On May 7, Microsoft announced its intention to acquire the Danish ERP accounting software vendor Navision. This announcement comes on the heels of Microsoft’s purchase last year of the midmarket accounting systems leader, Great Plains.
Navision has spent the last few years trying to catch Great Plains in the midmarket space. Many consultants had written off Navision as a competitor because of the increased awareness and bankroll that Microsoft brought to Great Plains. So what’s the rationale behind the acquisition, and how will it affect ERP consultants?
Microsoft’s party line
In an interview, Tami Reller, vice president of Global Solutions for the new Microsoft Great Plains Business Solutions division (MGP), offered two points about the acquisition:
* Microsoft is committed to partnering with its solution providers to provide business solutions to the middle market. The combination of Great Plains, bCentral (Microsoft’s small business solutions arm), and Navision will give partners a wide variety of midmarket accounting solutions and services to offer their customers.
* Microsoft is committed to providing the strongest .NET applications and development platforms, including extensible accounting solutions based on the .NET platform.
I interpreted my conversation with Reller this way: Although Great Plains had great consumer awareness and market share in the United States and Canada, it has had a difficult time getting that same recognition in the European market. The Navision acquisition gives Microsoft global reach in the midmarket accounting space almost overnight.
Navision may also hold the key to expanding Microsoft’s hosted solutions practice overseas. Until now, overseas companies haven’t found a compelling reason to take advantage of the business solutions offered by Microsoft’s bCentral division.
In the United States, Microsoft has done significant work to allow MGP customers to integrate their locally installed and managed Great Plains systems with features of bCentral that are designed to integrate with those systems. These features include Dun & Bradstreet company lookups, cross-company appointment management and, in the future, integration with hosted versions of Microsoft’s new CRM product, which is based on the .NET framework. (For more on the MGP product and its effect on consultants, read my previous column for IT Consultant Republic.)
By building new integration points between bCentral and Navision, Microsoft will be able to extend its hosting platform overseas and, in Navision, it will have a large number of existing partners who will help sell the services.
On the surface, this strategy seems intended to sell and promote Great Plains in North America and Navision in Europe. Yes, Great Plains has customers and partners in Europe, as does Navision in the United States, but Microsoft has a lot of work to do to differentiate the products to help its customers and its partners decide which product to buy and support, respectively. In the future, Microsoft will have to differentiate based on features and price in order for resellers to justify carrying Navision in the United States and Great Plains in Europe.
Navision’s reputation for the robustness of its manufacturing solution will be another near-term differentiator. Great Plains has its own manufacturing solution, but industry partners and customers don’t recognize it to be as robust or complete as the one provided by Navision. Each company has development partners whose products help them win business against other players, such as J. D. Edwards, Lawson Software, and CODA Software Systems, in the midmarket space. But Navision and Great Plains both benefit from the Microsoft name when selling against these other accounting systems companies.
How does the acquisition affect consultants?
Navision and Great Plains each have existing consulting channels. For the foreseeable future, both Navision’s and Great Plains’ certification programs for companies that want to resell their products will stay in place. And there will be little or no effect on existing partners. However, Microsoft now has three groups of partners to rationalize: Solution Providers, GP Partners, and Navision partners. Microsoft has made a point in the past to maintain the more difficult certification—GP—rather than the entry-level one—SP.
Existing consultants shouldn’t expect it to get any easier to sell accounting solutions from Navision just because Microsoft is acquiring them, and existing Navision dealers shouldn’t be concerned about the commoditization of their Navision certification.
This strategy is the right one for the channel and the customer and the same strategy will probably be employed with the Navision channel. The real differentiator between the Great Plains and Navision channels is their products’ customization capabilities and their partners’ staff commitments to deliver customer-specific solutions.
MGP customization has been hampered by its dependence on the proprietary Dexterity language developed before the acquisition of Great Plains. Navision, on the other hand, has a large community that uses the Navision customization toolkit to perform significant customizations of the Navision platform.
In fact, what draws many partners to the Navision platform is its customization capability. Where most MGP consultants generate minor revenue streams from customization engagements (and staff accordingly), Navision consulting firms have developers on staff and salespeople who know how to sell customization engagements.
As the code base for both products moves to .NET during the next 18 to 24 months, the entire MGP consulting channel will have new opportunities to generate sales from extended customization of the core accounting platform. Therefore, I suspect that one of the other key benefits of the Navision acquisition is the ability to use the sales and marketing knowledge regarding sales and support of product customization to help build a similar channel for Great Plains’ partners.
Even after you look at the evidence behind the party line, the core messages ring true: This acquisition demonstrates that Microsoft is intent on owning the midmarket space worldwide, and it intends to do so by partnering rather than building a large consulting organization (a la Oracle Financials). Any partner—whether it’s Navision, Great Plains, or a Microsoft Solutions Provider—better be investing heavily in developing its .NET development expertise if it wants to take advantage of upcoming opportunities from Microsoft.