• Chart: Upcoming Product Life-Cycle Transitions

The roadmap for Microsoft's midmarket strategies and products became clearer in Sept. 2005 with a midmarket-focused event for partners and customers in Redmond, WA. The company used the Microsoft Business Summit to announce new branding for its Microsoft Business Solutions products, outlining how four current product lines will be merged into one; announced a midmarket server offering built on Longhorn Server; and officially released its accounting product for small business.

Aiming at the Midmarket

The midmarket—defined by Microsoft as businesses with 25 to 500 PCs, or 50 to 1,000 employees—is shaping up as a major competitive battleground for Microsoft. Enterprise vendors, hurt by a general spending slowdown among large customers, are hungrily eyeing the next tier down and developing low-end or hosted versions of their products that don't require the deployment effort of their enterprise products.

Although Microsoft dominates the desktop in the midmarket (as everywhere else), the midmarket is also fertile ground for server products and services, where the company faces strong competition. In addition, the company's product line has not been optimized for the midmarket. For example, Small Business Server, with its low price and unified setup, works well for small business, but its 75-user limit cuts off many midmarket users. Larger customers with at least 250 PCs are eligible for Microsoft's more advanced volume licensing plans, such as Enterprise Agreements, but the bulk of the midmarket, with between 75 and 250 PCs, has fewer options and gets the fewest discounts.

To tackle that space, Microsoft has spent much of the last year researching midmarket IT requirements. Among the conclusions:

• Current desktop software is a poor fit for the business processes and roles of midmarket companies, often requiring cut-and-paste operations between desktop software and other business systems
• IT budgets in midmarket companies are often minimal, but their business IT requirements are often as complex as those of enterprises
• Midmarket IT professionals tend to be generalists who rarely have the time or resources to develop deep technical skills.

At the Business Summit, Microsoft executives said that future midmarket software development would focus on meeting these challenges, with products designed to integrate with common business processes and employee roles out of the box, as well as midmarket product bundles that are cheaper and easier to deploy.

Filling the gap between small-business software and enterprise-level business needs will be Centro, a planned suite of server products including e-mail, management, and security products. (For more details about Centro, see "Centro to Integrate Midsize Platform".)

Business Solutions Branding and Roadmap

The most important Microsoft products aimed specifically at the midmarket are its Microsoft Business Solutions products— Axapta, Great Plains, Navision, and Solomon, plus its customer relationship management (CRM) product. The company announced at the Business Summit that these products will eventually converge into a single product line called Dynamics (a name also used by a Great Plains accounting product).

The initial and obvious change will be in product naming. As each of the separate products is upgraded, it will get a Dynamics prefix, so that the next version of Microsoft CRM, scheduled for release in early 2006, will be called Dynamics CRM, while the next versions of Axapta, Great Plains, Navision, and Solomon will be released as Dynamics products with the letters AX, GP, NAV, and SL, respectively. These updates will also begin to incorporate common features across the business lines, such as an Outlook-like user interface and more emphasis on portals.

In 2008, Microsoft plans to ship a single Dynamics product line, although this product will probably consist of multiple configurable modules, as the Business Solutions lines do today. This will be the shipping version of the long-awaited Project Green, the code name for a single code base intended to combine the capabilities of the disparate Business Solutions lines. Users of the individual product lines will be able to upgrade to the combined Dynamics product, the company promised.

Dynamics is not merely about naming, Chief Software Architect Bill Gates and other executives emphasized. The next iterations of these products will ship with about 20 role-based interfaces that reflect Microsoft's research on midmarket companies' needs, and the converged Dynamics products will go even deeper, shipping with up to 40 templates that define more complex business processes and workflows that generally cross multiple roles. Customers will be able to modify these tools (using the Windows Workflow Foundation, which will be built into future versions of Windows) to reflect unique characteristics of these processes, and will also be able to map employee roles on these processes.

For example, an order entry process will involve steps such as entering customer information, checking inventory, determining customer discounts or incentives, entering actual order data, creating a warehouse pick order, and defining a shipping method. A field salesperson's role will include components of that process, such as accessing (and updating, if necessary) customer information and entering order information, while other parts of the process will be completed by employees with different roles or by automated systems.

Small Business Accounting Release

Microsoft's Small Business Accounting (SBA) product was also launched at the Business Summit, even though it is not positioned as a midmarket product. (The company wants midmarket customers to purchase the more expensive financial management products in its Business Solutions lines—soon to be renamed Dynamics.) Built by the Business Solutions product unit, SBA fills a gap in Microsoft's product line between home-office accounting products such as Microsoft Money and the more complex Small Business Financials, part of the Great Plains product line. It will compete with comparable products from Intuit and Sage, among others.

Unlike Small Business Financials, which typically costs more than US$2,000 to purchase, deploy, and configure, SBA is designed to be deployed by the customer and will initially cost (after rebates) US$149 in a stand-alone version or US$399 as part of a new edition of Office called Small Business Management Edition, which will also include Access, Excel, Outlook, PowerPoint, Publisher, and Word 2003.

Availability and Resources

Much of Microsoft's vision for the midmarket is long range: other than SBA and the simple renaming of existing Business Solutions products, much of what the company showed off at the Business Summit will not appear for three years. Centro will ship after Longhorn Server, putting it into the same 2008 time frame as the converged Dynamics products.

The Small Business Accounting site, which has evaluation versions and information about rebates, is at www.microsoft.com/smallbusiness/products/office/accounting/rebate.mspx.

Small Business Accounting was described in detail in "Small Business Accounting Fills Product Gap" on page 25 of the Dec. 2004 Update.