quite bizarrely, some would say--that a benefit to SAP in being acquired by Microsoft would be that such a deal would "drive down some technology that SAP has to the consumer level, which is a market to which SAP simply cannot get access."

Think about it: R3 on the Xbox. Will wonders never cease?


To discuss this column with other readers, please visit Bob Evans's forum on the Listening Post.

To find out more about Bob Evans, please visit his page on the Listening Post.

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