Microsoft financial analyst presentation highlights business applications' poor cousin status

The March 13 Microsoft (MSFT) presentation and Q&A session for financial analysts, conducted by the Busness Solutions general manager and by the Business Division CFO at Microsoft Convergence, hid the very slow payback Microsoft is realizing from its 2000 and 2002 investments in Great Plains and Navision respectively. Others are picking up my cry from a few years ago that Microsoft unload the entire operation; perhaps Great Plains founder Doug Burgum would come out of retirement and buy it back.

Kirill Tatarinov, Corporate Vice President, Microsoft Business Solutions, says his group is playing in what IDC measures as a $70 billion market. He's referring to the entire packaged applications market. Certainly, at that level, which includes collaboration applications such as Office and so forth, Microsoft is doing great, probably with about 20% of the market.

But Tatarinov went on to say how happy Microsoft was about having a billion-dollar year in "Business Solutions" in the Microsoft fiscal year that ended in June 2007. That's Dynamics CRM plus the former Damagard, Great Plains, Navision, Solomon ERP products (which they now admit they will never try to "fuse" together, in "green" or any other color). That's only about 3% of the market SAP (SAP) and Oracle's (ORCL) applications group talks about when they talk about ERP and CRM.

Microsoft might counter that it effectively competes only in the midmarket. But it didn't. And that's good because certainly it has not made this now going-on-a-decade-long effort simply to compete for such a small slice of the applications market. Especially with SAP coming down market after that same slice.

On the good news side, I estimate Microsoft did about $1.2B in calendar year 2007, 22% growth. And it does have the advantage in that it is already in the midmarket and has great channel partners, something that SAP needs badly. In fact, Doug can stay in retirement. Why doesn't SAP just buy this part of the Microsoft business?

But overall it was a pretty weak status update full of a lot of trivia about how Microsoft is trying to tie its Dynamics users into eBay and online Paypal services. And the usual nod to Software Plus Service.

-- Dennis Byron