Microsoft eyes up midmarket options

Microsoft is looking to increase desktop presence in medium-sized businesses. Established players in the field aren't overly concerned, though
Written by Sylvia Carr, Contributor

Microsoft is spearheading a fresh effort to win over UK mid-sized businesses as customers for its business applications.

Simon Hughes, head of mid-markets for Microsoft in the UK, said that while Microsoft has had success with the smallest firms (fewer than 25 people) it recognises it could do better in the mid-market (which it defines as 25 to 1,000 employees). The software giant will be using research and increased investment "to do a better job helping mid-sized companies learn where our technology and solutions meet their needs", he said.

The first part of the plan is to augment and raise the profile of its Web site for UK businesses, according to Hughes. The site will educate companies about Microsoft products and can help with tasks such as calculating total cost of ownership of Microsoft products, viewing all Microsoft licences and making contact with the company directly.

Microsoft is also forming a new customer support team in its Reading offices and a new tech support service -- both aimed specifically at mid-sized companies.

Redmond's interest in the market is no surprise. According to analyst house IDC, IT spending for mid-sized firms of 100 to 499 employees is outpacing the average for companies of all sizes and IDC predicts that small and mid-sized businesses with up to 499 employees will make up around half of IT spending in Western Europe from 2004 through 2008.

Hughes called mid-sized companies "the engine of the UK economy", citing research from Microsoft and Burlington Consultants which showed that while mid-sized companies account for less than 10 percent of total companies in the UK, they employ 30 percent of the people and account for 37 percent of total turnover.

But what are Microsoft's chances at wooing this market?

According to recent research from The Bathwick Group and ZDNet UK sister site silicon.com, Microsoft came in a poor seventh out of 12 in a ranking of which IT vendors SMEs trusted most for buying advice.

Microsoft's Hughes said in response to this: "It may be large brands are not as trusted nowadays by small organisations as they used to be." He said Microsoft plans to work alongside partners such as service providers which already have a trusted relationship with mid-sized firms.

Bertrand Sciard, CEO of Intentia, a Swedish ERP vendor aimed at the mid-market, agrees this would be a good strategy for Microsoft. "The way they want to approach this market, the only way is to go through strong partners," he said. "But how can you attract good partners?"

Intentia is likely to be competing more directly with Microsoft now that Microsoft is pushing for the mid-market and the Swedish company aims to grow its presence in the US market. Currently about 80 percent of Intentia's business comes from Europe, with 15 percent from Asia and just five percent in the US.

The difficulty with Microsoft finding solid mid-market partners lies with the fact that, according to Sciard, mid-sized companies want products that meet their needs out-of-the-box and don't need customisation -- which usually means a vertical-specific solution.

Microsoft's products, however, are "vanilla" solutions, he said. Microsoft wants its service provider partners to adapt products for the vertical market, Sciard explained, but the partners do not want to do this. "The partners say 'no way' -- we're not software developers, we're service providers."

Despite this conflict with partners, Sciard would not underestimate Microsoft's brand and marketing muscle as an asset in entering the mid-market.

"Microsoft's [business applications] technology is far from being best in class but the fact they have a big name... and marketing machine behind them could make them successful in the market," he said.

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