TECH TALK: Rethinking Enterprise Software: Microsoft’s Forays

The recent purchase of European software maker Navision by Microsoft for USD 1.3 billion has focused the spotlight on software for small and medium enterprises (SMEs). Microsoft had earlier bought Great Plans, which primarily targets the US mid-market companies, for USD 1.1 billion just over a year ago. SMEs represent the next big opportunity for software companies. There are millions of them worldwide and many of them have just gotten started with using software for automating business processes. Between the consumer mass market and the large enterprises, SMEs represent a huge opportunity and one which has been largely untapped so far.

Microsoft hopes to use its mass market approach to software to do to SMEs what it has done to consumers and the corporates through MS-Windows and MS-Office offer integrated suites for low-prices. Write Aaron Ricadela and Jennifer Maselli in InformationWeek (May 20, 2002):

Microsoft wants to sell small and midsize companies low-cost, ready-to-assemble enterprise resource planning, supply-chain, financial, and other run-the-business applications. The blueprint calls for Web services to weave them all together. Not coincidentally, Microsoft’s Office XP desktop applications, Visual Studio.Net development tools, and Windows operating systems also are important elements.

Smaller businesses should snap up integrated applications for customer-facing and back-office operations in the same way they did Microsoft’s do-it-all desktop suite, chairman and chief software architect Bill Gates said in an interview with InformationWeek.

As Gates envisions the world, desktop and business applications will be woven together via Web services to let IT departments mix and match applications across networks, with less middleware, custom integration, and consulting work. Microsoft officials give the example of an Excel spreadsheet user accessing inventory data from a supplier’s remote server. This desktop-to-back office architecture, seamlessly linking people and systems within and across companies, will provide an IT backbone for collaborative business, Gates says. The linchpin will be XML, the development language and Web-services standard, incorporated in development tools, databases, and the apps themselves.
Microsoft is also working on its own CRM software suite, which is due out at the end of the year. It is expected to cost USD 500 per seat, one-tenth that of Siebel, according to Information Week. According to Aberdeen Group, less than 15% of the 5 million to 6 million U.S. companies with fewer than 500 computer users have CRM software installed.

Microsoft already has a great platform because of its MS-Office presence on most corporate desktops. It is also planning to make the next-generation version integrate with enterprise applications. In addition, according to, [Microsoft] is considering an optional subscription version tied to Web services based on Extensible Markup Language (XML). Those services, which could include some of the online calendaring and collaboration features envisioned for .Net My Services.

Microsofts entry has galvanised the mid-market enterprise software, especially in US and Europe. But there are problems with the approach being taken by enterprise software makers.

Tomorrow: The Problems

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Rajesh Jain

An Entrepreneur based in Mumbai, India.