Microsoft Is Plain Crazy
By Rich Karlgaard
Forbes Magazine
Tuesday September 3, 11:35 am ET
biz.yahoo.com
Here's a prediction: sometime later in the decade a series of deadly missiles will hit Oracle , SAP and other global enterprise-software giants. It will surface in due course that the missiles were launched from little Fargo, N.D. by order of Doug Burgum, a guy with a lion's mane of hair who favors Nike shirts, cargo shorts and water sandals for office attire. More on this Burgum fellow later.
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Currently, Oracle (NasdaqNM:ORCL - News) and SAP (NYSE:SAP - News) are all right. Along with Microsoft (NasdaqNM:MSFT - News) and IBM (NYSE:IBM - News) , both will survive the tech bust and the consolidation crunch yet to come. Their five-year prognosis is sunny. CIOs--at least, every CIO I talk to--are under orders from their CEOs to shrink the software vendor list. In this winnowing, Oracle and SAP will emerge winners.
But in five years, look out. Gunning for Oracle and SAP is mighty Microsoft, which sometimes loses the early battles but never the war (its war chest now stands at $40 billion, cash). Microsoft, recall, fell behind Apple in windows interfaces during the 1980s. It now sports a 96% share. It started late in Web browsers. It now rules. Analysts today laugh at Microsoft's early efforts in enterprise software. They say Microsoft "doesn't get" enterprise--it doesn't comprehend that banks, airlines and hospitals will never tolerate hourly blue death screens; its customer service is lousy; its supply-chain relationships are strained; and so on. These criticisms have a certain ring of truth.
But 18 months ago Microsoft switched tracks. It bought Fargo-based Great Plains Software , a maker of accounting packages for small and medium-size businesses, for $1.1 billion in Microsoft stock. That was a whopping sum, even for boom times, even if it was pumped-up Microsoft paper--and analysts have wondered why. I've been puzzled, too. So last month I pointed my Cessna Skyhawk toward Hector Field, in Fargo, in an attempt to find out.
Grain Elevator Capital
My landing in Fargo was a doozy. Imagine a skier braking. At approximately that angle, my main wheels hit the tarmac--almost blowing a tire and scraping a wing. Such are Fargo's inexhaustible winds, even in the warm months. How can anybody live in this Siberia? Well, they do, and, in fact, the population of "metro" Fargo has doubled in ten years, to 150,000.
In that sense, Fargo is hot. Doug Burgum bears much of the responsibility for this. He built Great Plains Software from a computer retail chain of two stores in 1983 into a software firm that went public in 1997, doubled in value on its first day of trading and never fell below that end-of-day price. Then Microsoft bought Great Plains for a number scarcely imagined in North Dakota. Burgum proved that tech entrepreneurism could happen on a world scale in Fargo.
Previous press accounts have incorrectly called Burgum the founder of Great Plains. He actually arrived two years later, via North Dakota State University in Fargo, Stanford Business School in California and a three-year stint with McKinsey in Chicago. Like many in America, Burgum was struck with PC fever in 1983, a few months after Time magazine had named the PC as its Man of the Year and on the eve of the most interesting product introduction yet: the Apple Macintosh. Great Plains had been conceived by two Concordia College (Moorhead, Minn.) students as a chain of Mac stores.
Lonely in Chicago, Burgum realized two things about himself: He wanted to return to Fargo, and he desperately wanted to be in PCs--desperately enough to borrow $240,000 from the family business, a grain elevator in tiny Arthur, N.D. Paying nearly a quarter of a million dollars to buy in, Burgum wound up with a paltry 2.5% of Great Plains. He had crazily, dumbly overpaid! Some members of his family were furious.
Munching on artichoke pizza last month, Burgum recalled the early financial hole he'd put himself in. "I'm often asked which is tougher, dealing with shareholders at the Great Plains annual meeting or with [loud-voiced Microsoft CEO Steve] Ballmer behind a closed door. Well, both are easy. Tough was the Fourth of July family picnic when my uncles and cousins thought I'd mortgaged the grain elevator for nothing."
Nuts About Service
Burgum eventually took control of Great Plains and bet the works on accounting software. He tucked Great Plains into an unnoticed niche, with Intuit and Peachtree on the low end of accounting software and SAP, PeopleSoft and J.D. Edwards above. Then he got Great Plains to do what it does best: Serve customers. Focusing on service carried Great Plains to an IPO and nearly $300 million in annual sales.
The Great Plains brand name is now fading into a new division called Microsoft Business Solutions, which Burgum heads. Business Solutions has grown to 3,800 employees, or 8% of the entire Microsoft work force. Expansion is owed to internal growth and several small acquisitions made quietly by the Business Solutions division, including last month's purchase of Navision a/s, a Danish company.
With his long locks, Burgum resembles an aging surfer more than he does a businessman. Nevertheless he knows, as well as anyone at Microsoft, how to sell B2B software and keep customers happy. In this forum Burgum is teaching and Microsoft is listening. This relationship should put a long-term scare into Oracle, PeopleSoft and SAP.
Visit Rich Karlgaard's home page at www.forbes.com/karlgaard or email him at publisher@forbes.com. |
