Prior to the Microsoft acquisition, the accounting software maker had no significant presence among large corporate users. Is this about to change?
Is Great Plains ready to use its newfound financial clout as a Microsoft subsidiary to shift its strategy in the enterprise resource planning market?
The company says it’s not prepared to expand beyond the market served by its existing ERP package, E-Enterprise, which is sold to firms with $100 million to $500 million in annual sales. In this segment, it competes against some suppliers of mid-range systems such as NavisionDamgaard, Lawson, and Epicor.
“I don’t think our positioning of E-Enterprise will change drastically,” says Jeff Trosen, Great Plains’ vice president of product development.
Representatives from some Great Plains competitors say they have noticed no discernible impact since Microsoft’s acquisition closed in early April, although some say they are watching carefully and expect to see some change in the company and the broader financial software market before long.
But Yvonne Genovese, an analyst with Gartner, says Great Plains has been eagerly recruiting a development partner, preferably an end user from the process manufacturing sector, such as a maker of chemicals or pharmaceuticals, to help it develop an enhanced version of E-Enterprise geared to manufacturers. Gartner had been sought out for a consulting contract by one prospective development partner to help it evaluate the Great Plains proposal, and the company ultimately rejected the project.
To the extent that it’s seeking out an end user to help it develop a new system, Great Plains is no different from any other software company that tries to offset the high cost of developing an enterprise system. Once the bulk of the development costs have been absorbed by the initial end user, the finished product is then sold to other accounts at a much higher margin.
“They’re looking for places to expand their product,” Genovese says, who also notes that the process manufacturing market is largely an untapped field for the major ERP vendors. But whether Great Plains uses this added functionality to extend E-Enterprise into the high-end market is far from clear.
Genovese says Great Plains needs to enhance E-Enterprise with manufacturing-specific functions such as production control and tracking, costing, workflow management, and accountability and manufacturing audit trails. Some of these features are provided by Logility, which has a joint marketing deal with Great Plains, but Genovese notes that if Great Plains can offer these functions itself, its products will have a greater appeal to prospective clients.
A Logility spokesman said his firm sells its Voyager supply chain product to firms with $250 million to $2 billion in sales, and that Great Plains is using a scaled down version of the product for its E- Enterprise customers.
Great Plains’ Trosen says the software company did in fact plan to expand the functionality of E-enterprise for the manufacturing sector. But the company scrapped those plans, partly in deference to the need to conserve its resources in the midst of the soft economy and opted to work on expanding its relationship with Logility for supply chain management and Siebel for customer relationship management.
But Trosen adds that the company is “strengthening the backbone of our financials” in the E-Enterprise product.
A Great Plains spokeswoman also notes that the firm has no plans to encroach upon the markets served by ERP vendors like PeopleSoft and SAP, both of which are business partners of Microsoft.
Even Gartner’s Genovese admits, “It’s a while before they get into SAP’s market.”
But Dennis Byron, an analyst with the Framingham, Mass.-based market research firm IDC, notes that a break-up of Microsoft by the Justice Department still can’t be ruled out. If the applications company is separated from the operating system business, then there would be few restrictions upon it moving beyond its current market segment.
Yet even if Great Plains fails to mount a direct challenge to the other suppliers of high-end ERP systems, the Microsoft acquisition has shored up the firm’s presence in its target market among firms in the under $500 million a year sales range.
“They’re going to be on everybody’s short list,” Genovese says. “You’d have to be crazy as a CIO of a company not to put them on your list of possible suppliers.”