The acquisition of Great Plains bought Microsoft a significant beachhead in the US business applications market, but the company would not have enabled it to succeed in the European business applications market. Acquiring a local ERP vendor not only gives Microsoft a readymade position in Europe, but also additional developers to work on .NET.
Microsoft is preparing to integrate its $1.3 billion Danish acquisition, Navision.
Now that the dust has settled on Microsoft’s decision to buy Danish mid-market applications vendor Navision, it’s easier to see the drivers behind the deal. In short, it will position Microsoft to take advantage of the $3.3 billion Western European mid-market opportunity for ERP, CRM and SCM applications.
Microsoft began its foray into business applications in December 2000, buying US-based ERP vendor Great Plains. But while this acquisition served to allow Microsoft to break into the US business applications market, Great Plains’ lack of European presence would have made it hard for Microsoft to enter European business applications market based solely on that acquisition.
By acquiring Navision, a vendor of business applications such as ERP, CRM and SCM, Microsoft gains access to an extensive local partner network (necessary to target the vast SME market). Navision’s headquarters will now become the center of development and operations for Microsoft Business Solutions in Europe, the Middle East and Africa (EMEA), and will become Microsoft’s largest product development center outside the US.
The acquisition better positions Microsoft to meet two primary objectives: increasing its footprint in business applications and pushing its .NET platform. If Microsoft had chosen a Great Plains-led European expansion, it would have had to concentrate much of its time and effort increasing the brand awareness of Great Plains, while rivals such as SAP increased their market share.
In addition, because the vast majority of Great Plains sales resources are located in the US, Microsoft would have had to focus much of its sales efforts on building partnerships from scratch in each local country.
Microsoft also gains a necessary additional development area for .NET applications. So far the .NET initiative has been plagued with an opaque vision. Increasing the number of developers working on .NET applications will help Microsoft bring validity to its .NET initiative.
Related research: Datamonitor, 2001: CRM for SMEs
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