Microsoft aims high with Small Business Accounting

Microsoft Corp. in September plans to release Office Small Business Accounting, a new product designed to help small businesses operate better, taking on Intuit Inc., Best Software Inc. and others.

Microsoft will sell Office Small Business Accounting as a stand-alone product and as part of a new Office bundle called Office Small Business Management Edition, it announced Tuesday at an event for ISVs (independent software vendors) at its Redmond, Washington, headquarters.

The new Office bundle will include the familiar Office 2003 applications along with an updated version of Outlook 2003 with Business Contact Manager, Microsoft has said. Office Small Business Accounting was first announced in November. At that time Microsoft said it planned to ship the product in late 2005. Pricing has not yet been disclosed.

With the new product, small businesses will be able to manage customer, financial and business processes, according to Microsoft. Payroll functionality is offered through integration with services from outsourced payroll services provider Automatic Data Processing Inc.

Microsoft is aggressively going into this new market, gunning for millions of customers. There are over 70 million small businesses worldwide, 40 million of which have PCs and about 20 million of which are in the U.S., said Orlando Ayala, senior vice president of Microsoft's Small and Midmarket Solutions & Partner Group.

During a presentation at the ISV event, Ayala pitched the new Office Small Business Accounting product as an opportunity for Microsoft partners. Microsoft will provide basic business accounting and management functionality and ISVs can offer applications tailored to specific industries and tasks on top of the new Microsoft software, he said.

"Going for 40 million customers is not an easy thing to do" Ayala said. "Clearly Microsoft alone can not get it done."

That message resonated well with ISVs attending the event, including current Intuit partners. Atlas Business Solutions Inc. (ABS) of Fargo, North Dakota, currently offers seven applications that work with Intuit's QuickBooks, but is examining the Microsoft opportunity.

"We're here to figure out Microsoft's plans for diving into the small business accounting space," said Jon Forknell, vice president and general manager at ABS. "Microsoft can help grow that space. We are looking at it as an opportunity for us to acquire new customers."

One difference between Microsoft and Intuit that Forknell noted is that Microsoft has no plans to tailor Office Small Business Accounting for specific market niches, or verticals, while Intuit already does that. "Microsoft is saying that they will acquire the customers, but not add any of the vertical features that these people need, that adds opportunity for ISVs," he said.

Also, Intuit is mostly focused on the U.S., while Microsoft plans to offer its product worldwide, offering an international opportunity for ABS, Forknell said. Intuit has about 2.6 million U.S. customers, the company has said.

Microsoft is serious about conquering the market for small business accounting, said Paul DeGroot, an analyst at Directions on Microsoft Inc. in Kirkland, Washington. "Microsoft's message is that they intend to own this market," DeGroot said.

Office Small Business Accounting is currently available in a beta test version. It was developed jointly by Microsoft's Office group and Microsoft Business Solutions (MBS), the Microsoft group that sells business applications to small and medium-size businesses and divisions of large enterprises. It will offer an easy migration path to MBS products, Microsoft has said.

Office Small Business Accounting will be available in the U.S. first, with other countries set to follow about a year-and-a-half after the U.S. release, Ayala said.

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