Microsoft has made clear its intention to steal a big chunk of the business software market by significantly expanding the budget of its Business Solutions (MBS) arm and making wild claims about becoming a $10 billion business by 2011.
MBS will have an $850 million budget for 2005 - up from somewhere between $600 million and $700 million this year, depending on who you believe. That's a 21 to 42 percent increase.
The software giant also made bullish comments about MBS' likely success. The global business applications market will reach $62.1 billion in 2008, and Microsoft will go for more than half of that, Tami Reller, MBS' marketing head explained.
"If anything, it is a reasonably conservative estimate," Reller said. "Microsoft and our partners will pursue together that $35 billion. We want to be and we can be a profitable, multi-billion-dollar business over time."
Reller would not say what share of the market Microsoft is gunning for. However, according to an internal document made public during the Oracle trial, Microsoft is aiming for 30 percent by 2011. It currently holds just 4.9 percent of the worldwide ERP market.
MBS brings together Microsoft's Great Plains and Navision acquisitions with its CRM product and the small-business offering previously called bCentral. The group's products cover management of finance, human resources, customer relationships and other business tasks.
With $153 million in revenue for the most recently reported quarter, MBS is the second to smallest of Microsoft's seven independent profit and loss centers. Although still loss-making, the group is a key part of Microsoft's strategy for growth as it looks beyond its maturing Windows and Office franchises.
"This is not an accident that we're in the red," Reller said. "There is deliberate investment going on." MBS is pouring money in three distinct areas; research and development, sales and marketing, and integration of the various pieces the group consists of, Reller said. "There are brand new application categories that we're entering. Those are unprofitable categories."
Marketing investments are needed to let software buyers know Microsoft is an option for their business software, Reller explained: "There is not enough awareness by any measure that Microsoft is in business applications. We have got to get the word out, and that costs money."
Microsoft faces stiff competition for small and medium-size companies. Rivals include Oracle, SAP and PeopleSoft, as welll as smaller vendors like Salesforce.com, NetSuite and Intuit.