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Microsoft's strong midmarket channel thwarts Oracle, SAP

As Oracle and SAP aim for more small and midsized businesses, they are encountering a strong and complicated Microsoft channel partner network.

As SAP and Oracle Corp. move into the midmarket to build a larger customer base, they are struggling to untangle Microsoft's web of channel partners and build a strong network of their own.

Channel partners can convince customers to use a bigger Microsoft stack of solutions.
Sanjeev Aggarwal,
senior analystYankee Group

The midmarket is expected to generate the largest enterprise resource planning revenue for vendors in 2006 and 2007, according to Boston-based AMR Research Inc. While they are moving down into the midmarket, so far, Oracle and SAP are not causing a lot of stress for Microsoft, according to one Microsoft executive.

"To the extent that we can, we want to support and drive SAP in their pursuit of enterprise clients with their business applications," said Don Nelson, who runs Microsoft's sales, readiness, competitive strategy and channel development team. "In small and medium spaces we find ourselves competing, but there will be competition in any market that exists, and the market for enterprise versus small and medium business [SMB] apps are two different markets."

As the general manager of managed partners, Nelson is responsible for leading the worldwide channel strategy for Microsoft managed partners, which includes the Microsoft Certified and Microsoft Gold Certified partners.

Microsoft has had to deal with several hurdles with its network of software resellers, but it has been working to make it stronger, putting in place guidelines to foster communication between channel partners, Nelson said. That communication helps build industry expertise among vertical industries, he said.

For now, Microsoft will continue to grapple with Intuit Inc. and Sage Software Inc. in the SMB market, according to Sanjeev Aggarwal, a senior analyst for small and medium business strategy at Boston-based Yankee Group. SMBs seek accounting and financial applications integrated with payroll and inventory management. As they grow, they demand more robust software, Aggarwal said.

"Microsoft has a tremendous channel and that's what's been a big plus in Microsoft's world," he said. "It starts with Office and it allows Microsoft to be with customers as they make a natural progression. Channel partners can convince customers to use a bigger Microsoft stack of solutions."

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Microsoft is relishing in the strength of its channel partner network. Nelson points to Microsoft's Next Generation Partner Program, which aims to certify resellers that focus on a specific industry or technical specialization.

"There are very few partners that can build a business that delivers deployment services across all the pieces of our technology stack," Nelson said. "The magic of any channel program is to join the right partner with another partner and get them in front of a customer to exchange a solution based on the customer's specific need and infrastructure."

SAP has been successful in associating uncertainty around whether Oracle can successfully meld billions of dollars in acquisitions over the last year into its E-Business Suite. But Microsoft hasn't undergone the same criticism from its competitors, as it continue to tweak its classic partner channel and the channels it acquired along with Great Plains, Solomon, Navision, and Axapta business applications.

So far, the products have been rebranded into a Dynamics product line, and Microsoft has pledged to support those products until at least 2012, Nelson said.

"When you've got an experienced partner base and a strong customer base it is very hard, and I think irresponsible to retire a product line," he said. "Over time, we do expect to bring the technologies together and market a new consolidated ERP solution. We are doing that gradually, responsibly and smartly with good communications and a product roadmap."

One area of weakness that Oracle and SAP are targeting is Microsoft's lack of industry specialization. While Microsoft's products don't address specific industries, the company is tweaking its partner network to determine whether resellers have an industry niche, Nelson said. Other areas are also being explored to increase vertical specialties, according to Nelson. At the Microsoft Worldwide Partner Conference this summer, Microsoft also unveiled a new Small Business Specialist designation and added Custom Development and Mobility Solutions competencies, Nelson said.

"We've been asking our partners to profile themselves and their customer references based on vertical industries, so customers can search for partners and solutions based on a vertical pivot," he said.

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