Microsoft to Sink $850 Million into SMB Division

TORONTO — Microsoft plans to invest $850 million over the next year in sales, marketing and research and development programs dedicated to beefing up its Microsoft Business Solutions (MBS) division.

And as part of the renewed MBS focus, Microsoft is considering creating an MBS Global Services plan, via which the division will offer more consulting services around Microsoft’s MBS wares.

Microsoft Senior Vice President Orlando Ayala highlighted Microsoft’s plans to focus heavily on its small/mid-size business (SMB) unit during the opening day of Microsoft’s annual Worldwide Partner Conference here. Microsoft is expecting 5,000 of its channel partners to attend its four-day conference.

The MBS division is Microsoft’s second smallest (revenue-wise) of its seven, independent profit-and loss centers. In the third quarter of FY 2004, MBS revenues were $153 million, compared to $190 million in Q2. Officials have attributed the weak showing to too many new district sales folk in the U.S., as well as a slow start for the company’s merged MBS/corporate sales team. (Microsoft officially merged the teams as of July 1, 2003.)

Ayala — who recently added MBS chief-operating-officer responsibilities to his existing small and midmarket solutions and partner group ones — told conference attendees that Microsoft has designs on expanding and dominating the SMB markets in which it is playing. These include ERP, CRM, supply-chain-management and retail-management.

“We went through a year that was very painful,” Ayala said, in a nod to Microsoft’s difficulties in merging its various channel programs and sales forces. In FY 2005 (which commenced on July 1), we will hit our targets, but that’s not enough. We want to scale to millions of customers.”

Ayala said there are an estimated 40 million customers who potentially could purchase MBS products. “We want all of them,” he told conference attendees. “We’re going to win.”

In a move reminiscent of Microsoft CEO Steve Ballmer’s “developers, developers, developers” chant at a Microsoft sales meeting, Ayala led keynote attendees in a chorus of “We will, we will rock you.” Ayala called the refrain from the “We are the Champions” song by Queen was Microsoft’s fiscal 2005 theme song.

As part of the $850 million investment that Microsoft plans to make in MBS, Ayala said the company plans to: