Microsoft Moves in on the Midmarket
Bidding on Great Plains, MS works its way into the CRM arena.
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By proxy, Microsoft has just become one of the most influential players in midmarket CRM. As 2001 dawned, the software giant offered to acquire Fargo, N.D.-based Great Plains, a leading midmarket provider of automated financial and business processes solutions, including CRM applications offered through its partnership with Siebel.

The stock deal puts a substantial $1.1 billion price tag on the company, which did just under $200 million in revenue for 2000. (Tech industry cynics take note: Great Plains does at least have a long, largely profitable history of selling useful product to real customers.) Great Plains itself was just coming off of a substantial acquisition, picking up accounting rival Solomon Software in May 2000.

Although Siebel General Manager of Midmarket Products George Ahn would not confirm the ranking, Great Plains is widely considered Siebel's most productive and most visible resale partner in the category. At any rate, Siebel now claims, based on its interpretation of industry data, that it has nearly 55 percent of the midsize CRM market, and Great Plains indicates that it has sold a Great Plains/Siebel product mix to over 250 customers.

Partnership Triangle

The Microsoft/Great Plains relationship is formidable, but will it survive the new order? Although Microsoft did not respond to requests for comment, so far the picture is one of business as usual, with the previously established partnership triangle between the three companies becoming a more direct link. Certainly Siebel is not outwardly concerned that Microsoft will interfere with the Great Plains approach to CRM.

"It was their first [CRM partnership], thus we have the longest tenure with each other, have learned the most together and because of that we have been extremely successful together," says Ahn.

Great Plains, which will continue to manage itself as a Microsoft division out of its current location, is also predicting more of the same. "Hundreds of thousands of customers are a great fit for the [Great Plains/Siebel] product," says Jeff Young, executive vice president of operations for Great Plains. "We're going to maintain [the relationship] and going to continue to strengthen it."

Ahn says Siebel is looking forward to the injection of Microsoft resellers who will be eager to add Great Plains, and by extension Siebel, to their Microsoft-focused arsenal of products. "They now have the opportunity to become part of the new Microsoft channel to work with us. That's a tremendous opportunity for us," he says.

Young says Great Plains will not lower its certification standards to accommodate the potential influx of interest from the Microsoft channel. Even so, Laurie Orlov, research director for Forrester Research, is not so sure that the addition of rank-and-file resellers, even those that pass the Great Plains requirements, will necessarily represent a major boon for Siebel. "I don't know how appropriate [Microsoft solution partners] are for the sale of Siebel," says Orlov.

Microsoft may not need to tinker with Great Plains' partnerships in order to benefit from the deal in short order. "It's great for Microsoft, it gives them real applications to sell," says Orlov. "This gives them a line of business buffered from the rise and fall of the PC industry. [Great Plains software] is based on business change, not PC units sold." Orlov envisions the hosted version of Great Plains becoming a major component of Microsoft's fledgling bCentral small business application service.

More Aggressive Moves?

strong relationships aside, there would be little to stop Microsoft from acquiring its own CRM solution, and the Great Plains deal establishes a new precedent for the company to compete more directly with its application development partners. "Microsoft may want to move more aggressively into having its own CRM solution, and companies like Onyx and Pivotal and Interact and any others based on Windows NT might be potential acquisition targets," says Joe Outlaw, research director for GartnerGroup.

Orlov suggested one potential source of long-term conflict: Siebel's cross-platform design, which supports but does not require Microsoft Windows NT/2000 as a server platform. Other CRM vendors, such as those on Outlaw's list, have a stronger emphasis on Microsoft's OS and database, which may create pressures as Microsoft continues to verticalize its approach to enterprise software. Ahn indicates that some 70 percent of Siebel's midmarket implementations are already Microsoft-centered, which may stave off such concerns.

Outlaw is unconvinced that past results are a guarantee of future loyalty. "All will go out the window if Microsoft acquires a direct competitor. I don't see how it would make sense to offer two products," he says. But don't cry too much for the market leader--standing relationships with other industry giants such as Compaq and IBM Global Services mean Siebel's third-party channel is unlikely to evaporate.

As for Great Plains, the software darling of the nation's breadbasket finally has a world-class marketing organization behind it. And Microsoft has jumped into the midmarket software business in a major way, acquiring one of the bigger names in both CRM and accounting in one tidy billion-dollar transaction.

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