Microsoft Attacks Sage in ERP Market Battle

• By Kurt Mackie
• 07/30/09

Microsoft is taking aim at U.K.-based Sage Software in an attempt to grab a greater stake in the enterprise resource planning (ERP) software market.

The first salvo was launched last week. Microsoft pointed out in a press release that one of Sage's partners, the MIS Group, had gone out of business in July.

Ironically, Sage North America had honored the MIS Group earlier this year as "Overall Business Partner of the Year for 2008." Partners achieving "the highest total sales revenue in products and services" for the preceding fiscal year get the award, and MIS had been a two-time winner.

The MIS Group cited the current bad economy as its reason for exiting the ERP business.

"As a result of the current economic crisis, the lack of available credit and market circumstances beyond our control, we unfortunately are not able to be viable as a business and continue to service our customers," explained Robert Muir, MIS Group's chief executive officer, in a prepared statement.

That circumstance could easily apply to Microsoft's Dynamics partners, who have also faced shrinking credit in the current economic decline. However, Microsoft pegged the MIS Group's demise to questions about "Sage's ability to deliver ongoing innovation and investment in its ERP portfolio and remain competitive in this marketplace," according to a statement by Crispin Read, general manager at Microsoft Dynamics ERP.

Sage spokesperson John Schoutsen took a different position.

"Sage is very competitive, and in fact we're the share leader globally according to IDC," Schoutsen stated in an e-mail. "We have a global customer base of 5.8 million across all of our business applications."

In terms of revenue, Microsoft makes eighth place in a list of enterprise business application vendors, right behind Sage, according to a ranking by R. "Ray" Wang, vice president and principal analyst at Forrester Research, in his blog.

"If you look at if from a revenue perspective, I'd say SAP and Oracle still have a good presence in the market and can probably still be considered the leaders," said Wang concerning the ERP software business. "But if you were to take those guys out of the equation, then Infor, Intuit and Sage would be the next three big leaders."

When it comes to ERP, Sage is the software giant with a stronger footing than Microsoft in the small-to-medium business market segments.

"Now, Sage is still a two-some billion dollar entity, so they are twice the size of Dynamics in terms of revenue," Wang explained. "So, in this case, Microsoft is probably one of the underdogs compared to Sage."

Microsoft has been offering financial incentives to its partners to get their customers to switch to Microsoft Dynamics ERP from Sage's MAS 90 or MAS 200 software. The incentive program, which began in May of this year, offers half-price licensing fees along with a 25 percent rebate on the cost of the Microsoft Dynamics software, all of which can be passed on as savings to customers.

Microsoft also plans to apply some of its $9.5 billion research budget toward Dynamics--a point emphasized by Kevin Turner, Microsoft's chief operating officer, in a speech delivered at this year's Microsoft Worldwide Partner Conference. Turner adopted a "take no prisoners" attitude toward the competition, describing how Microsoft had undercut Siebel in the customer relationship management (CRM) software market.

"And so we began a rollout of displacing Siebel with Microsoft CRM," Turner said, according to a Microsoft transcript. "And we couldn't get it in the marketplace fast enough. And everywhere we put that product, our sales grew over 40 percent country by country as we rolled it out."

In the ERP market, Microsoft's main strengths have been making the software easier to use, along with applying its partner expertise, Wang said.

"One of the things Microsoft has done a good job with is useability," Wang explained. "And because of its broad range of partner networks, there's just a lot of talent out there in a lot of the core Microsoft technologies."

Sage, on the other hand, offers software with a regional and country-specific focus, Wang said, but it has been moving beyond that with its Sage ERP X3 and Accpac product lines. Sage has had "one the best models in the industry," Wang said, but it's currently working through some partner issues.

"Sage is having issues with their partner and channel model," Wang said. "Their partners are looking for more investment in the product; they're looking for different mixes of products. Sage is just having issues communicating expectations with its partners."

In the long run, easy-to-use ERP software that can interface with business partners and customers and help address business compliance issues will be the winning combination.