Microsoft To Clarify Business-Applications Strategy

Microsoft's business-applications division on Wednesday will attempt to clarify a product strategy that company officials worry has become confusing to some customers. Microsoft Business Solutions will outline plans to upgrade each of its four major software suites and introduce five principles intended to guide the development of current and future products.

The unit has grown quickly over the past few years, following Microsoft's acquisition of Great Plains Software in 2000 and Denmark-based Navision in 2002. As a result of those two deals, Microsoft ended up with four suites for enterprise resource planning: the Axapta, Great Plains, Navision, and Solomon lines. Microsoft Business Solutions grew 21%, to $471 million, in the first nine months of fiscal 2004.

But Microsoft's applications strategy has gotten muddled in the process. Some customers are unclear on how the four suites are different, and the company didn't help matters by revealing June 7 that it recently held preliminary merger talks with applications market leader SAP. In addition, Microsoft engineers are knee deep in a long-term development project to create a next-generation ERP suite code-named Green.

With merger talks behind it and next-generation products well into the future, Microsoft wants to put the focus on the investments it's making in its current applications. Over the next 12 months, Microsoft plans major upgrades to its Great Plains, Solomon, Navision, and Axapta applications, in that order.

The company also wants to reiterate that its development and marketing efforts are targeted at the needs of small and midsize businesses. "We've been doubling down on that," says Satya Nadella, corporate VP at Microsoft Business Solutions.

Great Plains 8.0, scheduled for availability this month, will come with dozens of new features and enhancements. The suite will adopt some of the look and feel of Microsoft's Office desktop applications and better integration with those apps, making it easier for workers to switch back and forth between the two environments. New information-tracking tools will make it possible to drill down into historical supply-chain and financial information, and user-generated reports can be distributed in a wider variety of ways. "One of the first things we hear customers say is, 'I want to generate this report, and I don't know where to start,'" says Nadella.

Many of the improvements are manifestations of Microsoft Business Solutions' five design principles: lowest total cost of ownership, business connectivity, data access and analysis capabilities for decision-making insight, features that "empower users," and an ability to adapt to different business processes.

The last of these principles, adaptable processes, is the "Holy Grail" in establishing a more flexible application infrastructure, Nadella says. 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 suites. "What you need is an upgradeable and customizable system. Today, it's either/or," Nadella says.

Those concepts best describe the thinking behind Microsoft's next-generation Green application suite, which is being written from scratch using Microsoft's own programming languages and APIs. Forrester Research analyst Paul Hamerman calls the Green development project a "very ambitious" and "well thought-out" plan.

But Green is timed to arrive with Microsoft's Longhorn server operating system in 2007, or possibly sometime after that, in order to integrate closely with a software layer in Longhorn called the Microsoft Business Framework that will provide a common set of software services to Microsoft and third-party programmers. In the meantime, Great Plains 8.0 will come with many built-in improvements for a variety of business processes such as a graphical bill of materials for manufacturing companies and "blanket" purchase orders for use in distribution environments.

Rich Powers, director of advanced technologies and architecture at chemical manufacturer FMC Corp., which uses SAP's ERP applications, says getting applications to align with business processes is one of the hardest challenges for any IT organization. "Business processes are hard, they're tough, they're brutal," Powers says. "That's the thing that drove our complexity. It's an area [Microsoft is] going to have to be able to deal with."

In July, Microsoft Business Solutions plans to deliver Solomon 6.0. Microsoft positions the Solomon suite as being especially well suited for financial management, project management, accounting, and distribution scenarios. The upgrade will include new capabilities in each of those areas, user-interface improvements, integration with Microsoft's Business Portal 2.5, and an error-reporting capability similar to what's available in Windows.

Next, the Microsoft unit is preparing upgrades to its Navision and Axapta applications. Navision 4.0 is slated for availability in the second half of 2004 and Axapta 4.0 in the first half of 2005. Microsoft describes the Navision apps as being particularly well suited for financial management among "lower midmarket to midmarket" companies and the Axapta software as being for advanced manufacturing and supply-chain needs of midsize and divisions of large companies.

With this week's announcement, Microsoft wants to demonstrate that some of the design goals for its still-in-development Green applications will surface in nearer-term products, albeit in scaled-back fashion. "Each of our product releases in the coming year will have proof points," says Nadella.

In a signal that Microsoft Business Solutions is becoming more central to the company's overall strategy, Microsoft recently realigned its management structure. Doug Burgum, the senior VP in charge of the division, now reports directly to CEO Steve Ballmer. And Orlando Ayala, the senior VP in charge of Microsoft's small and midsize marketing team, took on the added role as chief operating officer of Microsoft Business Solutions.