If at first you don't succeed, try and try again.Microsoft is taking that time-honored adage to heart with another attempt to capture the market for small business accounting software with its Small Business Accounting, due out this September.

"Before, we didn't have 25 years of experience in this field," explained Guy Gilbert, group product manager for the company's small and midsized business division. "Before, we took it as a short-term product. We've made a lot of progress in small business strategy."

Small Business Accounting will be sold as a stand-alone product or as a bundled option with MS Office suite, and will include all the familiar Office 2003 applications, along with an updated Business Contact Manager and Outlook 2003. The new accounting software for small businesses allows up to five concurrent users and features options like an advanced audit trail, dashboard options and a strong forecasting tool.

"The first concern and probably foremost on any accountant's mind is ease of use," said Laura Madeira, CPA and owner of the firm ACS Inc., in Florida. "That and allowing clients and accountants to be in tax preparation at same time as journal entry, and to transmit back and forth between them. Right now, there's no opportunity for that in SBA. Not saying they won't have it, but it's not in the beta version."

Microsoft has made numerous adjustments to their beta version, said Gilbert.

But will it all be enough? The jury is still out. It may be as many as five years before the marketplace really shifts either in Microsoft's favor or clearly away from them, said Robert Anderson, vice president of small and midsized business applications at researcher Gartner Inc. Anderson said that it depends largely on their dedication, and whether they have learned from their mistakes.

A long history

Microsoft first tried to take hold of this software sphere in the early 1990s with the introduction of Microsoft Profit, which has since been shelved.

Another product, Microsoft Small Business Manager, was launched a few years later - at roughly the same time that the company acquired Great Plains in 2000. SBM has since been rebranded Small Business Financials, in an effort to appeal to the higher end of the small and midsized business market.

Microsoft then tried buying out the competition with a $2 billion bid for Intuit in 1995, but the deal was blocked by the Department of Justice on anti-trust grounds. Intuit eventually became the dominant player in the market. Last year, Intuit sold about 87 percent of all software in the small business and personal finances marketplace, said its director of QuickBooks, Terry Hicks, citing figures from researcher NPD Group.

While Microsoft will have a hard time getting a big share of this market at first, they remain confident. "There are millions of opportunities around the globe [in this market]," Gilbert said. "We would love to serve them immediately."

Gilbert explained that with the acquisition of Great Plains, Navision and Axapta - enterprise resource planning software programs for midsized and larger businesses - the creation of Microsoft Business Solutions took shape and Microsoft absorbed a healthy amount of business application knowledge. Unlike Microsoft's previous efforts in the accounting marketplace, experienced ERP developers had input into the creation and design of the small business software effort.

"We feel like we've now built a solid roadmap for our customers," added MBS vice president of business development, Dave O'Hara. "We have the server-based environment and provide the tools and migration that can take them up to the next product."

Sizing up the competition

Some are looking forward to the competition that will help raise the bar and spur new advancements. "[Competition] has been stagnant," said George Goodall, a research analyst at Info-Tech in London, Ont. "Now that we have a new player on the block ... things will get really interesting."

"Any competition is usually good competition, but Microsoft's strengths are not usually applications, but operating systems," said Scott Savlowitz, chairman of the Information Technology Committee for the New York State Society of CPAs. "It's going to stretch [competitors'] resources."

Competitors like Intuit will need to start spending a lot more money on their marketing strategies, added Savlowitz. This may actually take away from development, leading to Microsoft dominating the market due to sheer size and backing. However, this is not something that either Intuit or Best Software are concerned about.

"Obviously we take them seriously - you have to take Microsoft seriously," said Doug Meyer, president of the Small Business Division at Best Software. "But this is what we do - all we do."

Intuit's Hicks compared the SBA effort to the time when Microsoft tried to combat Intuit's TurboTax success with the introduction of the now-defunct TaxSaver. "We came out ahead," he said. "The market grew and had no effect on our share."

The range of choices from SBA to Axapta lets users grow their businesses from mom-and-pop shops into corporations without changing software companies, said Microsoft's Gilbert and O'Hara. This time, instead of capturing customers by going head to head with the competition, Microsoft plans on obtaining fresh new users.

"Initially, we're not targeting QuickBooks and Peachtree users; our sweet spots are in new businesses and the 40 percent that use Office," said Gilbert.

But mom-and-pop shops are exactly the wrong target market for Microsoft to start off with, said Savlowitz. "They cannot afford to have problems and issues," he said, adding that version 1.0 products generally have numerous issues and bugs that need to be fixed. "It's just one layer of configuration that mom-and-pop offices may not have the sophistication to do."

Analysts are hopeful for SBA's longevity this time around. "They are stronger than ever before," said Anderson. "Their hand looks a lot better than before." The company will need to focus on three things to gain headway in this market over the long term, he added.

First, it will need to develop and maintain its partners and resellers to keep SBA visible in the market, and to keep adding new features to the ERP system. Second, it will need to keep the tight integration with Office applications. Last, and perhaps most important, Microsoft will need to continue with a strong drive and commitment. If it can, in three to five years, MS could shave about 20 percent off of QuickBooks' percent of the market, said Anderson.

Said Intuit's Hicks, "Bring it on. We're ready."

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