Microsoft Discovers Midsize Business

Saying the midsize market has been neglected, the Redmond, Wash.-based software developer yesterday announced its next generation of business applications, including Microsoft Corp.'s Dynamic, a role-driven initiative to integrate various business applications across an employee's field of work and Centro, a mid-market infrastructure bundle. Both are designed specifically for the market, which Microsoft defines as companies with 50 to 1,000 employees, and a key growth area for the company in coming years.

But the market is already served by several vendors who produce products specifically for companies in the midsize range, and quite well, according to Phil Haines, of MSGi, of Eagan, Minn., a midsize business consultant.

"Microsoft may have ignored the market, but the market isn't ignored, by any means," he said. "There are hundreds of solutions out there that meet the midsize markets needs quite nicely—SAP, PeopleSoft, and Oracle. Microsoft will be a player when they arrive, because they're Microsoft. But these other companies won't just go away."

Click here to read more about Microsoft's midsize bundle, Centro.

In introducing Dynamic yesterday before a gathering of resellers and business customers, Microsoft CEO Steve Ballmer said midsize businesses were the least well served market across the spectrum.

"They have their own set of issues," he said. "They compete with the enterprise, while they are challenged by scale to find solutions they can still afford."

Applications designed for the mid-market, like Dynamic and Centro, would create a niche for them among Microsoft's line, offering more valuable solutions, he said.

Microsoft's new focus has already been a help, said Scott M. Urbatsch, chief technologist at Polar Systems Inc., of Portland, Ore., which works with midsize businesses. His company is already making inroads on quotes for Microsoft's Mid-Market Server, which was announced last week.

"It's a perfect fit for most of our clients," he said. The small business stuff is too restrictive and the bigger stuff is out of their league. The midrange is the perfect fit. And that's a sale."

While eager for customized attention from vendors, the midsize business market consumes vast amounts of technology and is poised to do more. According to research conducted by AMI, the segment consists of 1.4 million businesses worldwide, with 68 million PCs (49 per company) and 4.8 million servers (three per company). In terms of IT investments, midsize businesses spent $134 billion on software and IT services in 2004, which is expected to grow to $185 billion by 2009.

Click here to read more about Microsoft's next generation of business applications, Microsoft Dynamics.

To reach the market, Ballmer said, the channel would be integral and the company intends to cultivate its partnerships with resellers.

If we're to have them do amazing things in IT, we have to re-engineer our relationship," he said. "We're going to invest in the partnerships and tools that give us the personalized connection with millions of customers."

"There is a great opportunity for revenue in the mid-market, and that doesn't mean raising prices on them," Ballmer added. "It means improving solutions and serving a set of customers better." Mike Menard, president of DataSource Inc., a Worcester, Mass., VAR already installing Microsoft solutions in the SMBs (small and midsize businesses) market, said Microsoft's entry to the midsize market would entice him and his peers to consider entering the market with them.

"With the SMBs and midsize businesses the sales cycles are very similar: slow. From a partner standpoint, it would obviously be better to secure larger deals with the same or similar effort," he said. "Any advantage Microsoft gains in that sector would be a benefit to us."