by John Covaleski

Redmond, Wash. - Three months into the launch of its customer relationship management software, Microsoft is pushing into another potentially key technology area for small and midsized businesses - supply chain management systems that interconnect trading partners’ purchase order and order fulfillment processes.

This summer, the software giant plans to start selling subscriptions to Microsoft Business Network, an Internet-based platform that will tie SMBs and other businesses into the electronic data exchange systems and SCM platforms of other high-volume, business-to-business buyers, including most of the major retailers of consumer goods.

MBN, which began beta-testing in April, will be primarily sold by the 6,000 resellers of Microsoft Business Solutions, a division whose main products are the Great Plains, Solomon, Navision and Axapta accounting/enterprise software lines for SMBs. Microsoft’s other 24,000 resellers also figure in the selling.

Separately, Microsoft just released a new version of Great Plains that includes several SCM enhancements, and, according to industry analysts Aberdeen Group, it is developing a full suite of new SCM applications for all the Microsoft Business Solutions products.

Microsoft also is recruiting SCM specialists as MBS resellers. It recently added Fullscope Inc., an Ann Arbor, Mich., firm that has traditionally served Fortune 2000 manufacturing companies and works with high-end vendors, such as enterprise developer Baan.

The linchpin of Microsoft’s SCM strategy is MBN, which will be accessible to companies running the Outlook and Excel applications in the latest editions of Microsoft’s Office desktop suite. Companies linked to MBN will be able to exchange purchase orders, acknowledgments, advance shipping notices and other business documents that are common to supply chain transactions with large business-to-business “hub” buyers whose EDI and other SCM platforms will be accessed by the network.

Microsoft said that the hub businesses that MBN will reach would include 50 national retail companies, such as Wal-Mart Stores Inc. MBN will be interoperable with “generic EDI” and “other EDI standards,” the company said in announcing the program.

In addition to the EDI connections, MBN will also be a platform that businesses use to transfer and share non-SCM information with customers and partners. “Microsoft Business Network will help businesses connected and integrate seamlessly and powerfully across their business ecosystem,” the MBN announcement said.

Data sent though MBN, including critical purchase orders distributed by buyers, would be routed to users’ Outlook systems, from which the user could contact the buyer to begin the transaction and fulfillment process. The purchase order information could also flow directly from Outlook into the users’ accounting software systems to automate the fulfillment process.

That back-end accounting integration capability will, according to one press report, first be available with Great Plains and later be extended to MBS’s other accounting/enterprise lines. It will also be available with other developers’ software systems that have Microsoft Biztalk Server code embedded in them.

Demand for MBN’s SCM capabilities could be key to Microsoft’s broader plan to reach $10 billion in SMB market revenue by 2010. MBN follows Microsoft’s recent launch of a CRM application (see story on page 26).

Microsoft product development director Jeff Edwards estimates the total market of SMBs that are interested in accessing large hubs’ SCM systems to be from 5 to 6 million, including at least 500,000 companies with from 50 to 1,000 employees, the main target of Microsoft’s MBS division.

“Microsoft Business Network will take care of one of the key issues in this area. Hub buyers need information [from SMB suppliers] and they need it immediately,” Edwards said.

Most of MBS’s rivals in middle-market accounting and enterprise software offer EDI connections services in alliances with third-party vendors, but only Accpac International has an EDI package as comprehensive and ready-to-use as MBN promises to be.

Accpac’s Exchange provides for the same type of document transfer allowed by MBN and also interconnects with the EDI systems of many business-to-business hub buyers, including Wal-Mart. The application integrates with Accpac’s enterprise accounting software, which enables purchase orders and related documents to flow into the enterprise packages, which then access information about the user’s inventory and work flow to determine if the order can be filled and, if so, begin the fulfillment process.

Accpac Exchange uses an IBM service to transfer data online, while Microsoft has that transfer capability internally. MBN and Exchange each use third-party document management vendors, such as eBridge Software, to facilitate the business-to-business connections.

Microsoft did not release pricing for MBN.

Accpac has said that Exchange users can expect to pay about $100 per month to handle a “low volume” of EDI transactions with a partner, versus $1,000 to $1,500 per month via traditional EDI connections. An SMB could have 10 or more simultaneous SCM relationships.

Both programs are similar, but MBN’s market potential is far greater. While Accpac boasts about 100,000 registered users of its Pro and Advantage accounting/enterprise lines, there are some 2 million Microsoft Office users worldwide.

However, only the most recent versions of Office are compatible with MBN and just a small percentage of Office users would have any interest in using the SCM service.

Among the businesses that are interested, only a small percentage are capable of meeting the trading requirements of the network’s “hub” buyers; Wal-Mart in particular is notorious for fining trading partners who fail to meet their supplier commitments.

Still, MBN would clearly be the software industry’s biggest move to enable SMBs to strike supply relationships with large buyers. If successful, industry analysts speculate that it could prompt other SMB software vendors to develop platforms of their own.

“This will enable companies to use the Internet to get through to other companies’ networks, an area that the middle market has been basically shut out of because of the stiff requirements for EDI,” said Katherine Jones, an analyst with Aberdeen Group. “I would expect other vendors to follow.”

Accpac product management vice president Craig Downing said, “This kind of platform provides a nice annuity stream for the vendor and it gives the kind of ongoing relationships they want with customers.”

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