Microsoft shores up midmarket strategy

Microsoft Corp. is expected to reveal new products for midmarket customers and more details of Project Green, its long-term plan for its financial applications portfolio, at a conference for small and medium-size business customers Wednesday.

At the Microsoft Business Summit in Redmond, Washington, Microsoft Wednesday also will articulate a new strategy for mid-sized businesses called “Together, We Build Business.” Microsoft Chief Executive Officer Steve Ballmer will send out an e-mail to Microsoft’s midmarket business customers that day outlining the strategy and the new products that will be unveiled at the show.

One of those products is a new midmarket server product code-named Centro, which is based on the future release of the Longhorn version of Windows Server. Longhorn, the code-name for the next version of Microsoft’s Windows Server operating system (OS), is scheduled to ship in 2007, after which Centro will be made available.

Microsoft defines a midmarket customer as anyone with 25 to 500 connected PCs.

The software giant also will unveil the official name for the products that fall under Project Green, a two-phased plan to unify Microsoft’s various business applications on one code base, said Orlando Ayala, senior vice president of Microsoft’s Small and Midmarket Solutions & Partner Group business unit, and chief operating officer for Microsoft Business Solutions.

The next versions of the product families that are part of Project Green, including Axapta, Great Plains, Solomon and Navision, will be rebranded Dynamics, Ayala said.

At Microsoft’s partner conference in Minneapolis in July, Doug Burgum, senior vice president of Microsoft Business Solutions, said in an interview that Microsoft’s strategy for Project Green is to more tightly integrate Microsoft’s various business applications instead of letting customers suffer integrating the products themselves. This is especially important for Microsoft’s business applications portfolio, which are a set of applications — mostly acquired from other companies — that have some overlapping functionality but also serve different customer needs.

Indeed, unifying some of these products on a common code base and a common brand is not only good for Microsoft’s customers and partners, but also for the company itself, said Chris Alliegro, a lead analyst with research firm Directions on Microsoft.

The overlap in functionality of some of the products means “you have R&D teams at Microsoft being paid to work on similar features,” he said. This situation is causing Microsoft to have “an inefficient R&D cost structure” in its business solutions group, a situation that can be eliminated if the company’s vision for Project Green pans out, Alliegro said.

“It certainly makes sense to have if not one, then fewer teams working on similar product sets,” he said.

Ayala said that Microsoft’s overall marketing plan for mid-sized companies reflects the kind of product integration being undertaken through Project Green. He said Microsoft aims to bring its products closer together in ways that will solve the complex IT problems midmarket customers often face, in an effort to make it easier for them to deploy a more simplified IT infrastructure.

IT professionals at mid-sized companies face a difficult task, because while the needs of their companies are complex, their IT budgets and departments are often limited in resources, Ayala said.

“The most unhappy people in the IT world are the IT specialists in the midmarket,” he said. “They have very few (resources) and they have to compete with big companies. We know there is a lot of pain in this space that we can solve.”

Microsoft isn’t the only company trying to woo midmarket customers. IBM Corp., Oracle Corp. and SAP AG also are gunning for mid-sized business customers, a fact Ayala acknowledged. “Everyone is rushing into this space,” he said.

However, Ayala added that the midmarket is the fastest-growing customer segment for Microsoft, which had double-digit growth in the midmarket during the last fiscal year. He would not disclose specific figures for any gains Microsoft has made in the segment.

As part of its midmarket focus, Microsoft also will give customers one licensing model, a plan that it disclosed in July at its partner conference. Back then, Microsoft announced it was streamlining its Open License Value program, changing the name to simply Open Value and making the new program worldwide, eliminating different iterations of the previous program that existed in different countries. Ayala said the company plans to provide more detail on Open Value Wednesday at the conference.

Additionally, in his keynote Wednesday Ballmer will outline more of Microsoft’s plan to leverage its partner community to reach vertical customers that serve the midmarket, Ayala said.

Microsoft has been pushing its ISV (independent software vendor) and consulting and services partners to deliver products and services tailored to vertical customers, a plan that has been met with mixed reactions from its partner community.

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