Background

Microsoft Business Solutions (MBS) is the Microsoft division that came about when “Microsoft Classic,” as MBS personnel refer to it, announced the proposed acquisition of Great Plains on December 21, 2000. At the time of the acquisition announcement, Microsoft President and CEO Steve Ballmer made the following statement:

“In nineteen years of operations Great Plains has proved to be one of Microsoft's most innovative partners. Microsoft and Great Plains see the future of business applications for small and medium-sized companies in the same way.”

This marked Microsoft's entrance into the business applications market, a bold new step from a company very much used to taking bold new steps. Up to this point, Microsoft had gained dominance in both the operating system market and the desktop applications market and was seeing increased acceptance in the market for development languages and platforms.

Microsoft completed the acquisition of Great Plains on April 5, 2001. The deal cost Microsoft approximately $1.1 billion in stock at the time it closed. Upon completion of the acquisition, Great Plains President, Doug Burgum, made the following statement:

“Microsoft Great Plains will continue to enhance our solid reputation for customer service and innovative business solutions. With the commitment of our 2,200 global channel partners, more than 2,000 team members, and the tremendous people and technical assets within Microsoft, we have the opportunity to reshape some of the basic assumptions that have guided commerce in the past and truly improve the lives and business success of our customers.”

Just a few years prior to this, Microsoft founder Bill Gates had been quoted in Great Plains' 1998 Annual report stating:

“The relationship between Microsoft and Great Plains is an example of a real partnership that demonstrates how technology companies can work together for the true benefit of our mutual customers.”

Clearly, the companies were highly aligned long before the acquisition. The official press description of Great Plains at the time the acquisition was completed was published as

“More than 140,000 businesses in 132 countries count on Microsoft Great Plains Business Solutions. Microsoft Great Plains provides business applications that help small and midmarket companies become more agile in today's interconnected economy by extending specific information and procedures to employees, customers, vendors and partners. The business applications automate end-to-end business processes across financials, distribution, project accounting, electronic commerce, human resources and payroll, manufacturing, supply chain management, business analytics, sales and marketing management, and customer service and support.”

Prior to its acquisition by Microsoft, Great Plains had been in existence in Fargo, North Dakota for nearly twenty years and had built a well-organized Value Added Reseller (VAR) network. Of course, the company had a solid set of financial, accounting, and supply chain management applications based on Microsoft technologies, but it was probably the advanced channel network that made Great Plains a prime target for acquisition by Microsoft. These 2,200 partners had the relationships and experience to sell financially oriented applications to small and medium-sized businesses. Microsoft and Great Plains went about integrating their organizations and in September 2002 (announced at the annual Stampede conference) Great Plains officially became Microsoft Business Solutions.

The next big step in Microsoft's Business Solutions journey came on May 7, 2002, when Microsoft announced its plans to acquire Navision, a leading European developer of business applications. Much like Great Plains, the Navision acquisition offered Microsoft a well-developed partner channel, but in an entirely separate geography—Europe. Prior to their integration into Microsoft, both Great Plains and Navision were very similar in their respective markets. With both acquisitions in place, Microsoft quickly gained strong United States and European partner channels; something that would have taken any other company years, if not decades, to accomplish.

The Navision acquisition was completed in July of 2002, but not without resistance from at least one large competitor. The Sage Group PLC of England worked to have the European Commission investigate the deal on the grounds that Microsoft/Navision might engage in anticompetitive behavior. The investigation was not approved, but it did signal the market's growing awareness that Microsoft as a Business Solutions player was formidable.

Microsoft has been dabbling in CRM for some time. Their email client, Microsoft Outlook, has traditionally provided competition in the contact management space and their bCentral services offered some CRM functionality for smaller businesses. In fact, Microsoft's initial inroads into CRM date back to February of 1999 when a plan was approved to undertake CRM-like projects for MSN (Microsoft Network). One of these projects, Carpoint, led to 20,000 auto dealers using the service for CRM-type functionality. After this came the bCentral Customer Manager and eventually the development of the Microsoft CRM code base. Prior to the release of Microsoft CRM in January 2003, the Microsoft CRM code base had been in development for nearly three years.

However, Microsoft's first major foray in traditional CRM came in the form of a legacy reseller agreement between the Great Plains division and Siebel Systems, the traditional CRM market leader. Siebel had long dominated the enterprise CRM market and needed a strategy for selling into the midmarket. Great Plains had a large midmarket sales channel, but no CRM product to sell. It seemed like a match made in heaven, and the deal was sealed in July of 1999. The two companies worked together to create an impressive integration between the product sets. However, what seemed like a good thing at first just didn't work. The Great Plains resellers were perhaps too financially oriented and the Siebel product was powerful but too complex for the market. The partnership struggled and was finally laid to rest in August of 2002.

The end of the Microsoft-Siebel reseller relationship came about, not coincidentally, just as Microsoft was beginning initial training on its own homegrown CRM solution. Microsoft had been planning a CRM solution/direction for some time and announced in February of 2002 that they were well underway building a product. Microsoft CRM, which is officially named Microsoft Business Solutions CRM, is the first Microsoft product to be built largely with .NET technologies. The database is SQL Server 2000, the application is written in C#, and the Web interface has been built with ASP .NET. Because Microsoft has been investing so much in the .NET strategy, the fact that they chose CRM to be the first true .NET application made a statement about their dedication to the CRM market.

The origins of the Microsoft CRM application are not entirely clear. There is some tie-in to the bCentral efforts and there are also rumors that Microsoft looked at existing midmarket CRM vendors for acquisition and ultimately decided that it was best to start from scratch. Regardless, the Microsoft Business Solutions team is forging rapidly ahead and has made a lot of progress in a short period of time. In addition to the progress they have made on the product side, Microsoft has made a strong effort to recruit business partners with true CRM expertise as well as to hire experts from the CRM industry.

Microsoft CRM was released to manufacturing (RTM) on January 21^, 2003, three weeks after the generally expected arrival. Pre-orders were accepted in the third quarter of 2002 and it is estimated that somewhere around 400 implementations were sold prior to release and many more after release. This is amazing when you consider that in the three-year life of the Microsoft/Siebel agreement, less than 500 implementations were sold.