by John M. Covaleski

Lakewood, Colo. - Serenic Software, one of the newest software companies dedicated to solutions for nonprofits and government entities, could quickly become a lot better known courtesy of Microsoft Corp.

Serenic was founded in 1999 as a developer of nonprofit/government industry software specifically for use with accounting software developed by the former Navision, a company that Microsoft acquired in 2002 and has placed into its Microsoft Business Solutions unit.

As part of its expansion of the Business Solutions Group, Microsoft will be launching intensified development and marketing efforts directed at key vertical industries, with the initial efforts focusing on nonprofits and government entities. Serenic is one of four nonprofit/government development specialists that it has identified as its independent software vendor partners for the intensified focus.

Microsoft unveils vertical strategy Nonprofit and government organizations are the first two of four vertical industries that Microsoft Corp. will be targeting with new intensive sales and marketing efforts, according to Pat Fitzhenry, Microsoft's director of vertical strategies.
Most immediately, the software giant plans to also go after the health care and education markets after launching programs in the nonprofit and government sectors. In the longer term, Microsoft has identified some 50 verticals that it is considering going after in the same fashion.
In each industry effort, Microsoft will develop applications that meet each industry's very specialized needs, and co-market those applications with its general use applications, such as desktop applications, which include its Microsoft Office suite, and accounting solutions from its Microsoft Business Solutions group.
More significantly, the vertical products developed under Fitzhenry's program will be available for distribution by Microsoft's thousands of sales partners focused on small and midsized businesses and, where appropriate, by members of its Industry Services Group, which markets to very large enterprises. Government is one of the ISG sectors.
Fitzhenry has the right experience to lead the vertical charge: He helped develop the vertical program for Solomon Software, an accounting software developer that worked with some 300 independent software vendors. Solomon was acquired by the former Great Plains in 1999 and became part of Microsoft when it acquired Great Plains in 2000.
Other ISVs with Serenic in the nonprofit/government industries push are CherryRoad Technologies of Parsippany, N.J., which develops solutions that work off Axapta, an accounting line originally developed by Navision, and Olson Business Solutions, of Seattle, which develops systems that work with Great Plains products. There is also another ISV that builds off of Great Plains, but its identity could not be confirmed.
While all the vertical industry efforts could include applications development by both ISVs and by Microsoft's internal operations, ISVs may play a larger role in the nonprofit/government effort. "Today, we [Microsoft] provide the basic financials that work fine for this market, but we don't have fund accounting, encumbrances and grant management, while all our ISVs have all three," Fitzhenry said.
He cited property tax computation, license processing and cashiering as government industry needs that are likely to handled by technology developed by ISVs.
The use of ISVs quells speculation that Microsoft would buy a nonprofit/government software development specialist. However, Microsoft has not announced whether it has such intentions.
On Microsoft's ultimate vertical plans, Fitzhenry said, "We are mapping out the opportunity across all verticals and across all geographies to determine where we have solutions, how big the opportunity is in each market and, if there is a need for a solution, should we build it or partner with an ISV."
-- John M. Covaleski

“This certainly changes the message we can bring to the market,” said Serenic founder and chief executive Jay Malik. “We had been selling as part of Navision, a software that was not that well known, and now we’re selling as a Microsoft company with their Microsoft Business Solutions logo. That’s going to generate a lot of additional interest in our products.”Serenic, based here, in a Denver suburb, is not a part of Microsoft. It is an ISV partner to that software titan in a relationship similar to its original alliance with Navision.

The big difference in the relationships is that Serenic is now partnering with Microsoft, a worldwide giant with thousands of sales channel members and a sharp appetite for developing and selling new applications and in tapping specifically into the government and nonprofit markets.

With Navision, its products have been primarily sold through a channel of about 45 “Solution Center” resellers, only a fraction of whom were necessarily pursuing government and nonprofit clients.

While Serenic will still be marketed through the 45 Navision Solution Centers, its products will now be available to Microsoft’s entire channel of several thousand people.

“Government and nonprofits represent a huge market of which we have had very little penetration, but we are going after it now,” said Pat Fitzhenry, Microsoft’s director of vertical strategies. “This is huge for Serenic because they will have all these feet [Microsoft channel members] on the street.”

Microsoft’s use of ISVs in its nonprofit/government push counters widespread software industry speculation that it would acquire a software vendor already established in the sector. Malik said, “We work with Microsoft groups, but we are not owned by them and we don’t want to be owned by them.”

Government and nonprofits are the first two of four vertical industries that Microsoft will pursue via development strategies in which Microsoft and its ISVs would build new solutions that meet their verticals’ vital needs. They would subsequently package those specialty products with Microsoft’s broad range of generic technologies (see box).

As part of the new push, according to Fitzhenry, Serenic’s applications would be dually marketed by members of Microsoft’s Small and Medium Solutions & Partners group, which is dedicated to serving small and midsized businesses, and the government portion of its Industry Solutions Group, which is dedicated to larger, enterprise end users in several key industries.

Microsoft also plans to recruit additional resellers and non-reseller consultants with expertise in serving nonprofits and governments. “We very much want partners who specialize in this area,” said Fitzhenry, who added that accounting professionals are among those Microsoft wants to recruit.

For Malik, 48, Microsoft’s involvement adds a new twist to an already diverse software background. His career has included key executive positions with the commercial market business software vendor formerly known as Platinum Software (now known as Epicor) and Serenic’s rival nonprofit/government developer American Fundware, of Denver, which last year became part of Intuit.

Malik and his wife Liesa created Serenic after almost two years at Fundware, where he was vice president of field operations. During his tenure, Fundware made significant changes to its sales channel structure, but developed a reputation for lagging behind the rest of the market in development matters.

“Fundware introduced me to this market and I’m thankful for that. But I felt that nonprofits and government needed better functionality than what we were offering,” Malik recalled. Fundware also brought him from Texas to the Denver area, where Serenic is based.

He said that he decided to become a reseller for Navision, because that company made its source code available to elite Navision Solutions Center resellers who could then work with the code to tailor the software to end users’ specific needs. In Malik’s case, that meant tailoring nonprofit/government solutions.

Also helping Malik decide was the fact that Navision’s U.S. operations president at the time was Randy Keith, a former colleague at Platinum Software.

Shortly after establishing Serenic as a reseller, Malik shifted his focus to developing nonprofit/government solutions that operated off Navision’s financial application, which was then called Attain. Serenic soon morphed into a software company as Malik concentrated on developing and marketing Attain and encouraging other Navision resellers to turn to his product when dealing with nonprofit/government prospects.

Serenic’s two products are Serenic Navigator, which works off Navision and is designed for nonprofits with annual budgets of at least $20 million and for government agencies that serve populations of at least 20,000, and Serenic Fundamentals, designed for nonprofits with budgets of under $5 million and government agencies that serve smaller populations.

Serenic’s business grew to slightly more than $100,000 in product license sales in 2000, to $590,000 in 2001, $1.5 million in 2002, and $2.2 million in the fiscal year ended this June. Business was so good last year that Serenic began marketing and private-labeling Fundamentals, which is actually developed by another vendor - E-Tek Solutions, also in Denver.

Growth over the past year was helped by Navigator sales to several large users, such as Trans World Radio, a 1,000-employee Christian broadcasting station in Cary, N.C., and the Gwinnett County (Ga.) Public Library, which checks out more than 5 million items per year.

Serenic’s recruitment of Navision Solution Centers was shifting into high gear last year at about the same time that Microsoft stepped forward to buy Navision. It ultimately melded that company into its Microsoft Business Solutions group, which also includes the former Great Plains Software, and changed Attain’s name to Navision.

“From the time Microsoft said it would buy Navision, I knew it was good news,” Malik recalled. “You know how Microsoft works - market share. As we turn up our engine, Microsoft’s goal will be to have a significant market share in nonprofits and government. I am excited about that.”

Malik has built Serenic rather rapidly, but it’s far from being able to boast having a significant market share. It has about 90 end-user organizations, while Fitzhenry estimated that there are more than 750,000 nonprofit and government organizations in the United States alone.

In addition to selling more products to nonprofits and governments, Fitzhenry said that Microsoft’s vertical strategy should send out the message that Microsoft is deeply committed to this sector and to the other verticals it enters. To that end, he and Christian Pedersen, Microsoft’s director of global product management, each made presentations at Serenic’s first users’ conference, held in Denver in late July.

“The idea was to let the customers who attended our conference know that Microsoft is committed to this market. I believe that message came across loud and clear,” Malik said.

Microsoft’s message has already reached Serenic reseller John Janiczek, vice president of business development for Parente Technologies, a consulting arm of CPA firm Parente Randolph, of Wilkes-Barre, Pa.

He said that government industry specialists from Microsoft recently joined his practice while it was making a Serenic sales presentation to a “large local government” in Northeast Pennsylvania.

“We made a joint presentation to the mayor and his aides, and having Microsoft there really helped,” Janiczek said. “To impress upon a mayor that Microsoft is standing behind the solution you represent makes a huge impression.”

Malik, meanwhile, speculates that Serenic will double its current customer count in the next year or so. He also plans to double the $250,000 that Serenic spent on marketing last year.

Microsoft should help in the marketing. In a program separate from its vertical push, Microsoft just added Serenic to its Partnering for Success program, in which it provides select partners with funds for marketing efforts, based on the partners’ sales volume.

“This should be a good year for us,” Malik said.

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