I wonder if any one outside of the USA had heard of an application package developer called Great Plains before this year? Indeed I suspect that the significance of this American company had passed unnoticed by many in the IT industry, including myself. But all that has changed, Great Plains is now a Microsoft subsidiary.
Great Plains makes business applications packages targeted at the smaller business, typically up to 500 employees. It claims to be an ERP package, although it hardly competes with SAP, etc. on functionality and a 500 employee company is hardly an "Enterprise". Nevertheless Great Plains has a reputed 2,200 employees world-wide and Microsoft has paid $1.1 billion in stock (at least that was the value when the deal was signed, you win some, you lose some), so they are hardly insignificant.
This is a very important acquisition, the second biggest Microsoft has made, because it furthers the suggestion that they are aware that they have to change if they are to progress. They are trying a number of different tracks at the moment, a sensible ploy given how cash rich they still are. They are struggling badly in their attempts to penetrate the large scale systems dominated be IBM, Sun and Hewlett-Packard and they have only just started to move into the games market, but their services divisions show signs of improving despite the endless attacks by hackers. But the fact of life is that Microsoft make their obscene profits because they can grossly overcharge for their Office applications package because they have a monopoly on desktop systems. It is the control of the applications that stops users from abandoning Windows, not any love for that crude operating system. This is where the profit has come from and so it follows that they will try to do the same to the server market as they did to the desktop, a rather unpleasant prospect. They have had limited success by controlling the actual server software with IIS, SQL Server, Exchange, et al, but to gain total control it is the applications that count.
The Great Plains packages do not directly compete with SAP today, and it is unlikely that Microsoft will make any attempt to move in that direction for many years to come, although they will do so eventually if they are not stopped. They will focus on dominating the market that Great Plains are already in, and that is very bad news for all those smaller companies who have followed the Microsoft line over the last few years in developing applications for NT. This also means that in the short term Microsoft are not in a position to threaten Intuit, the market leader in applications for small companies, but we can be sure that the challenge will not be long in coming.
Microsoft had already made a start before the Great Plains acquisition with a Web site for small businesses called bCentral. This has been a slow starter and has only recently launched an accounting package of its own. Nevertheless, bCentral will obviously benefit from the new arrival, with a far more comprehensive application offering. This may be a slow growth however since there are signs to suggest that small companies are worried about committing their data to a Web based service. Intuit, who are developing a Web-based package of their own, are still claiming that this is only a precaution and that their customers prefer a PC package. But that surely is going to be an early target for Great Plains, it will be much easier than taking on SAP, Oracle or PeopleSoft in the first instance!
There are some interesting gambles that Microsoft has taken in acquiring Great Plains. It must be obvious to every Microsoft partner involved in developing applications that their future looks dim, just as Microsoft's assurances that they didn't intend to take over the markets of their partners in the PC sector now ring untrue. Great Plains is still small fry in the greater market for applications and if they cannot dominate it, then Microsoft are likely to drive their partners into other camps. Unlike the desktop, this time there is another camp, Linux. While it is not yet practical to push Linux on the desktop, it is doing very well as a server. All it lacks is a bigger range of applications. The purchase of Great Plains should stop any one with a similar product from furthering a Microsoft alliance. They will probably all develop for both NT and Linux, which in the end will prove the winner for Linux.