A lot of juicy tidbits emerged from the DOJ's attempts this past summer to stop Oracle's hostile bid for PeopleSoft. The most intriguing testimony wasn't about rolling up the market; it was about possibly rolling out of a market. Microsoft's head of sales, Orlando Ayala, seemed to make it clear that Microsoft was rethinking its plans for the high-end of the enterprise software market. Earlier testimony by Doug Burgum, the head of Microsoft's enterprise apps group, made similar claims. The question is whether Ayala and Burgum really meant what they said, and what their words mean for the rest of the market.
What's interesting about Ayala's testimony (as reported by PeopleSoft lawyer Gary Reback) is that there are two apparent misstatements, and one not-so-startling confession, assuming Reback is as good a reporter as he is a lawyer. According to Reback, Ayala said that Microsoft's high-end enterprise app, Axapta, is not suited for multi-national companies. And while they get the occasional large customer, the software isn't suitable for everyone. This left Ayala's confession-that Microsoft's attempts at getting into enterprise apps has been a "humbling" experience-as perhaps the most unimpeachable thing he said.
Burgum took a similar tack, despite being shown internal Microsoft documents that targeted some very large companies. He claimed there was no sales force that could work these accounts, and that documents showing technology improvements benefiting large companies were really about technology that would be available in seven or eight years.
So what's really going on, especially with Axapta? There is no doubt that Axapta is running at large multi-nationals. This is big-company software, even if the majority of its customers are decidedly mid-market. And there is no doubt that Microsoft is challenging SAP, Oracle and PeopleSoft for their customers, and even winning in diverse industries: Esselte in office products and a division of electronics giant Philips are the two best known examples.
Meanwhile, field sales execs across the industry are on the look-out for Microsoft, and for good reason. While Microsoft may not have a direct sales force targeting this market, it does have a number of large, multi-national integration partners that are capable of acting on Microsoft's behalf. And as of this past fall, Microsoft had a team based in Redmond that provided the necessary coordination between partners servicing high-end accounts.
Microsoft also had a strong incentive to support the DOJ, even if it meant stretching the truth a bit: An Oracle/PeopleSoft merger would make a difficult competitive market even more difficult for Microsoft. Keeping the inevitable M&A activity to a minimum buys Microsoft time to stave off any further "humbling." And keeping everyone thinking that Microsoft only wants to own the low-end of the market is a good defense that might keep some competitive threats at bay.
So what's really happening with Microsoft and the enterprise apps market? Ayala is right, the company's initial experiences have been quite humbling, and Burgum's division has been one of the only steady sources of red ink in the company. There is no doubt that Microsoft is heavily committed to the low-end of the market, and its Great Plains, Solomon and other product lines reflect that emphasis. But keep an eye on Axapta, and don't underestimate Microsoft's interest in big-ticket, high-end enterprise customers. Microsoft doesn't take "humbling" lightly.