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9/22/2009
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Microsoft Acquires Midmarket ERP Products

The software giant wants to pick up divisional business from large companies standardized on Oracle or SAP ERP.

Microsoft, which has built a mid-market ERP software business based on acquisitions, is at it again.

The company announced Tuesday the acquisition of industry-specific products from four smaller ERP vendors. The products are to be folded into the Microsoft Dynamics AX suite. Microsoft is hoping the acquisitions will help it pick up divisional business from large companies standardized on Oracle or SAP ERP.

The software giant acquired process manufacturing software from Fullscope, professional services software from Computer Generated Solutions, and retail software from LS Retail and To-Increase Denmark. Financial terms of the deals weren't disclosed, yet those companies will continue to build smaller add-on applications, as Microsoft partners, to the core apps they've sold to Microsoft, said Kees Hertogh, director of product management for Microsoft Dynamics AX.

Development of the AX suite derives from the 2002 acquisition of Navision; the product is designed for the upper end of the midmarket, typically companies with several thousand or more employees.

"In the midmarket customers are not buying generic ERP anymore; they really want vertical ERP solutions," Hertogh said. But Microsoft also wants to make its AX offering more attractive to big, multinational companies with a "two-tiered ERP strategy," where they might have a central SAP or Oracle system but are looking for an alternative for subsidiaries and divisions. Potentially lower software maintenance costs than SAP or Oracle could be one motivator, he suggested.

While the vertical strategy of Dynamics AX isn't new, the large influx of partner involvement has made it an unwieldy one for Microsoft. The product, based on Navision's Axapta software, has done well in the midmarket under Microsoft; it was the only product to be ranked as a leader in Gartner's "Magic Quadrant for Midmarket and Tier 2-Oriented ERP for Product-Centric Companies," released in June.

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