• Illustration: Levels of the Business Platform

A business application platform for vertical ISVs will enable them to focus on their areas of expertise rather than on solving common business problems, such as how to record transactions in a general ledger. If Microsoft’s plan succeeds, vertical ISVs will become an increasingly important sales channel for Microsoft server products and advocates for the .NET initiative, particularly among small and medium-size businesses. But these ISVs will have to focus on vertical expertise to differentiate themselves and will be more closely bound to Microsoft's development process.

Business Functions Move into Platform

In 2001, a team under Microsoft Business Solutions (MBS) Vice President Darren Laybourn initiated a project to build a business applications platform, tentatively named the Microsoft Business Platform (the final name is likely to change). The goal is to take certain functions that are needed by nearly all business applications, such as the ability to record transactions or take orders, and make them available to all developers, rather than having each vendor write different code to perform the same task. The project is analogous to Microsoft's efforts to turn Office into a platform for customized applications and vertical ISVs by releasing tools such as Visual Basic for Applications.

The Business Platform will be built with small and medium-size businesses (SMBs) in mind. For example, because the company sees a business opportunity in helping SMBs connect their business applications to one another, the Business Platform will include support for Web services to improve connectivity between applications. The platform will also support the ability to create highly customizable user interfaces and reports from business data, both of which will reinforce the value of "smart clients" and the Windows desktop. Additionally, the Business Platform will support user transitions between locally hosted and remotely hosted applications, which could increase the audience for hosted services, such as those offered by Microsoft's bCentral.

Within the new platform, a "business framework" will provide the lowest level of functionality. For example, it will provide a common but extensible way to define entities, such as a customer, or to handle processes, such as recording a transaction. The framework will then be used to create reusable, higher-level "business components," such as a general ledger. The next generation of MBS applications will be rebuilt from these components, although MBS will continue to support its current product lines through the transition. (For more details, see the illustration "Levels of the Business Platform".)

ISVs will be able to use various levels of the Business Platform, depending on how much granularity they need. For example, if few trucking companies wanted customer relationship management (CRM) applications, an ISV that specialized in the trucking industry could simply resell Microsoft CRM—an MBS application—to interested customers. But the same ISV might want to build logistics capabilities directly into its applications. In this case, it could use the appropriate subset of the business components that make up the MBS Logistics application. If the ISV wanted to customize the logistics functionality in its product even further to match the needs of a specific subset of customers (such as trucking companies that cross international borders and have to deal with currency and weight conversion or international tariffs), it could use the business framework as its foundation.

Goal: Attract ISVs

Microsoft hopes to attract vertical ISVs to build solutions on the Business Platform, thereby increasing the sell-through of Microsoft server products to SMBs and helping promote the Web services capabilities of .NET.

The attraction for ISVs is that, instead of having to write code to handle basic business functions, the Business Platform will allow them to concentrate their development on adding vertical-specific functionality. Customers will also benefit from a greater range of applications tailored to their needs.

As ISVs create vertical applications on the Business Platform, they will become an important channel for Microsoft products, particularly Windows Server and SQL Server. This will help Microsoft sell more servers to the highly fragmented SMB market and make it less likely that those customers will switch to competing application platforms and servers (particularly Java-based solutions running on Linux).

These vertical ISVs will also help Microsoft provide examples of how .NET helps solve real business problems, such as connecting companies with suppliers and customers. Putting some meat on the "one degree of separation" claim could help Microsoft promote .NET to larger enterprise ISVs and corporate customers, and stave off Java-based applications from competitors such as IBM and Oracle.

(For more details on the importance of ISVs to the .NET initiative, see ".NET Marketing Focusing on Developers, ISVs, Enterprises".)

Benefits and Risks for ISV Partners

In addition to lowering costs and allowing them to focus more on their areas of expertise, the Business Platform could also help vertical ISVs capitalize on Microsoft's marketing clout. For example, as more businesses buy MBS products based on the Business Platform, their partners and customers might be encouraged to buy vertical products based on the same platform to ensure easy interconnectivity and a consistent user interface.

But ISVs who take the plunge might also find it harder to deliver unique value to customers: if everybody has the same basic business features, ISVs will have to work harder to identify viable vertical markets and develop or improve features for those markets. In addition, these ISVs will be more dependent on Microsoft's development cycle—for example, they might not be able to update the sales force automation part of their application until Microsoft updates the appropriate components.

More broadly, ISVs should understand that MBS is not only building broad horizontal business applications—the company has named enterprise resource management, supply chain management, customer relationship management, and business analytics as its four main areas of concentration—but is also interested in broad industry segments. MBS already offers products for retailers, wholesale distributors, professional services organizations (e.g., consultants), and manufacturers, and could expand into similar segments if it sees a business opportunity. Thus, the biggest beneficiaries of the Business Platform will be ISVs and systems integrators with deep knowledge of a particular industry, such as healthcare or finance, while more generalized business software companies will increasingly find themselves competing against Microsoft.