June has been a tough month for sports gamblers. In different ways stalwarts such as Argentina’s national soccer team and upstarts like the NHL’s Carolina Hurricanes, to name two, have drained dollars from our pockets.
Such are the lessons to keep in mind for those looking to place bets on what’s shaping up to be a grudge match in the IT industry. Odds are now being calculated for what seems to be Microsoft Corp.’s plan to take a run at the enterprise resource planning (ERP) software market. Rumours that the folks in Redmond were eyeing the space in a serious way began last year when the company dropped US$1.1 billion for Fargo, N.D.-based Great Plains Software Inc. And if there were any lingering doubts, they were wiped out last month when Microsoft acquired Danish business software maker Navision A/S for US$1.3 billion.
The move follows earlier announcements that Microsoft will ship an enterprise-class version of its Project program and, at some point in the future, a customer relationship management product.
Those acquisitions, plus the words of Dennis Byron, vice-president of IDC’s enterprise applications research in Framingham, Mass., as quoted in a recent IDG News Service story, aren’t likely to help executives working among the “Big 5” ERP vendors – SAP, Oracle, J.D. Edwards, Baan and PeopleSoft, known collectively as JBOPS – sleep any better. “(The Navision buy) could attract thousands of developers to develop very industry-specific niche stuff to add on to whatever it is Microsoft will come up with. This would be a huge benefit to users – it could result in providing the market with its first price break in years,” Byron said.
So the big question is, does Microsoft really have what it takes to storm the mid-market ERP space?
First, let’s look at what the company has going in its favour. This may come as a surprise to some, but Microsoft is already the world’s fourth-largest seller of ERP software, albeit mostly to small companies.
Second, Microsoft has a lot of mindshare and expertise in the mid-market. To varying degrees of success, most of the JBOPS players have been angling to get into the market for years. But none have anything akin to Microsoft’s substantial roots in the middle tier.
Third, given that it’s coming to the mid-market space from the bottom, and not the top, Microsoft is better positioned to offer companies less expensive, easier to customize solutions than, say, a Tier 1 vendor, which would have to strip down its monolithic software suite. And whether it’s justified or not, the perception among many mid-market customers is that software from Tier 1 vendors is far too complex and expensive.
And then, of course, there’s the Microsoft mystique – to put it simply, would you be willing to write Gates off entirely, regardless of the venture?
On the negative site, even without a major ERP play, Gates is dipping his company’s toes in an awful lot of pools. “Microsoft has a lot of things to worry about and it is getting spread very thin,” said Charles Homs, senior analyst for Forrester Research in Amsterdam, quoted in a recent IDG News Service story. And invading JBOPS turf is going to take a large, concentrated effort. Microsoft has a lot of work ahead in order to integrate Navision’s family of software into its own offerings – the results of which aren’t likely to be seen anytime soon. Even if such products were available tomorrow, it will take time for Microsoft to build up its credibility in this area.
That said, there’s no doubt in my mind that a serious effort on the part of Microsoft to crack the midsize ERP nut is going to put pressure on JBOPS’ relationship with its low-end customers. That should translate into more competition and lower prices – good news for Canadian customers.
But I wouldn’t stake my salary on the likelihood of Microsoft seriously upsetting JBOPS marketshare anytime soon. It will likely find most of its success among small businesses, while a renewed focus among the Tier 1 players to solidify the mid-market before Microsoft does will prompt customers to opt for their undeniable experience and expertise.
Then again, I also thought the 2002 World Cup belonged to Argentina.
