There's some big changes going on with Microsoft Business Solutions, which sells four accounting software lines. But before anyone in Redmond goes ballistic, disses here does not stand for dis-respecting. It stands for distribution.

Sure, resellers are paranoid enough about the decision to combine Microsoft’s Fusion reseller conference this fall with the MBS/Great Plains reseller conference. Moves being made signal the real end to MBS as simply Great Plains with a new face. MBS is getting Microsoftized. Resellers fear Microsoft will go direct, with various theories about the company buying ePartners to do it, coming over the email transom.

But it doesn’t fit. It doesn’t make economic sense. What Microsoft will probably move to is a combination of direct sales, national accounts, and three-tier distribution. That’s pretty much the way most VAR markets work. Accounting has always had the luxury of operating under the two-tier model—vendor to reseller. Now, we’ll get a dose of vendor-to-distributor-to reseller, depending on where an organization is in the food chain.

Hybrid sales organizations work. They work all the time, although they do take a lot of vendor effort to keep VARs, distributors, and direct sales forces from choking each other.

What we could see is the following. A direct sales force will handle Enterpise accounts. Many mid-market vendors are part of the way here with consulting staffs that aid in larger accounts. Big companies want to deal directly with the vendor. National accounts will serve some major accountants, including large resellers. Smaller resellers will buy from distributors such as Ingram Micro.

Microsoft is already part of the way there, since it already sells Small Business Manager and Microsoft CRM through Ingram.

Vendors move to distributors because of the cost of selling to numerous small accounts and that describes the accounting software market well. Many vendors claim 1,000 to 3,000 resellers, and whether the upper ends of these ranges are true, there’s a lot of cost in serving all the small fry.

Unless Microsoft suffers from a severe case of we-can-do-anything syndrome, these decisions will be made on a ROI basis and cost of different models will be the deciding factor, not whether Microsoft likes the channel or not. Certainly changes will be made. MBS/Great Plains has been losing money at an increasing pace for three years. When Microsoft spent $1.2 billion to buy Great Plains and another $1.3 billion to buy Navision, it had something else in mind, other than losing 65 cents on every dollar of revenue. Results like that produce corporate changes aimed at better results.

These changes will most likely include products, distribution, and leadership. That’s how business works, and MBS, at this point, isn’t working all that well.



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