SMEs to get lower cost standard ERP as Microsoft moves in

Small to mid size manufacturers (SMEs) can finally look forward to a de facto standard framework of enterprise software (ERP) modules and functionality, lower costs and compelling business IT – from Microsoft in its recently formed incarnation as Microsoft Business Solutions (MBS). The company, which bought US ERP software vendor Great Plains two years ago and completed its acquisition of European manufacturing ERP developer Navision (which had itself acquired Danish Damgaard) in July, says it intends to do for “collaborative productivity” what it’s already done for individual productivity with Microsoft Office. According to MBS managing director Simon Edwards, the vision is one of “the Microsoft .Net architecture with a business framework of Web Services and a business objects layer on top to connect businesses and enable collaboration computer to computer.” Pie in the sky? No: Edwards says it’s due at the end of 2003. That framework could signal significant change for manufacturing users and the independent ERP software vendors (ISVs) alike, as well as for MBS and Microsoft itself. Edwards points to the fact that in the smaller company range of SMEs, the market for ERP-like manufacturing business systems is fragmented, and not just in the UK. With the MBS framework covering “all of ERP except the presentation layer”, all that potentially changes overnight. Because crucially, Microsoft’s definition of ‘partner’ is rather different to that of any other ISV: most ERP ISVs are Microsoft ‘partners’ at one level or another. And for these ERP software providers Microsoft is effectively saying, ‘we’re building a framework and business objects to take care of the standard ERP stuff; why don’t you come on board and use that?’. As Edwards put it: “The world may look very different in five years. Part of this will be an adjustment of understanding of what being an ISV is.” And the clear proposition is that MBS will provide an ever increasing ERP modules ‘backbone’ upon which ISVs and its own ERP partner VARs can build their more advanced functionality. It’s not without precedent, but it moves the game up a significant notch to a point that will make some of the ISVs understandably uncomfortable. “We’d love them to use our applications, and we’re bringing out more next year that will add to the value,” says Edwards. And with Clyde Bennett, MBS manufacturing representative, talking up Theory of Constraints, lean thinking, Just in Time and the rest, this is serious. While Edwards claims the Microsoft party line of favouring competition – which to be fair makes some sense given the spectrum of industry-specifics and expertise – you have to question how long it will be before many ISVs morph into MBS VARs. “We’d love to have companies like that,” he says. “They can’t afford to keep up with technology anyway.” Fair point: contrast most SME software vendors’ R&D teams with MBS’ 1,800 developers. And, pride notwithstanding, there is sense in moving development expertise up the IT value chain to deliver more advanced industry-specific manufacturing and business functionality and solutions. It also fits with MBS and Microsoft’s strategy of channel partner building – in this case meaning also consultants, system implementors, integrators and the like – to ship software. Edwards makes it clear that Microsoft is determined to build what he terms “leadership share” with whoever the partners turn out to be, for itself and for business users. He also expects the resulting rate of change of functionality founded on standards, collaboration and connectivity to lead to a “huge new wave of IT uptake around 2008”. For now though, Edwards says Microsoft will continue to invest in all its existing ERP products (MBS Axapta, Navision (formerly Attain; both from the Navision camp) and Enterprise (Great Plains)) for SMEs, building enhanced manufacturing capability across all of them to support the global customer bases. He insists that existing partners will be supported by the Microsoft empire, while others are sought, following the familiar Navision approach of VARs and system implementers with regional coverage and industry-specific extensions. Then next year will see the arrival of MBS CRM (customer relationship management), the Common User Portal System (for browser-based any information, anywhere access) and its Unified Business Analytics Suite, with backwards compatibility to the existing MBS ERP suites. Beyond this, the next generation of unified business applications, built on and beyond the Navision and Great Plains foundations, is about three years away. Is the ERP acquisition trail over? Of course Edwards can’t speculate, although he does say: “We have no objective of building competing capability in the [bigger] enterprise sector. Our focus is on the SMEs space.” So who knows? It certainly doesn’t rule out acquisitions in the CAD/CAM, visualisation or PDM/PLM collaborative engineering development arena. Watch that space too.