Microsoft targets small businesses with new Office

Microsoft Corp. next year will expand its Office product lineup with a bundle designed to help small businesses operate better, taking on Intuit Inc. and its QuickBooks product.

The new Microsoft Office for small-business management product bundle will include the familiar Office 2003 applications along with a new financial management product called Microsoft Office Small Business Accounting and an updated version of Outlook 2003 with Business Contact Manager, Microsoft said in a statement on Friday.

With the new Office edition, due out at the end of 2005, small businesses will be able to manage customer, financial and business processes, according to Microsoft. Payroll functionality is offered through integration with services from outsourced payroll services provider Automatic Data Processing Inc., Microsoft said.

The new Office edition was developed jointly by Microsoft’s Office group and Microsoft Business Solutions (MBS), the Microsoft group that sells business applications to small and medium-size businesses and divisions of large enterprises. Office for small-business management will offer an easy migration path to MBS products, Microsoft said.

By offering a path up to the more sophisticated MBS products such as Great Plains and Microsoft CRM, Microsoft is filling a significant gap in its product offerings and taking on Intuit, said Paul DeGroot, an analyst at Directions on Microsoft Inc. in Kirkland, Wash.

“Microsoft has a major gap in its small business offering. They have basically left that to Intuit and QuickBooks is the dominant product in that area,” DeGroot said. “As a consequence there has not been a ladder for small businesses to climb on and get to Great Plains. I would say that this is an important gap that Microsoft needs to fill.”

For the smallest businesses, Microsoft today offers a simple chequebook-type application called Money Small Business. The next step up is Small Business Manager, an entry-level ERP (enterprise resource planning) product.

“There is a gap today where people need an entry-level accounting system, but don’t need entry-level ERP,” said Steven Guggenheimer, a vice-president in Microsoft’s Small and Midmarket Solutions & Partner Group. The new product combines accounting with business contact management and Office functionality, Guggenheimer said.

“There are stand-alone accounting applications out there today, but they do not connect very well with the other applications most people use in their business. They don’t have the seamless connection with contact management or Excel, which some people use for their accounting,” he said.

Among the features of the new Microsoft application combination is the ability to mark hours as billable when a calendar entry is created in Outlook. This information can then easily be transferred to the accounting application, he said.

Another feature is easy invoicing using Word. Data from the accounting application can be pushed to Word for use in invoice templates, Guggenheimer said.

Microsoft will offer tools for QuickBooks users as well as users who do their accounting in Excel to migrate to the new Microsoft Office suite, Guggenheimer said.

Intuit has competed with Microsoft before and has maintained its leadership in the market for small business accounting software, said Terry Hicks, director of product management for QuickBooks at Intuit. More than 2.6 million U.S. small businesses use QuickBooks, he said.

Aside from winning more customers for its business products, the expansion of the Office suite lineup also fits in with Microsoft’s strategy to grow its Office business by tailoring product bundles for specific audiences. The vendor already sells a Small Business Edition of Office 2003, introduced last year, which includes Excel, Outlook with Business Contact Manager, PowerPoint, Publisher and Word.

Microsoft pitches the new Office Small Business Accounting product in the bundle as an opportunity for partners. Other software makers, or ISVs (independent software vendors), can offer vertical and horizontal applications on top of the new Microsoft accounting software, the Redmond, Wash.-based software maker said.

Part of the new suite, the updated Outlook with Business Contact Manager will include support for peer-to-peer networking to share contacts, support for the new Microsoft Small Business Accounting product and support for Pocket PCs, Guggenheimer said.

Microsoft did not disclose pricing information and said it is too early to discuss plans for international availability of Office for small-business management.

Outlook with Business Contact Manager will be updated for all 18 markets in which it is currently available, Guggenheimer said.

A beta test version of Microsoft Small Business Accounting will be available on Monday. Those interested can sign up online at:

Related stories:

New IT guide designed to help small companies, (Oct. 14, 2004)

Microsoft delivers Office Service Pack, (July 27, 2004)

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