Two years and more than $2 billion after Microsoft bought its way into the business-applications market, the company's Business Solutions division is a money loser. Yet Microsoft officials remain doggedly upbeat about the direction of a unit that increasingly will compete with Oracle, PeopleSoft, and SAP in a software sector that's been dragging. Why? The answer involves a little-known initiative called Project Green.
As Microsoft looks for avenues of growth beyond its maturing Windows and Office lines, business applications may represent one of its best opportunities. Senior VP Orlando Ayala was recently quoted in The New York Times as saying that run-your-company applications could become a $10 billion business for Microsoft. Business Solutions, the Microsoft unit that sells business applications, generated $567 million in revenue in fiscal 2003, an 84% increase over the previous year. The jump reflects last year's acquisition of European software company Navision.
A large and growing percentage of Business Solutions' developers are quietly working on a suite of enterprise applications intended to integrate tightly with Microsoft's next-generation desktop and server software. Project Green is "very ambitious," says Paul Hamerman, a Giga Information Group analyst. "They've crafted a strategy to integrate the entire Microsoft stack, from back-end systems and operating systems to the Office applications."
To some, the whole undertaking may seem counterintuitive. Why write new financial, human-resources, distribution, and other enterprise-resource-planning modules when Microsoft already has four suites of applications that support many of the same functions? That's right. When Microsoft purchased Great Plains in 2001, it also got the applications of Solomon Software, a company Great Plains bought earlier. And when Microsoft acquired Navision last year, the deal included ERP software from Axapta, which Navision had previously snapped up. The result: Microsoft found itself with four sets of business applications to sell--and support.
By next year, most Business Solutions' developers will focus on new products, VP Nadella says
A product road map released earlier this year calls for the Green applications to begin appearing in 2005, but that date could slip because the apps are being developed in parallel with Microsoft's next-generation operating system, known as Longhorn. "Think of us as being aligned with Longhorn," Nadella says. Microsoft hasn't given a target date for Longhorn, but some analysts have speculated it won't arrive until 2006. In the meantime, Microsoft is working on technologies related to the Green applications.
The rationale for Project Green is that, in order to get the kind of deep and wide integration that increasingly defines all Microsoft software, the company had to write applications using its own programming languages, development tools, and APIs. Originally developed outside of Microsoft, the Axapta, Great Plains, Navision, and Solomon applications were written in a variety of languages using different programming tools, and they run on disparate operating systems and databases.
New product development at Business Solutions is being driven by what Nadella refers to as five "transformational" underpinnings. One is the goal of a single, integrated set of applications built on a common code base. Closely related to that is the belief that employee productivity can be increased by creating better synergies between those integrated business applications, where transactions are handled, and Microsoft's widely used Office desktop applications, where much content is created. "There's huge opportunity to define business processes more holistically and correlate information creation with transactional business processes," Nadella says.
A third design point is to help companies further automate their business-to-business processes and supply chains. The fourth is to make it easy to customize these next-generation IT environments, and fifth, letting independent software vendors layer their own applications on top of it all. The software being developed as part of Project Green, Nadella says, "allows us to achieve those five transformational changes in a much more powerful way than we can with the current generation platforms."