Those are the respective locations of Great Plains Software and Navision, which Microsoft acquired in one of its most important initiatives in years. The two companies, which make accounting and other software, form the core of Microsoft's long-planned move into enterprise applications--complex programs designed to help companies do such things as close books, process orders, manage inventory, and track customers, suppliers and employees.
That is a daunting prospect even for the world's largest software company, thrusting it into unfamiliar terrain dominated by such industry giants as Oracle, SAP, Siebel Systems and PeopleSoft.
"(Microsoft's) intention is to lead and dominate the midmarket for business applications, not just for accounting but by selling anything an enterprise would need to run their business," said Paul Hamerman, an analyst at technology research company Giga Information Group.
Microsoft, however, can hardly be characterized as an underdog. Controlling more than 90 percent of the desktop operating system and business application markets, the company has unparalleled influence on the entire high-tech industry and has repeatedly shown that it can take new markets away from long-established competitors.
The company sees its thrust into enterprise business applications as the linchpin of a broader strategy. As sales of its mainstay Office business software begin to wane, Microsoft is hoping to tap into the multibillion-dollar potential of the enterprise software market and the twin technologies that have become hot corporate trends in recent years--enterprise resource planning and customer relationship management, better known in the business as ERP and CRM.
"Both the consumer and business markets for desktop applications are saturated," said Matt Rosoff, an analyst at Directions on Microsoft. "It's getting harder and harder to get people to upgrade to the next version of Office. So, one way for Microsoft to grow is to get into markets where it hasn't been competing, such as enterprise applications."
Microsoft Chief Executive Steve Ballmer told CNET News.com that the software maker is concentrating on what he sees as a hugely lucrative market serving small- and medium-sized businesses. "The biggest part of the computer market is not the enterprise or the consumer market. It's the small and medium-size businesses," he said.
Ballmer also downplayed competition with established business application makers. "There will be some overlap between us and SAP, Siebel and others...But that overlap isn't 90 percent of their revenue or 90 percent of our revenue. It's a small percentage of our revenue in both CRM and ERP," Ballmer said.
Key to Microsoft's strategy is a time-tested weapon it employs in hostile territory: undercutting prices. When the company wanted to make its SQL Server database management software a market leader on Windows, Microsoft slashed prices in competition with database giant Oracle. To gain a foothold in the local networking business dominated by Novell, the company heavily discounted its LAN Manager software. And to displace WordPerfect as the ruler of word-processing software, Microsoft created Office as a value pack of business applications.
The practice continues with enterprise software, particularly in customer relationship management. Microsoft CRM, or MSCRM, will debut this year at prices between US$20,000 and US$30,000 for complete packages, including setup and integration. Competitive products routinely sell for at least US$100,000 and can often cost millions of dollars when integration and consulting fees are included, giving Microsoft a huge edge with small to medium-size customers.
In some respects, Microsoft is taking a page from Oracle's playbook. Both companies used their roots in IT infrastructure, such as databases and development tools, to branch out into applications that run atop such products. Selling applications in turn fuels new sales of infrastructure products.
That means every time Microsoft makes an enterprise application sale, it sells more copies of products like Windows operating systems and the SQL Server database--used by all of Microsoft's enterprise applications--along with development tools like Visual Studio.Net. As an added incentive, Microsoft is offering steep discounts to customers that buy business applications and infrastructure software.
"Microsoft is hoping that its business solutions unit will not only spur sales of new products, it will help them sell...more copies of Windows and encourages the sell-through of Exchange (email server software) and Office," said Rosoff. "They have a tremendous amount of money to invest in this business. They can't be ignored."
If Microsoft at times seems obsessed with enterprise applications, the numbers show why. The market has been a lucrative one, generating double-digit growth for leading software companies until the recession dampened demand. In the late '90s, businesses rushed to install new enterprise applications as a way to avoid Y2K problems. Companies invested in still more applications to join the dot-com boom.
Microsoft may have missed those waves, but it has no intention of being left out in the next one. The company predicts that the market will pick up again in two to four years, giving it just enough time to integrate the companies it has acquired, assemble various products and accelerate its sales efforts.
Microsoft executives also hope a thriving enterprise applications business unit can help offset any slowdown in the desktop applications market. Office sales are down slightly for the year, and there's little room for growth aside from selling upgrades to existing customers--a troubling indicator for a product that contributes more than one-third of Microsoft's revenue.
That's where Great Plains and Navision come in. Great Plains, which Microsoft bought for US$1.1 billion, had around US$300 million in revenue last year; Navision, acquired in July for US$1.45 billion, gives Microsoft an instant market in Europe with US$181 million in sales last year. Together, the two companies constitute Microsoft Business Solutions, one of seven lines of business Microsoft Chief Executive Steve Ballmer named as core areas of focus and investment for the company.
The fledgling unit, with several hundred million dollars in annual revenue, makes up a wee portion of Microsoft's US$28.37 billion in sales and is dwarfed by SAP, the 800-pound gorilla in the market, with US$7.24 billion in revenue last year. But Microsoft has far-reaching plans for rapid expansion.
"To accelerate demand and get customers to switch to Microsoft applications, it will take a next-generation value proposition, and that's about three years out," said Lynne Stockstad, general manager of Microsoft Business Solutions.
It may be even longer if Microsoft hopes to create a franchise that approaches anything like the wild success of Office and its popular desktop applications, such as Word, Excel and PowerPoint. Where such desktop software is designed for personal use, enterprise applications have the task of improving large-scale and complicated business operations.
In addition to six product lines it gained in its acquisitions, Microsoft plans to introduce five new sets of applications in the next 12 months. One of these sets, MSCRM, is designed to help companies streamline their sales and marketing, making Microsoft a player in the customer relationship management market ruled by Siebel Systems. A second set is meant to help service companies organize projects and delegate work, and yet another aims to help retailers track inventory and gather sales information.
But Microsoft faces serious competition in these areas, not the least of them a fierce group of rivals including SAP, Siebel, Oracle, J.D. Edwards and PeopleSoft. Moreover, Microsoft needs to convince its all-important application resellers--a loosely organised collection of companies that sell billions of dollars worth of software--that it offers them a better way to make money than these competitors.
"Microsoft has to convince systems integrators that it is a deal all the way around--marketing, sales, technology," said Rob Horwitz, an analyst with Directions on Microsoft.
