Microsoft And Oracle Bicker Over Microsoft's Plans For Enterprise Market

Microsoft VP Douglas Burgum testified at the Oracle antitrust trial that his company has no plans to invade the enterprise applications market for big companies.
Microsoft held firm in its testimony that it has no plans to move its current enterprise application software products into Oracle's large enterprise space, despite Oracle's defense attorney holding up a number of Microsoft documents which outline the high-functioning product migrating into that market.

Government witness Douglas Burgum, a Microsoft senior VP, testifying Wednesday at the Oracle antitrust trial in its efforts to acquire rival PeopleSoft Inc., said industry reports that Microsoft is moving into large customer markets with its enterprise application products is "the most widely reported and consistently incorrectly reported" piece of information--information Oracle maintains is true.

Burgum, who heads the Microsoft Business Solutions group, said Project Green, Microsoft's code-name for enterprise application products, is focused solely on the core small business, low midmarket, and core midmarket, and that Microsoft is not targeting these products at the upper midmarket or large companies. These small and midsize customers have between 1,000 and 5,000 employees, between five to 250 PCs, and from $1,100 to $300,000 as their average IT spending.

"It's not our goal to be in that business We want to be technology innovators," Burgum said of the enterprise customer market. "We try to create incentives around short engagements and lots of customers." He added that Microsoft products aren't appropriate for large customers due to a gap in functionality, lack of direct sales force, and inadequate support staff.

During his cross examination late in the day at the U.S. District Court in San Francisco, Oracle attorney Daniel Wall showed the court Microsoft sales documents describing large-sized customers--with the customer names blacked out due to a sealed request. One such document had 150,000 employees and was seen as a potential customer of Microsoft's Axapta enterprise applications product.

Another Microsoft document submitted to the court by Wall titled Target Market outlined a technology footprint showing Microsoft's current go-to-market accounts, supporting smaller and midmarket customers, as well as a future technical and functional product design created to support upper midmarket and big customers. "As a result of this (design), the product you're going to have is going to be one designed with a state-of-the-art architecture for upper midmarket and corporate market," Wall pointed out.

However, Burgum replied that it will take until 2010 or 2011 to achieve that level of functionality, "We wanted to write it so it could be a path for our current generation of customers," he said.

Burgum, who was CEO and chairman of Great Plains Software before the company was acquired by Microsoft, said Microsoft doesn't even have a sales force to sell into large accounts. He testified that last year there were only a "handful of cases" where Microsoft was asked by a customer to be involved directly in a sales process for its "larger" customers. After a recent reorganization, Burgum now reports directly to Steve Ballmer, Microsoft's CEO.

Burgum testified that large customers requiring software that can handle multiple languages, currencies, sites, and countries were too complex for its product line. He called them multi, multi, multi, multi requirements, and added that "We can't meet all those needs."

Wall noted the apparent contradiction between this statement and a Microsoft product document called Axapta Technical Positioning, which outlined a number of high-level functions of the product. The document said it was capable of high-level scalability and included a three-tiered architecture for fast growth and expansion to support multicountry, multisite, multilanguage and multicurrency. "That's the multi, multi, multi; multi you were talking about?" Wall asked Burgum, who answered "Yes."

Earlier in the day, a witness who works for SAP testified that SAP would expect a "a hugely more competitive environment" in the United States if Oracle is allowed to buy out PeopleSoft.

Richard Knowles, SAP America's VP of North American operations, said the buyout would cause Oracle's U.S. market share to skyrocket to 38%, passing SAP's 34% hold on the U.S. market (these figures are based on Gartner research, an Oracle attorney later told InformationWeek).

"It will be highly more competitive for us to battle (Oracle) when you turn on the Oracle marketing machine, as we like to call it...c A database company is now in the applications business, and not only have they gained in the applications business, but they've taken a huge sales force to market, with commissions, so we'll see more sales people competing against us," Knowles said in an impassioned testimony. Nevertheless, he said, SAP remains neutral on the debate over whether the two companies should merge.

Oracle is attempting to convince the court that it's desperately trying to stay competitive with SAP, a $7 billion global software vendor, and others entering and gaining traction in the broad business-software market.

Knowles also testified that SAP's marketing mirrors that of Oracle in the high-function business-software market--namely that it looks at the entire enterprise software market, called enterprise application software, and doesn't narrowly focus on the ERP market, a subset of the EAS market. This has been a sticking point between Oracle and the Justice Department, which is trying to show that a merger between Oracle and PeopleSoft's ERP technology will leave customers with no other options because of the two companies' dominance in the ERP market, which includes HR and financial-management applications.

However, Oracle maintains that ERP is just one piece of its product and services lines. Oracle claims its covets PeopleSoft because it must keep up with competitors in the enterprise applications software market. This week, Oracle has been talking up (through witnesses and a white paper released to the media) Microsoft's strategy to move into this market since acquiring EAS players Great Plains and Navision within the last few years.

Knowles was asked to explain numerous documents displayed by Oracle which showed SAP sales personnel running into a number of competitors in their EAS bidding process, including not only Oracle and PeopleSoft, but IBM, Lawson, and even Microsoft. Further, year-end analysis commissioned by SAP reported that Microsoft is making healthy strides in the EAS market, and that SAP is losing market share in the portals segment to IBM.

One memo from SAP America CEO Bill McDermott began with "These guys are here!", indicating that Microsoft is making headway into SAP's niche.