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Microsoft's latest ERP push: What does it mean for SAP, Duet?

Jon Franke, News Editor

Microsoft had some strong words about SAP at last week's Convergence conference in San Diego. Does this signal the end of the happy union between the two companies?

Microsoft CEO Steve Ballmer called SAP his company's "big competitor" in the enterprise market and said that Dynamics has a simpler set of processes, requiring less customization than SAP and that it is "enterprise-ready." "When it comes to scale, reliability, transaction volume, there's nothing in our design mentality, philosophy or anything else that should hold us back," Ballmer said. "We want to give people the capabilities they want, the capabilities that their users can use, and the capabilities that you can get implemented at whatever size, whatever volume you are."

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Ballmer's comments indicate that Microsoft is attempting to bring its Dynamics ERP (enterprise resource planning) and CRM (customer relationship management) products -- which historically appeal to smaller enterprises -- up market to larger customers, according to Paul Hamerman, a vice president for Cambridge, Mass.-based Forrester Research Inc. Meanwhile, SAP has embarked on a well-publicized push to attract midmarket customers.

"This is a signal that Microsoft is concerned with SAP's midmarket strategy and preparing for battle," Hamerman said. "The Microsoft-SAP relationship is really strange right now."

Ultimately, as SAP moves down into Microsoft's sweet spot and Microsoft moves up into SAP's, more fiery exchanges between the two sides are likely, according to Ray Wang, a principal analyst for Forrester Research.

But it is important to remember that this so-called co-opetition -- where companies partner in some areas while competing in others -- is very common in the software business, Hamerman said.

"Steve Ballmer has been making competitive statements about SAP," said Joshua Greenbaum, principal of Enterprise Applications Consulting (EAC) in Berkeley, Calif. "But, competition aside, both companies feel collaboration in the desktop is valuable, and Microsoft knows SAP is a stronger ally than competitor."

Is a strained relationship bad for SAP customers?

There is a school of thought that Microsoft and SAP's collaborative product, Duet, could suffer from tension between the two giants, according to Hamerman. But many experts view Microsoft's enhanced Dynamics as a potential motivator for the Duet team rather than a threat.

"Efforts by the Dynamics team to extend enterprise integration should not impact the SAP relationship," Wang said. "In fact, it should add pressure to the Duet team to expedite rollout of other Duet modules."

EAC's Greenbaum agreed, saying the Duet team will be under increased scrutiny to hit milestones. "Not that they needed a wake-up call," he said. "But this should sharpen the focus of the Duet team."

The SAP-Microsoft co-opetition should have a positive effect beyond Duet, as well.

"SAP and Microsoft competing [in these markets] means that both companies are aggressively pushing good technology," Greenbaum said. "Both companies are focused on the issues of usability and expanding the user base to those who wouldn't usually touch back-office data."

Companies large and small want to leverage their ERP systems as much as possible to justify high implementation costs, Greenbaum explained. But many organizations don't want to spend the time or money required to train users on those systems.

"Microsoft's and SAP's strategies are very user-focused from the get-go," he said. "This should make it easier for more users to access ERP data."

And easy-to-use systems mean lower training costs, Greenbaum continued, resulting in more people using the systems and data, ultimately upping their productivity.

"It's good for everyone," he said.


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