Microsoft puts brakes on next business apps

Microsoft is slowing down development work on a new family of its business applications – known as “Project Green” – and is instead focusing on the products it currently sells.

Because the first products now won’t be out until 2008 at the earliest, the number of developers assigned to Project Green is being reduced from 200 to 70, Microsoft Senior Vice President Doug Burgum said Wednesday. Microsoft originally had planned to ship the first results of Project Green as early as late 2004.

“We have made a decision to move resources off Green and back on the core product lines to strengthen those product lines because we realize now that it is going to take much longer,” Burgum told a federal court in testimony in the U.S. Department of Justice’s case to block Oracle’s takeover of PeopleSoft.

With Project Green, Microsoft aims to solve what Burgum called its “embarrassment of riches” – the company’s four overlapping sets of business applications that it gained by purchasing Great Plains Software of Fargo, N.D., in 2000 and Navision of Vedbaek, Denmark, in 2002. The applications cover management of finance, human resources, customer relationship and other business tasks.

Microsoft plans to build completely new business applications on a single code base that will eventually replace its existing offerings. The new products will depend on the delayed “Longhorn” versions of Microsoft’s client and server operating systems. The Longhorn client is expected to ship in 2006 and the server version in 2007.

The decision to reassign developers off Project Green is a reversal in strategy. Microsoft Business Solutions executives last year said the company planned to have two-thirds of its developers working on the new products by mid-2004, with one-third focused existing products. Microsoft Business Solutions has about 1,200 developers worldwide, Burgum said.

The process of reassigning developers is currently underway, Microsoft spokeswoman Janelle Poole said Thursday. Poole could not say when Microsoft made the decision to scale down work on Project Green, but did say development will begin in earnest after the Longhorn client is released.

Microsoft Business Solutions, headed by Burgum, although still loss-making, is a key part of Microsoft’s strategy for growth as it looks beyond its maturing Windows and Office franchises.

“Microsoft fully believes that the business applications market for small- and midsized businesses is a potential multibillion-dollar business,” Poole said.

Burgum’s testimony and internal Microsoft documents related to Project Green entered into evidence in the Justice Department’s case provided some more, previously undisclosed, details on Microsoft’s plans for Project Green.

A “Market Requirements Document” reveals that Microsoft plans to target new customers only with the first release of Project Green. “There will be no specific effort yet to convert existing MBS customers to Green,” the document reads.

Furthermore, Release 1 of Project Green will be a subset of the functionality that Microsoft offers in its current Axapta, Solomon, Great Plains and Navision products, Burgum testified. The next version, due in 2010 at the earliest, would offer functionality at par with Microsoft’s existing products, the Microsoft Business Solutions chief said.

Microsoft has committed to support the existing Business Solutions products until 2013.

Project Green Release 1 products will be targeted at core small business, low midmarket and core midmarket companies, which, according to Microsoft’s taxonomy are businesses with between 10 and 49, 50 and 99 and 100 and 500 employees, respectively, according to the market requirements document.

The second release of Project Green would extend into the upper midmarket and the corporate account space, companies with between 500 and 1,000 and between 1,000 and 5,000 employees, respectively, according to the Microsoft document.

Microsoft is ambitious and hopes to expand its reseller network to 15,000 partners by the time the Project Green products come out, according to a PowerPoint presentation used as evidence in the Oracle-Justice Department trial. Microsoft Business Solutions currently has 6,000 partners, Poole confirmed.

According to the same PowerPoint presentation, Microsoft is aiming for a 30% market share, based on revenue, in the business solutions space by 2011. The company held a meager 4.9% of the worldwide ERP market in terms of revenue in 2002, according to data from Gartner.

Competition in the space comes mostly from local vendors as well as global players who traditionally sold only to large enterprises but are moving down-market. Microsoft in its “Market Requirements Document” identifies Intuit, The Sage Group PLC., SAP AG, Visma ASA and Exact Holding NV as its top competitors.