This next year is going to be different.
What's different is Great Plains, which Microsoft bought last January for a modest $1.1 billion. It was, to put it simply, a masterstroke on the part of a company that I had more or less written off as hopelessly stuck in its desktop monopoly. (Which, admittedly, provides a good excuse for ignoring the enterprise software space.) But with the Great Plains group now feeling its oats, Microsoft is emerging as a genuine player in a market they have tried, and failed, to play in for some time.
Great Plains was a great buy. Try to find a major software player today that has reached a billion-dollar valuation selling to small and mid-sized businesses; Great Plains stands alone on the list. And it has an impressive number of customers, having nabbed 4,000 newbies in 2000 alone. By comparison, J.D. Edwards has a total of 6,200 customers.
Of course, JDE's customers are a little higher up the food chain, more toward the mid-market, with average annual revenue north of $200 million. Not to worry. In that sector Great Plains now has 5,000 customers, having added some 700 mid-sized customers last year, compared to JDE's 480. Thats why Great Plains -- and hence its new masters -- is a force to be reckoned with.
Great Plains' prospects for moving higher up the food chain are less solid. Though its software doesn't scale well to the billon-dollar enterprise, it plans to go after high-end customers of rival SAP by targeting these customers' divisions, subsidiaries, and partners. Great Plains claims that Microsoft's close relationship with SAP will help nurture these sales.
It's a nice idea, since SAP hasn't exactly lit a fire under the standalone mid-market. But SAP has excelled at selling to subsidiaries and divisions of its larger customers, so don't expect the gang from Waldorf to yield this fertile ground to its on-again/off-again pals at Microsoft.
While we're accentuating the negative, Microsoft's commitment to move Great Plains upscale into the mid-market remains unimpressive. Redmond's big push with respect to Great Plains has been centered in its bCentral hosted solution for small companies and in its .NET initiative, which still hasn't proven its relevance to larger businesses.
I fail to see how Microsoft is taking the lead: the real enterprise software effort is being left up to Great Plains. Then again, considering how poorly Microsoft has done in the past, this is perhaps as it should be. If Gates and company really intended to build up that capacity in-house, they wouldn't have shelled out the big bucks for Great Plains in the first place.
Finally, there's the channel problem. Great Plains' success has been built solely on channel sales. This is a brilliant strategy for the low end of the market, but it starts to bog down quickly as you move upscale. The larger the enterprise, the more its executives want the vendor to take direct responsibility for the success (and failure) of the implementation. This is something that Microsoft has never done well, or even understood, at the enterprise level. And Great Plains has no plans to change its model to fit this requirement. While I admit it's fared well doing things its way, in the end the sales strategy will limit how much the company can expand into the markets higher end.
Will Great Plains take over the world? Never. Will it start stealing market share from the likes of SAP, Oracle, and PeopleSoft? Not likely. Does it stand a chance at tapping into the thousands of mid-market companies that need new enterprise resource planning and e-business software? You'd better believe it. Which goes to prove that while money can't buy happiness, it can buy credibility. Even with skeptics like me.