Is Microsoft the dark horse of biz apps?

The software giant is quietly pulling punches as SAP and Oracle take stabs at each other. Who will emerge victorious?
Written by Aaron Tan, Contributor

While the industry has its eyes on the SAP-Oracle rivalry in the business applications market, rising contender Microsoft may just be the one to watch out for in coming years.

According to John Young, Microsoft's Asia-Pacific solutions and services partner director, the software giant was last year one of the top five business applications vendors in the Asia-Pacific region, excluding Japan. When contacted, IDC Asia-Pacific verified Young's claim.

However, unlike its enterprise applications rivals, Microsoft is focused on the mid-market, Young told ZDNet Asia. He added that the company has over 5,000 ERP customers in the Asia-Pacific region.

"We really see the mid-market [as having] the greatest opportunity," he said. "Although estimates may vary, 37 percent of midsize businesses today use ERP."

IDC indicated that the Asia-Pacific applications market was worth US$1.06 billion in 2004, and is expected to grow steadily at a five-year compound annual growth rate (CAGR) of 13.2 percent, reaching US$1.97 billion by 2009.

While SAP and Oracle would each claim it has market leadership in the enterprise space, Young noted that their products are usually built around large and high-cost ERP implementations. Both vendors however, have previously launched efforts aimed at the lucrative mid-market with scaled-down versions of enterprise products.

Microsoft remains unfazed.

"We are already successful in the mid-market in the region today," Young said. "We are well-established in Australia and New Zealand, as well as key markets in Southeast Asia including Singapore, Thailand, Indonesia, Philippines and Malaysia."

To beef up its business applications portfolio, Microsoft has acquired several ERP products in the past five years--Great Plains (GP), Axapta, Navision and Soloman. Products from the four vendors would eventually be superseded by the software giant's ambitious Project Green, which will showcase next-generation ERP products in 2008.

According to Young, Project Green involves two phases which will see Microsoft working on a common interface that cuts across the four ERP suites, before merging their software codes in future iterations of the company's business applications.

Already, bits and pieces of the project have started to emerge. Last September, Microsoft rebranded its four ERP suites into a single product line called Dynamics.

Subsequently in December 2005, the software giant unveiled its Dynamics GP 9.0 with features that included customized desktops and business reports based on the jobs of particular users. The ERP product also ties into e-mail and calendar information from Microsoft Outlook.

Alan Tong, research manager for enterprise applications at IDC Asia-Pacific, was reserved in his evaluation of the link that has been established between Microsoft's business applications and the company's office productivity applications.

Tong said: "The business process fits and industry best practices are important elements when selecting a solution. Being tightly integrated to Outlook may be of secondary priority. Microsoft will still have to prove to customers that its Dynamics solution fit their requirements."

Young agreed that incorporating effective business processes management would be crucial to the success of any ERP product.

"Businesses change all the time on a biannual basis," he explained. "When that happens, the business systems need to change to reflect the different roles and functions in the company."

He added that Microsoft will eventually include workflow tools and model-driven development capabilities, to create flexible business processes in its next-generation business applications.

Meanwhile, Singapore-based logistics and transportation company C&P Holdings has approached the software giant in a bid to become more efficient.

According to Mark Lui, the company’s business process and technology manager, Microsoft Navision has allowed him to streamline operations by eliminating double entry of data into previously disparate systems from multiple vendors.

The improved efficiency has also shortened the company's financial reporting period from two months to just 15 days, he added.

Moving on-demand
With the popularity of the on-demand model, where business software is delivered over the Internet, it is hardly surprising that Microsoft is making a dash for this market segment as well.

Last December, the company unveiled its Dynamics CRM 3.0 that lets companies track and manage customer information. It includes marketing management and service scheduling capabilities, along with tight integration with Microsoft Office.

The Web-based version of Dynamics CRM 3.0 pits Microsoft against on-demand CRM pioneer Salesforce.com, as well as Oracle and more recently, SAP.

IDC's Tong said: "The software-as-a-service business model is certainly gaining more awareness in the technology-matured countries, and the room is slowly becoming crowded.

"The market opportunity will be restricted to the SMB (small and midsize business) segment and Microsoft will be just another player in market."

Tong also noted that the quality of Microsoft's partners who provide the hosting service will be critical, in ensuring non-disruptive and consistent services are offered to on-demand subscribers.

"The partners will need to prove their experience and expertise in hosting service and also the reliability of [Microsoft's] solution," he said.

In addition, he said, partnerships with global independent software vendors (ISVs) such as Avaya and Genesys, would add value to Microsoft CRM as these vendors incorporate Microsoft functionalities into their own contact center offerings.

However, analyst firm Garter noted that Microsoft's own business applications products might compete with at least 30 percent of vendors that develop rival products on the .NET platform. Some of these vendors could very well be Microsoft's software partners.

"Revenue from the ISV community is at risk, including ERP vendors that have converted their products to [Microsoft] .NET or are contemplating doing so," Gartner said in a report published in May 2003. It also noted that most of these ISVs are Microsoft's competitors such as Epicor and Mapics.

While Young agreed that a lot of ISVs were nervous that Microsoft would cut them out, he argued that their worries were unfounded.

"We work very closely with a large number of ISVs across the Dynamics platform because they are crucial in developing customized applications for specific markets," he said.

He added that in most cases, Microsoft only provides the backend infrastructure so ISVs can focus their research and development efforts to ensure their own products are different and competitive.

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