• Illustration: MBS Reorganization, Summer 2004

A June 2004 reorganization has more tightly aligned Microsoft Business Solutions (MBS) development with Microsoft's sales and partner strategy for small and mid-size businesses. Microsoft has also announced that it will outsource a portion of product development and support for MBS Solomon, one of MBS's four enterprise resource planning (ERP) product lines. These moves could improve MBS's financial performance, which is in danger of missing previously stated revenue goals for fiscal year 2004 (which ends June 30).

MBS Reports to Ballmer

Under the reorganization, Microsoft Senior Vice President and former Great Plains CEO Doug Burgum, who oversees product planning and development for MBS, will report directly to Microsoft CEO Steve Ballmer. Senior Vice President Orlando Ayala's Small and Midmarket Services and Partners (SMS&P) group, which is in charge of Microsoft's sales and marketing strategy for small and mid-size businesses, including relationships with ISVs and channel partners, will report to Burgum. Ayala will also take on a new role as chief operating officer of the MBS group. Previously, both Burgum and Ayala reported to Productivity and Business Services Group Vice President Jeff Raikes.

(For a complete view of the reorganization, see the illustration "MBS Reorganization, Summer 2004".)

Ayala will gain several new reports:

• Kurt Kolb, vice president of the system builder channel, who moves into the SMS&P group from Kevin Johnson's worldwide sales organization
• Bill Landefeld, who formerly oversaw Microsoft's worldwide licensing and is taking on a new role as vice president of MBS operations
• John Lauer, who replaces Lindsay Sparks as vice president of mid-size business sales and marketing
• Dave O’Hara, vice president of MBS business development, who formerly reported to Burgum
• Tami Reller, vice president of MBS marketing and strategy, who formerly reported to Burgum.

MBS Vice President Jodi Uecker-Rust, a veteran of Great Plains who oversaw MBS's global sales, marketing, and services and reported to Burgum, will leave the company in July. Ayala will oversee Uecker-Rust's direct reports until a new sales executive is hired to take on some of her duties.

Satya Nadella, who oversees MBS product development, will continue to report to Burgum.

The reorganization follows a middling financial performance by MBS in Q3'04, which ended Mar. 31, 2004: while every other Microsoft business unit showed revenue growth of 17% or higher from the previous year, and business IT spending outpaced Microsoft's expectations, MBS showed only 4% revenue growth, coming in at US$153 million for the quarter. This means that MBS would have to take in an unlikely US$229 million in Q4'04 to make its previously stated minimum revenue goal of US$700 million for the entire fiscal year.

In a conference call with investors, Microsoft Chief Financial Officer John Connors blamed the disparity partly on a lack of effectiveness with traditional MBS partners in North America—that is, former Great Plains and Solomon resellers. One of Ayala's tasks with the SMS&P group is to integrate the traditional MBS partners into Microsoft's standard partner program. Ayala's direct oversight of all sales and marketing initiatives for MBS could help this process along.

(For more information about integration of MBS partners into a new Microsoft Partner Program, see "New Partner Program Readied".)

Solomon Outsourced

Microsoft also announced that it plans to close its office in Findlay, OH, the former headquarters of Solomon Software. (Great Plains acquired Solomon in 2000, shortly before Microsoft acquired Great Plains and started integrating it into the new MBS group.) MBS has signed a contract with Plumbline Software, a new company created by the three founders of Solomon, to oversee some development and support of the Solomon product line. Plumbline will also become an MBS ISV partner and may develop vertical solutions on top of Project Green (MBS's forthcoming generation of base-level business management applications) or add-ons to other MBS products.

Approximately 100 positions in Microsoft's Findlay office are being eliminated, although some of these employees may find work at Plumbline, which is seeking about 70 new employees. The remaining 70 or so employees in Microsoft's Findlay office, including some employees working on the Microsoft Business Framework, a planned common platform for business management applications that is being developed in Eric Rudder's Server and Tools division, will be relocated to MBS locations in Redmond, WA (Microsoft headquarters) or Fargo, ND (the site of the former Great Plains headquarters).

Microsoft says that the decision to outsource some Solomon product development does not indicate any change in Solomon's status relative to the other ERP product lines (Great Plains, Navision, and Axapta). Solomon 6.0 will be released in July 2004 on schedule, and MBS has committed to a 7.0 release and will continue supporting the product line through 2013 or later. Instead, the move is primarily an operational cost-cutting move and continues the MBS consolidation that began in spring 2003 when MBS closed several development centers and began focusing operations around three locations: Redmond, Fargo, and Vedbaek, Denmark (former headquarters of Navision).