But that may change this year as Microsoft rolls out its new generation of business applications.
Grouped under the Microsoft Business Solutions brand, customers can expect a stream of releases over the next six to 24 months. These are expected to include customer management, supply chain, professional services, human resources and business intelligence applications. While this strategy will provide competition for mid-range vendors, it poses many questions.
When Microsoft acquired Navision/Damgaard in July 2002 there was an outcry from Sage who tried to persuade European regulators that it posed a competitive risk. In a move some saw as the pot calling the kettle black, Sage argued Microsoft would use its position to create a monopoly.
Others drew attention to the confusion created by the acquisition. They argued that since Microsoft owned Great Plains and Solomon Software, customers would not be able to distinguish which product provided the best solution to their business problems. That could be regarded as a tacit admission that product development in accounting software has slowed and a recognition that it is difficult for customers to choose on the basis of a feature/function comparison. Microsoft has remained largely tight-lipped, but that is changing.
Simon Edwards, UK director of MBS, is clear about the company’s direction: ‘We’re adopting a surround strategy where new products will “surround” the existing. Customers using Navision, Great Plains etc can expect to see us expand functionality across all products and contrary to what some might think, wherever those products are supported, that will continue.’ But this presents Microsoft with a development migraine.
The Navision and Great Plains products use their own proprietary development tools that are not consistent with Microsoft’s development strategy. Damgaard products, while remaining a blip on the competitive landscape are closer to Microsoft’s.NET development mantra. But the applications market is littered with the corpses of developers that struggled to move products onto new technologies.
JD Edwards took five years to get it right, Oracle faced the wrath of its user base when it switched technologies, Systems Union failed and even the mighty SAP gave up trying to unbundle its applications after nearly five years of effort.
As technology changes, products have to be integrated back to older ones or older ones redesigned to fit new technology. This is technically difficult because about 80% of product development centres on the internal workings of the software and not the features the user sees.
Adrian Jones, financial controller at Corgi, found Pegasus Opera couldn’t provide him with the control required to manage sales margins. ‘I used to have credibility problems,’ he admits. Part of the difficulty lay in the lack of analysis available from Opera and other issues in reconciling stock. That changed when Corgi switched to Damgaard’s Axapta: ‘Now the sales teams can’t absorb all the information we throw at them and we have good warehouse control.’
Crawford Fisher, financial controller at Steel and Alloy Processing, a supplier to the automotive sector, was in a similar position with its Tetra 2000 and bespoke manufacturing products. ‘We needed to transition to a fully-integrated solution,’ he says. The overall cost of his Navision solution was £400,000. He believes the investment was worthwhile: ‘Our project has allowed us to achieve things not possible in the past.’
In both cases, some bespoke work was conducted by resellers. This is where value is added to the product, but equally is the area that causes the most grief when there’s a technology change as the bespoke parts are rarely carried into new product without a degree of recoding.
Andy Smith, MBS integration manager, admits: ‘No-one has managed to fully redevelop products.’ But he says Microsoft’s new products will integrate with existing ones. ‘We’re working with both current and next generation products and supporting all development environments for the time being. From a customer’s perspective, they can migrate at a point which suits them,’ he adds.
It appears Microsoft is integrating the easy stuff, like Outlook, to its forthcoming customer management solution. This is due for release in the UK this summer. Dean Carroll, head of MBS’s business development strategy says: ‘Globally, Microsoft wants to grow Business Solutions to $10bn (£6.25bn) in revenue over eight years. In the UK, that will represent $500m.’ At present the estimated UK revenues are closer to $25-27m so the target is nothing if not ambitious.
JD Edwards, which turns over around $900m has around 1,250 developers, while SAP with a $6.4bn turnover has 7,800. Microsoft argues it will develop generically and expect the reseller channel along with independent software vendors like Deloitte & Touche and KPMG to undertake the vertical market and bespoke work.
But the channel has other concerns. Nick Richards, head of sales and marketing at MBS reseller Sytation, says: ‘As a Great Plains reseller, we fight tooth and nail with Navision shops. I’m not sure that changes. Why should Microsoft care – it still gets the licence income?’
Along with other resellers, there is concern about which product brands take precedence. This is not going away for the time being because Microsoft is keeping the individual brand names, albeit prefixed by the MBS moniker.
Also, there is deep suspicion about how Microsoft will manage lead generation.
‘How can it qualify an enquiry if it doesn’t know where the expertise lies?’ says Richards. The company is addressing this area by focusing on channel communications. But the channel is unhappy about Microsoft’s stated aim of increasing the reseller base. ‘We can’t get there without expanding this,’ says Carroll.
David Rankin of Tenon is taking a mixed product view, having been recruited to the Exchequer channel alongside selling Great Plains. He sums up the general sense among resellers: ‘It will create a lot of tiny shops with little real expertise.’
Others, like Aston, offer all MBS products but most are single product resellers who are reluctant to train staff on products where they are nervous about future support. It takes around a year to create the expertise to go to market and the current near-zero growth in the applications market is seen as a disincentive to invest now.
Microsoft says it will develop for retail, professional services, manufacture and wholesale distribution markets though its focus will be on broad-based modules developers can incorporate into their own offerings. This may mean customers won’t ‘buy’ a Navision or Great Plains but take functionality that sits inside a business-focused application. ‘Customers need to be innovative and we provide them with the widest choice,’ says Aruna Carver, MBS marketing manager.
Talking to customers and resellers, it is clear there are two distinct views. While resellers are concerned about a range of issues, users are oblivious or ambivalent to Microsoft. Summing up opinion, Fisher says: Maybe we’ll come to see software as an expense.’
That would suit Microsoft fine. The end game is one where it sees a continuing stream of royalties as the mainstay of its business model.
WHAT SHOULD CUSTOMERS DO?
This is a year where Microsoft can afford to spend as much as it chooses developing rather than marketing.
Given the current lack of appetite for buying software should customers adopt a ‘wait and see’ approach or should they press ahead with their buying decisions?
Industry pundits like Dennis Keeling, chairman of BASDA, say: ‘No-one’s keen to buy, and that suits Microsoft very well.’ ‘Not so’ say Microsoft insiders who are keen to gain market share.
Those who already have exposure to the products are pressing ahead with more development. Resellers are caught in the middle and customers trust them.
Resellers are struggling because Microsoft has yet to fully reveal its product delivery timeline. More important, it must deliver on its promise of new software to complement existing products and that has yet to happen.
In the meantime, competitors are furiously developing tightly focused vertical market products in an effort to stave off what will eventually become an avalanche of competitively priced products from Microsoft.
Barclays has partnered with accounting software company Xero to provide businesses with access to transaction data through its direct feed.
Government's estimate of a £400m admin saving from Making Tax Digital is way off - and is instead a huge cost burden, warns Lamont Pridmore chief executive Graham Lamont
Xero unveiled its expanded global partner programme at Xerocon South, the accounting technology conference in Australasia
Accountancy software firm Sage has been hit by a data breach which may have compromised the personal details and bank account details of as many as 300 UK businesses