Xenakis on Technology: Microsoft Acquires Great Plains Software

Microsoft would like to make an accounting system available on its bCentral (www.bcentral.com) service, which is a Microsoft hosting service for small businesses, and one possibility would be to develop a self- configuring ASP version of that a business could run on bCentral.

But this would undercut Great Plains' resellers, and Great Plains' Reller says that this definitely will NOT happen. "Microsoft's bCentral is more like [low end ASP-only accounting software vendor] Intacct," she says. "Today we have a hosted offering through our partner [reseller] channel. Once the acquisition is complete, we'll look at how bCentral and our strategies come together, but we will always continue to leverage the partner model."

So Great Plains may not use bCentral at all? "It's too big a leap to say that bCentral would not be a leveraged component," says Reller. "There could be some great bCentral components that add value to our customers and partners."

In other words, Great Plains expects to continue doing business pretty much the same as before, without risking anything that might disturb its valuable reseller channel.

So it's easy to see what Great Plains is getting out of this deal: access to Microsoft's vast assets and resources. But what is Microsoft getting out of it?

"We have tremendous domain expertise in business applications and the mid-market, and that's where Microsoft sees value," says Reller. "They don't have domain expertise in the business application area, and they need that to serve the mid-market."

Microsoft's public statements suggest that it may tap Great Plains' expertise to develop its own bCentral-based accounting system, which would compete with Intacct and NetLedger.

If Microsoft can be happy with so minimal a return from its investment in Great Plains, then things may go well. But if, as expected, Microsoft is going to demand substantially greater growth and further product integration than that, then Microsoft will have to deal with the same channel-contention issues that every other firm has had to deal with, and which have caused more than one of these firms to founder.

(Send John Xenakis your questions and comments for Xenakis on Technology (XOT) to xot@jxenakis.com.)

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