December 27, 2000, 1:30 PM — The great software octopus that is Microsoft just got bigger.
With the acquisition of Great Plains Software Inc. in a $1.1 billion stock swap, announced yesterday, the Redmond giant is spreading its tentacles into a new market, reaching for a whole new set of customers.
With this deal, Microsoft is moving to create and market a suite of applications to help companies run their businesses that may eventually rival its Office suite of applications for end users.
"This is the first fundamentally new business we've entered since 1995," says David Vaskevitch, Microsoft's senior vice president for business applications. "A year ago, it became clear that we needed another new growth business. I proposed that we get into the business applications space," he said. "This is a huge new market."
In the business market, until now, Microsoft has sold only applications for end users (pre-eminently the Office suite of what is termed productivity applications) and infrastructure software (the Windows platform, including enterprise servers). It hasn't sold the sort of applications that run a business in the background, so-called business processes applications: typically software packages that automate accounting, customer relationship management, e-commerce, financial management, human resources, inventory, report writing, supply chain, travel expenses and so on.
But now, Microsoft says it plans to sell these types of applications with its acquisition of Fargo, N.D.-based Great Plains, which specializes in accounting, financial management and other software for the medium-size business market. This will move Microsoft from creating applications for personal financial services for individuals, such as its Microsoft Money software and its Microsoft Network MoneyCentral Web site, to developing software packages that can easily run a 300-person company's accounting department. In a conference call, Jeff Raikes, a Microsoft group vice president, emphasized that financial software is only the beginning for Microsoft.
Great Plains has recently expanded its product line to include human resources and customer management software. Raikes compared the mission of the new Great Plains division of Microsoft to the integration of word processing, spreadsheet and other separate applications into the massively successful Office suite, a product Raikes helped drive to market in the late 1980s.
"[Great Plains CEO] Doug [Burgum] and his team and Microsoft understand the importance of making individual business processes applications into more than a suite, more a seamless application," Raikes says.