Battle for the Mid-Market

Print
Email
Reprints

(Page 1 of 3)

In January 2000 consultants, resellers, and vendors were still talking about Y2K. There was the long-anticipated consolidation of the accounting software market which hadn’t happened. How fast three years have gone! How much has changed!

In that time, Great Plains bought Solomon and FRx, then Microsoft acquired both Great Plains and Navision. Accpac nabbed SBT while Softline snapped up BusinessVision and AccountMate. Best went a somewhat different direction, adding the old Best Software with its FAS and Abra line, along with SalesLogix, MIP and CPASoftware, while Macola was absorbed by Exact Software.

There may be more. Best CEO Ron Verni quotes the Gartner Group as predicting that half of all current software providers will disappear in the next two years. "It’s a classically maturing market place," notes Verni.

Partner Insights

Accounting Technology asked its readers who would dominate the mid-market in this month’s Street Talk (See page 8). Microsoft got the most mentions, with Best, Intuit, and Accpac generally mentioned in comments received, some published, some not. For some, it’s Microsoft versus Microsoft, with advocates naming Great Plains, Solomon, Navision, and Axapta lines each as winners.

A more complex answer comes from Sheldon Kralstein, a former Navision reseller who recently started a marketing consulting organization, Success Driven by Marketing, based in Morganville, N.J. He sees Best Software owning the market for companies having $5 million to $50 million in annual revenue with its MAS 90/MAS 200.

"The new version 4 of MAS 90 is a total rewrite and from the demos I have seen, I am confident they will maintain and grow their current user base," he says. Microsoft will dominate the market from $50 million to $250 million with Navision and Axapta. "In addition, both of these products are ready today for the international marketplace, and a larger part of Microsoft’s growth will come from the International community."

The market itself is subject to varying definitions. Most say it includes companies ranging from $5 million to $250 million in revenue, some stretching that to $500 million.

There could be more than one winner. What will it take to win? Size counts because size means larger revenue which can be used for development costs and acquiring other companies.

"You have to be able to keep up with the innovation in order to stay competitive," says Robert Anderson, research director for the Gartner Small and Midsize Business Practice. Anderson says that playing in vertical markets, such as manufacturing and distribution, is necessary. But above all, "financial stability is at the top of the list," says Anderson.

The views that follow come from the people running the major players as they talk about what it will take for their companies to succeed.

Microsoft Business Solutions

Microsoft Business Solutions displays many trappings of Great Plains Software. Its president, Doug Burgum, long-time president of Great Plains, still sports his long locks, delivers rambling speeches with a historical orientation, and relishes his role as visionary and guru.

MBS Customers
Great Plains Accounting 18,239
Classic/Expertise 17,012
  (former RealWorld products)
Great Plains Select 14,091
Great Plains Edition 8,748
Solomon III 7,951
Solomon Select 7,554
Solomon Edition 3,508
Retail Management 2,458
Small Business Manager 460
Microsoft CRM 307

MBS still has a substantial base of DOS accounting customers with 26,190 between Solomon III and Great Plains Accounting. Most former RealWorld installations are probably DOS.
Source: MBS

When other executives trail around him, he looks more like a rock star with an entourage, rather than a former McKinsey consultant who worked with management guru Tom Peters, while Great Plains’ fluid organizational style seems based on a "Friend of Doug" system.

He still speaks in grand visions. "My big bucket is transformational innovation," says Burgum. His goal is more than just having satisfied customers. "If you asked small and medium-system customers are they satisfied, they might say they are satisfied. But joyful, ecstatic? They are not there yet."

But Fargo, N.D., is no longer just Great Plains. From there, Burgum oversees an enterprise with an estimated $550 million in revenue from product lines from the former Great Plains, Solomon, and Navision, and 3,800 employees, including bCentral. And its parent Microsoft, with $28 billion in annual sales, makes it the favorite to dominate the mid-market.

MBS itself had $308 million in sales for the year ended June 30, most generated by the former GP and Solomon. Navision, which it acquired in July, was running about $225 million in sales this year.

Microsoft wants MBS to hit $10 billion in revenue in ten years, and reportedly charged Burgum with building Small Business Manager to $500 million to $1 billion in five years. He reportedly tried to jump-start the process, but top management rejected his effort to quickly achieve $1 billion by merging in the Microsoft Project business. Despite SBM’s struggles, Burgum notes that Microsoft sells billions of dollars of product into the small business market. "There has been some preliminary work done that indicates that the number one package in small business is Excel," he notes. MBS will try to deliver more small business offerings through bCentral, which Burgum says is doing "very well."

Burgum agrees $10 billion will come from more than just accounting software. "If you take a look broadly at SBM, ERP, CRM, and business intelligence, and look at it globally, not just the U.S., you could get a number that’s very large and not even have a majority share," says Burgum. He also outlines a general strategy that suggests MBS will leverage the Microsoft Network and Office to deliver small business services. And certainly, part of that money will come from the newly released Microsoft CRM.

Burgum repeatedly says MBS will go downstream, not upstream, as many still expect will happen with Axapta. Competitors and observers think Microsoft may be saying that to avoid offending current European allies.

It’s a hard read. MBS dropped an alliance under which it authorized its resellers to sell the Siebel Mid-Market CRM package. VARs now must get their authorization from Siebel. But no sooner did MBS end its Siebel deal than Microsoft entered a strong alliance with Siebel. Some suspect that means Microsoft will go upstream, just not via Burgum’s operation. Burgum’s take? "Tom Siebel and I have stayed very much in touch," he says.

Microsoft Business Solutions VARs
Total U.S. reseller count  2,000
Small Business Manager:  1,835
Great Plains:   1,083
Solomon:   399
Navision and Axapta:   211
The numbers for individual lines exceed the 2,000 total because many resellers carry multiple MBS products.
Source: MBS
One puzzling element has been Great Plains, and MBS’ slowness to adopt a CPA referrer program. Although the company has many CPA resellers, it long lacked the kind of recommender program used by most competitors. Don Nelson, the company’s channel vice president, says one is being built for SBM, although he does not have a launch date.

For the moment, MBS will rely on four historical lines, Great Plains, (the merged Dynamics and eEnterprise), Navision, (the former Attain) and the Solomon and Axapta lines. The company will ride these horses until the next generation product, featuring a common code base, hits the market. Most resellers think nextgen won’t be a factor until 2007.

Burgum says that product is on course with a development team that includes Great Plains, Navision, and Solomon developers. "We’ve been challenged by Bill (Gates) and Steve (Ballmer), ‘Can you do it faster?’" acknowledges Burgum.

Best Software

It’s hard not to position Ron Verni, CEO of Best Software’s U.S. operations, as the anti-Burgum, since Best is generally viewed as number two to Microsoft Business Solutions in the U.S.

Verni looks as corporate in his short hair and suits as Burgum does new age in his long hair and casual clothes. Where Burgum is a long-time Great Plains employee, Verni rose to the top through two acquisitions, moving from Great American Software, the originator of One-Write Plus, purchased by Peachtree, which was in turn purchased by Sage.

Best Software’s Reseller Base
Mid-market  3,800
Small Business (Timeslips)  160
Specialty (FAS, Abra, etc.)  1,000
MIP  100
CRM (SalesLogix)  1,500
Source: Best Software
Burgum surrounds himself with other long-time employees. Verni has built a national organization by hiring outside talent. The Great Plains/MBS table of organization has never been seen publicly. Best routinely issues press releases on executive appointments. MBS rarely makes a big deal about hirings and promotions. Best put its organization table on a PowerPoint slide at a special two-day press and analyst strategy briefing, the kind of event that Burgum’s organizations have never conducted.

"People might say Microsoft is a juggernaut, outspending us by any factor," says Verni. But because the two biggest influences in software purchases are existing customers and accountants, Verni says Best has a strong position. "Our satisfaction rates are high. Our retention rates are high."

Comments (0)

Be the first to comment on this post using the section below.

Add Your Comments:
Not Registered?
You must be registered to post a comment. Click here to register.
Already registered? Log in here
Please note you must now log in with your email address and password.

Register now for FREE site access and more