Microsoft, the largest software company on the planet, is expected next week to announce that it is acquiring Danish mid market enterprise software vendor Navision for $1.2 billion. If the deal goes ahead, it will be the second major ERP purchase for Microsoft – the last being that of Navision competitor Great Plains in April 2001. There is considerable logic in the purchase. Great Plains in the US serves the SME business sector well, but has achieved little penetration over here. Navision, however, now almost entirely Microsoft-centric anyway, is on a very strong growth curve throughout Europe, but has failed to make the grade in the US, despite seven years of trying. There will be issues around application support, integration and the rest in the longer term, but with two quite different markets being served from one technology base under one company an avowed aim of dominating SME enterprise software in business and industry with Microsoft Office-like ‘commodity’ software could be achievable. Beyond this, Microsoft is reported as sitting on a $39 billion cash mountain; and its issues with the US Department of Justice are looking a lot more predictable. Other purchases have been much smaller, focused on technology or market acquisitions, apart from its stakes in telecoms firms. Now seems like a good time to move on. For competitors like Sage and SAP, at opposite ends of the ERP vendor community market, the folding of Navision into Microsoft will come as a blow. Navision, which includes formerly competitor Damgaard since the merger a little over a year ago, was already a healthy adversary. Navision published 2001 global revenues (to June 30 2001) as £124 million and net income at £13 million. Its forecast for this year is £146.3 million, with net income at £15 million. With Microsoft in the driving seat, this is likely to be revised up. Certainly, the markets think so – Navision’s shares rose 21% on initial reports of the news. Sage, although also bucking the trend of IT industry downturn and reporting a 16% increase in operating profits for its first half with considerable new sales into its extensive customer base, will have to fight harder to repeat the performance. For SAP, with its aspirations for growth among SMEs clearly stated, and then restated following its purchase of Israeli software firm TopManage Financial Solutions, again the acquisition will make realisation of its dream that much tougher. There are also relationship issues to sort out. Both Sage and SAP, like many throughout the ERP vendor community are Microsoft partners, as indeed has Navision been until now. Navision also has a global alliance with IBM to provide implementation and support services, eventually around the world. As part of that deal, Navision is being ported to the IBM iSeries (formerly AS/400), with general release scheduled for Q2 2002. But there is a world of difference between partnering and owning, which may lead to discomfort for the vendors and polarising views for potential manufacturing users. On the one hand there is strength in Great Plains’ current assertion that direct and favoured access to all Microsoft’s technology both safeguards and advantages its users. Although little has happened with Great Plains in the UK and Europe so far – manufacturing businesses are still awaiting the first fruits of a close alliance with Great Plains VAR Syscom – the same is not the case in the US. There, the injection of Microsoft muscle, both technological and marketing, has catapulted the firm into the SME sector. On the other hand, others might be concerned about too much total reliance on one dominant software provider – particularly at a time when there is disquiet over Microsoft’ new license pricing model and freeware and other Microsoft alternatives are being sought.