Fairly frequently, someone asks a variant of the following question: "Do you think that Microsoft Great Plains is going to dominate the accounting software market?

If the question implies that (complete) domination is inevitable, my answer is "No." If the question is asking whether Microsoft can dominate the market, my answer is "Of course." That may be a bit evasive. But I think there are conditions that must be met for either outcome to occur.

Microsoft doesn’t succeed at everything, especially in the accounting market. Remember Profit or the Accounting Analysis Pak? Or its TaxSaver tax preparation software? Remember Small Business Server? That suite was introduced four years ago and was going to sweep the market with its inclusion of SQL Server. It got such a high-profile introduction that now-Microsoft CEO Steve Ballmer was at the roll out. Despite the fact that SBS is still around; it was never a world-beater, especially not in the accounting software market.

Now Microsoft owns the full Great Plains artillery of Dynamics, Solomon, and eEnterprise, and the new Small Business Manager, a stripped-down version of Dynamics that looks like the next tool for driving SQL Server into the small business market.

What are Microsoft’s strengths in the mid-market? It got one of the two top players when it bought Great Plains. It got a company committed to quality and one that’s willing to discuss its mistakes. At least a few years ago, GP president Doug Burgum, embarrassed by a release of Great Plains Accounting, publicly broke eggs on his head in apology. (One doubts you’d ever see Ballmer or Gates doing something like that. They’d at least box the broken eggs and sell them as a Version 1.0 product.)

They also got Burgum, who has a vision of the future, a strong channel, and I believe they got the next generation of software that was being put together at Solomon. They may also have gotten overly optimistic expectations. Microsoft is used to very high profit margins, margins that companies like Great Plains and Solomon never could achieve.

This is the one great danger for Microsoft Great Plains--that the parent will try to squeeze the channel for too much profit. We saw something of that last year when Great Plains and Solomon implemented new margin structures and the moans from the reseller channel indicated it’s harder to get top dollar from Microsoft, than from rival Best Software. One observer also says that Microsoft’s revenue expectations for the accounting software market would work only if it buys Best. There’s just not that much money around. A year ago, Pat FitzHenry, a Solomon vice president, told a group of resellers that Microsoft wants 185 percent revenue growth from the channel over five years.

Maybe there’s something else at work here. At Convergence, the Great Plains user conference, Burgum spoke about enlarging the channel, using Microsoft resellers, to sell SBM. Maybe the vision is of a different channel than we’ve known and they can make those numbers.

But will the company inevitably dominate the accounting market? Microsoft may be Microsoft. But I’m not ready to list it with death and taxes, at least not this year.-Robert W. Scott

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