Microsoft boosts solutions with Navision

Microsoft is reinforcing its business solutions division with the US$1.3 billion acquisition of mid-market ERP player Navision.

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By  Matthew Southwell Published  July 1, 2002

|~||~||~|Microsoft is reinforcing its business solutions division with the US$1.3 billion acquisition of mid-market ERP player Navision. The software giant plans to eventually merge Navision’s products with its current Great Plains line to enhance its offering to small and medium sized businesses (SMBs).

“The combined vision, business strategy and product offerings of Microsoft and Navision will provide great benefits to small and mid-market customers as well as creating a strong growth opportunity,” says Microsoft’s CEO Steve Ballmer.

“Many business processes in these companies [SMBs] are not yet benefiting from the efficiencies that technology offers. [Both] Microsoft and Navision’s teams are committed to delivering solutions to this important and large market segment, through our partners, that will enable businesses to be more competitive, agile and productive,” he adds.

According to Mohamad Jarrar, manager, small & medium business group, South Gulf Region, Microsoft, this is particularly true in the Middle East, where SMBs are still failing to see the value of IT investments.

“In this region, small businesses don’t see IT as a value investment. Hopefully, we will be able to provide solutions that help remedy this and show them the value of technology,” he says.

Regardless of Microsoft’s ambitious plans for its enterprise applications business, it will face significant challenges with the acquisition. In the short term, the software giant has to sort out its product marketing strategy and streamline its distribution channels.

“The differences in product technologies, culture and overlap in function will likely impair time to market of a combined Navision/Great Plains product,” states a Gartner Group report on the takeover.

Jarrar confirms that little information on how the two companies will be integrated has been received from Microsoft’s corporate headquarters as of yet. Part of the reason for this is that the deal is yet to be concluded, he says.

When the acquisition is complete and integration begins however, Jarrar explains that there will be no problems at the local level, as Navision does not have a regional presence.

“Navision does not have a presence in the Middle East region and we will see gradual integration into the global Microsoft team in the short to medium term. However, we still don’t have a clear view on how this will happen,” he says.

Gartner Group predicts that, through 2004, Microsoft will likely continue to sell and maintain both products as it looks to grow market share. Despite the potential post-merger indigestion that the integration of Great Plains products and Navision may cause, Gartner Group believes Microsoft is likely to emerge as the leading player in the mid-range enterprise resource planning (ERP) space.

“The purchases of Great Plains and Navision position Microsoft to dominate the ERP II market among small and mid-size businesses with annual revenue up to US$200 million,” states the Gartner Group report. Furthermore, the Navision acquisition is also predicted to put Microsoft’s business solutions division into direct competition with established ERP players, such as JD Edwards and Intentia.

“Depending on product investment and marketing strategy, Microsoft may eventually gain among enterprises traditionally targeted by larger competitors such as SAP and Oracle,” adds the report.

However, while Microsoft eyes up the larger enterprises, the established ERP vendors are begining to target the mid-market segment. Last year, JD Edwards tailored its advanced planning solutions for mid-market enterprises by offering them ‘one module at a time.’ Oracle also began to pursue a strategy of hosted SMB applications.

In addition, SAP has recently unveiled plans to service the SMB market through its Business One suite, a product based on the technology it inherited when it acquired financial solutions company Top Manage earlier in the year. Targeted at companies with between 10 and 250 employees, the Business One suite includes general ledger, sales, procurement, banking, inventory management, costing and some light CRM.

Due for release in Germany in the third quarter of this year, the timeline for its introduction into the Middle East is unclear. However, SAP Arabia, the ERP giant’s local distributor, says an announcement should be made about the time of Gitex.

Microsoft’s Jarrar is unconcerned by the large vendors’ movement towards the mid-market, as he believes Microsoft has both the installed base and partner channel to succeed within the Middle East.

“It is an open market and I think whoever gives the customer the best service and value will be the company that wins. Microsoft is already adding value to its [SMB] customers, especially in this region, where SMBs represent about 93% of the business community,” he says.

However, Sharon Ward, vice president of enterprise applications group at Hurwitz Group, believes the current mid-market vendors should beware of SAP.

“It’s not like SAP is actually a stranger to the mid-market... Despite the pervasive rumours to the contrary, SAP has ‘been there; done that’,” she says.

“SAP’s unparalleled understanding and mastery of business processes, combined with low fixed prices, and simple integrations will turn out to be a blockbuster. Dedicated mid-market vendors should be shaking in their shoes now that SAP has gotten serious about the mid-market,” she adds.||**||

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