Cover Story

Chasing SMBs

Microsoft is targeting SMBs with a revamped enterprise application suite that combines a familiar interface and lower pricing than traditional enterprise wide application suites. Priya Jain reports

According to a recent study by AMI Partners, the small and medium business (SMB) sector constitutes approximately 95 percent of the total industrial units in India and is a substantial contributor to the country’s GDP. Small enterprises constitute approximately 99.4 percent of the country’s SMB universe. At present, Indian SMBs provide employment to over 21 million people and more than one-third of the enterprises would have recruited an additional 3.4 million personnel by end-2005.

Eyeing this huge market almost all the vendors are offering specially crafted solutions for this segment. Microsoft recently introduced Microsoft Dynamics as the platform for a suite of offerings for the SMB segment. Under this, it is offering financial management, supply chain management (SCM), and customer relationship management (CRM) solutions designed for SMBs.

Microsoft’s offerings for the SMB segment have been available for quite some time. It is just to renew focus on this segment that they rebranded their Microsoft Business Solutions (MBS) as Microsoft Dynamics. However, the one remarkable change this time around was Microsoft spoke to almost 2,000 SMB customers and came up with 50 profiles of roles that people work on before going ahead with the change.

Microsoft chose to rename the products and use this as the new brand because they wanted to simplify the line of business solutions to make it easier for customers. With a single brand, they can strengthen the line and provide increased support for partners. Moreover, they wanted to signal a new generation of products that were reflective of the Project Green vision.

Keen on Green

" We feel rebranding makes it clearer to customers that Microsoft has financial management, SCM and CRM solutions designed to meet their needs" - Sushant Dwivedy Business Group Lead - MBS, Microsoft India

The new Microsoft Dynamics brand represents Microsoft’s strategy to align its products with its business management suite product and R&D roadmap, formerly referred to as Project Green. The strategy encompassed a people and process-centric design approach to deliver breakthrough innovation in two significant release waves.

The company’s focus on SMBs goes back to 2003. Microsoft had compiled its SMB portfolio under the name Project Green. Microsoft’s integrated ERP suite consisted of Great Plains, Solomon, Axapta and Navision applications.

Sushant Dwivedy, Business Group Lead - MBS, Microsoft India explains, “Project Green was implemented in two phases. The first phase focussed on having a common user interface for the products and the second phase was to integrate the back-end and business logic. As a result, Microsoft Dynamics is a line of integrated, adaptable business solutions that automate and streamline financial, customer relationship and supply chain management.”

According to Microsoft Dynamics roadmap, the first wave which will be shipped between 2005 and 2007 includes a common user experience, portal, business intelligence integration, and Web services layer. The second wave, which will start rolling around 2008 will build on the first wave and extend the model-driven approach to finer granular business processes. It will help lower costs further. Customers will receive these innovations by staying current on their Enhancement Plan.

While Microsoft will continue to use MBS as the name of one of Microsoft’s seven groups internally, they have decided to rebrand their business management products to make their customers’ purchasing decisions easier.

“We believe this rebranding makes it clearer to business customers that Microsoft has financial management, SCM and CRM solutions designed to meet their needs. Our product lines will converge and our branding and product naming strategy is the next logical step,” explains Dwivedy.

Microsoft Dynamics include applications and services for retailers, manu-facturers, wholesale distributors and service companies doing business in the domestic circuit or in multiple countries. Dwivedy informs, “As part of the Microsoft family of offerings, these solutions are similar to other easy-to-use personal productivity tools like Microsoft Office. Further, they are readied to work with productivity applications and technologies like Microsoft Windows Server System and Microsoft .NET.”

When Microsoft acquired these companies there was scepticism on the roadmap the company would offer. By welding the acquisitions into a suite of offerings the company seems on the right track. Alok Shende, Director, ICT Practice opines, “Microsoft had a number of acquisitions like Navision and Great Plains in the integrated and adaptable business solutions space therefore consolidation and restructuring of products was a logical need for MBS.”

Eyeing SMBs

Microsoft is not the only one banking on this emerging SMB segment. SAP beat it to market with SAP Business One, an integrated software solution for small businesses. Business One offers a full-fledged enterprise solution enabling SMBs to have a single system to automate, manage and control critical operations such as sales, finance, purchasing, inventory, manufacturing and interaction with customers, suppliers and employees. SAP started its SMB initiatives in 1998 and has in India over 54 percent marketshare and 850 customers that include 450 SMB customers.

SAP signed 120 new deals in 2005 in the all-in-one space and 15 new deals in the recently-announced Business One offering. Its ecosystem of partners consists of 25 partners for Business One and 20 for all-in-one. With the initial implementation cost for all-in-one being Rs 25 lakh and Business One Rs 10 lakh, they have had considerable gains in the segment.

Further, it makes the competition stiffer as SAP Business One’s new version is now available with faster installation, more intuitive use, space for global trade and easy Microsoft Excel-based reporting and analytics.

Comments Nagraj Bhargava, Director, Marketing, Strategic Initiatives, SAP, “A product’s value proposition is not dependent on a single criterion such as ease of use. Customers consider other aspects like market references and the marketshare of the company while buying a product. This is where SAP scores. Ease of use by itself cannot override a customer’s decision to buy SAP products.”

" Microsoft has an advantage from a usability, ownership cost and ubiquity perspective with SharePoint, SQL Server, Office 2007 and Vista playing a huge role" - R ‘Ray’ Wang Senior Analyst Forrester Research

Oracle too is not far behind. SMBs make up more than 80 percent of Oracle’s 25,000 plus customer base in APAC.

R ‘Ray’ Wang, Senior Analyst, Forrester Research informs, “What’s happening is SMBs are looking at adopting one middleware platform and are choosing among SAP, Oracle, IBM and Microsoft.” He does add that Microsoft could be a winner in the future, “We see Microsoft having an advantage from a usability, ownership cost and ubiquity perspective with Windows SharePoint, SQL Server, Office 2007 and Vista playing a huge role.”

Though these products are fine-tuned to the Indian market, they need a strategy with regard to SMBs. Alok Shende, Director, ICT Practice, Frost and Sullivan discloses some interesting strategies that companies have for SMBs. According to him, the first strategy is the pricing mechanism. As the level of customisation is need-based there is critical but little customisation and hence the price goes down.

The second strategy is playing a volume game where companies have a large chunk of customers—about 60 to 70 percent from the SMB segment—helping to reduce the price points. And the third key strategy is micro-verticalisation of channels where partners specialised in specific business segments like retail, automobile and discrete manufacturing offer tailor-made products and services. For instance, Cisco is focussing on the segment with its two-tier channel primarily comprising registered or premier partners targeting SMB customers.

Shende says, “Business solutions companies are focussing on SMBs for the past three to four years. Now this trend seems to be maturing with increase in penetration of integrated and adaptable business solutions. According to a Frost & Sullivan research on revenue marketshare for the mid-market ERP applications, Microsoft was at number three in terms of the marketshare in 2004. However, its marketshare is growing in this segment.”

Ecosystem of partners

When targeting the SMBs a lot depends on the partners as these are the people who are constantly in touch with the customers. Microsoft is not taking any chances.

Microsoft Dynamics solutions are delivered by an ecosystem of about 60 certified partners in India which include ISVs. These partners specialise in different industries and range from small, domestic consultants to multinational groups. They are known for providing local, personalised service, from planning and implementation, to customisation at a granular level with support and education.

Keeping in mind the price sensitivity, this segment has the initial implementation costs coming to about Rs 4 to 5 lakh. Besides Microsoft Dynamics software and services can be customised to an individual user’s unique requirement. All functionality can be made available on the Web for the convenience of employees, customers, vendors and partners.

Wang says, “While establishing these offerings in the SMB segment, the challenge for companies like Microsoft lies in establishing reputable and trusted partners in each country. Moreover, one wants partners who can service and provide development of new functionality on top of the existing platform of solutions. This is a tall order and requires long-term commitment and support.”

But then the others too are gearing up. For instance, SAP has signed Hewlett-Packard as its national distributor. Leveraging on HP’s channel experience and using their vast channel infrastructure of solution implementers and partners in India, they will ensure that the SAP solution is available to SMBs spread across the country. HP till date has almost 25 partners that are looking at this segment.

Gaining marketshare

Microsoft Dynamics has almost 400 customers in India such as SREI Infrastructure Finance, LM Glasfiber, Geoscope Information Sys-tems, AIMIL, Tricolite Electrical Industries and Munjal Auto to name a few.

The other good news for Microsoft is that licensing and pricing is no longer an issue among the SMBs for buying integrated, adaptable business solutions. Wang says, “The standardisation of database, middleware and hardware platforms have helped lower costs. New deployment options such as On-Demand, Software as a service and turnkey solutions have reduced costs.”

Many analysts feel that Microsoft has an edge over the other offerings due to the user-friendliness and the standardisation it allows. Bhaskar Rao, CEO, Nelito says, “The acceptance of Microsoft Dynamics is higher than the others because it is user-friendly. Its lifecycle of execution is smaller than the others in the market. We expect a good conversion rate. In about six months of our partnership with Microsoft Dynamics we have three customers.”

Nelito, an ISV-certified partner of Microsoft Dyna-mics, is providing integrated solutions to banks. It has implemented a pilot project of Axapta in Jaipur Nagaur Bank, a regional rural bank of north India. Previously, the bank had a standalone locally-developed module.

The other instance is of HeroITES, a part of the Hero group of companies, which required a business solution that would integrate information within the company to streamline certain critical ongoing business processes for optimum business productivity.

HeroITES partnered with Munjal eSystems, a Microsoft-certified business solutions partner, to customise and implement Axapta, Financials l, Human Resource Management (HRM) 1, HRM 2 and HRM 3 modules of business solutions.

S Madhavan, President and CTO, Servion Global Solutions also a certified partner agrees, “In the next six to eight months Microsoft Dynamics will gain momentum in the SMB market.”

Microsoft may have got off to a slow start but it is trying hard to pull ahead of the leaders with its new initiatives. The company could potentially gain marketshare due to the standardisation and ease-of-use it offers.

priya@expresscomputeronline.com