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12:42 PM
Bob Evans
Bob Evans

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.

Some wonderful analyses of Microsoft and its future have been produced since the company and SAP told the world on June 7 that they had engaged in merger talks in 2003. But perhaps the definitive piece that sheds the greatest light on Microsoft's strategy, ambitions, and emergent capabilities was written a full week before the SAP buzz-maker by my colleague John Foley, who on May 31 wrote the following:

"What Microsoft is doing in health care is a sign of a major strategic shift, one that raises questions in other industries, as well. From the time it was founded 28 years ago, Microsoft's focus has been on the software that goes inside computers. Increasingly, however, the company is assessing the business processes of specific industries--and writing software products to support them."

So there are a couple of ways to look at this: Is Microsoft just trying to keep up with relatively new buzzwords, or has it hit on a strategy that will help define how IT stuff--particularly enterprise software--is going to be evaluated and purchased over the next decade? In the first alternative, we can cough up the common-wisdom Microsoft profile: always a technology follower, never a leader, but has bulldog tendency to spend billions on multiple versions until it gets it right, but by then the thing that's right is five years behind the times. This pooh-poohing perspective also would lead some to dismiss the business-process focus articulated by Foley as nothing more than one of Microsoft's myriad mediocre projects that it's willing to fund in the hope that one of them turns into something significant. But, this line of thinking goes, even if Microsoft gets it right, it won't amount to much because it's a PC-centric company and business-technology customers don't think it has enterprise-strength capabilities.

For myself, I would tend to categorize such analyses as falling somewhere between Dubious and Silly. I think what John Foley's piece captured was nothing less than the birth of Microsoft's next major mission, right up there on par with its now-legendary companywide shakeup 10 years ago to become Web- and Internet-centric. And I think those that fixate on the SAP discussions and on such questions as "Will Microsoft try to get deeper into the applications business?" are barking up the wrong tree--instead, the essential issue is this: in the coming decade, how will Microsoft increase its value and relevance to corporate customers? Enterprise apps will play a role in that effort, no doubt--but if that's as far as the answer goes, then we could conclude that Microsoft's plan is, like, really, soooo last decade! Instead, the high-value play will come in giving customers the ability to optimize their business processes , to change them as frequently and as radically as they need to, and to deploy them locally, nationally, or globally with no hitches in consistency or performance. The emphasis on business processes is a perfect play for Microsoft because it extends the company's expertise in infrastructure software while also paving the way for a powerful and seamless move into not just the midmarket application space but also the global-enterprise market.

And that's the brilliance behind John Foley's piece: Enterprise apps aren't the endgame for Microsoft--rather, they're table stakes. The biggest bets the company is making and will continue to make are right there in the excerpt from Foley: "Increasingly, however, the company is assessing the business processes of specific industries--and writing software products to support them."

For the past several years, Microsoft has had in place sales and marketing teams for some of its biggest vertical markets: financial services, communications, education, government, automotive, retail and hospitality, health care, manufacturing, and media. In this new business-process initiative, however, the company is going far beyond having a specialized sales force, Foley says:

"Now Microsoft is expanding the number of industries it targets, injecting industry-specific code directly into its core software platforms and hiring business-technology professionals steeped in [those sectors]....Microsoft engineers are creating software add-ons, called accelerators, aimed at business processes common to companies in a given industry. For financial-services companies, there's an accelerator to help with the trend toward straight-through processing, an automated means of moving a transaction through multiple stages. For health-care companies, there's an accelerator to facilitate information sharing using the Health Level 7 messaging standard."

In another effort to deepen its value in vertical sectors, Microsoft Business Solutions has begun inserting what it calls "industry-enabling layers" into its enterprise applications, with initial efforts aimed at such markets as nonprofits and schools, manufacturing, wholesale distribution, retail, and professional services.

On top of that, the Business Solutions group has highlighted its commitment to helping its customers optimize their business processes through a design principle that it says is "the Holy Grail" in establishing a more-flexible application infrastructure. Last week, Foley followed up on his original Microsoft analysis by showing how Microsoft plans to tie some of its core infrastructure products into this effort to give companies what they want most: more control over and flexibility within their business processes:

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