P2533-R: Microsoft - Project Green Release 1: Market Requirements Document, Draft 2

Microsoft

Project Green Release 1

Market Requirements Document

This Market Requirements Document is designed to provide a blueprint for Green Release 1. It leverages market research to identify trends, opportunities and pains, and outlines prioritized requirements for Green R1 to address them. The intended audience for this document is internal Microsoft Business Solutions team members, with the primary audience being the Green development organization.

This document is one of a group of documents that will define the Green release. The complete group of documents includes:

1. Market Opportunity Document - defines opportunity for Green over the long-term
2. Market Requirements Document - defines opportunity and market requirements for Green R1 and is the basis for the Vision document.
3. Product Vision Document - describes how Green will deliver on the requirements in the MRD and introduces application breakthroughs. It also describes the product vision for Green, with details specific to Green R1. (Includes several supporting documents on various initiatives, such as CPE, Accessibility, Trustworthy Computing and Engineering Excellence.)
4. Stakeholder Overview - communicates the vision, strategy and tactical information for Project Green to internal audiences within the MBS business group.
5. Architecture Document - describes the underlying architecture and technology bets for Green R1
6. Positioning Framework - a 1 -2 page document used to develop the product positioning and which identifies the target audience, benefits, evidence to support the benefits and value propositions.

Last updated: 6 January 2004

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Confidentiality Notice

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Table of Contents

Strategic objectives for 'Project Green'

Specific objectives for Green R1

Audience taxonomy

Customer segments

Geographies

Industries

Archetypes

Personas

Sizing the opportunity

Changing economic conditions

Globalization and breakdown of boundaries

Increased need for connectivity

Consolidation of business application vendors

New legislative demands

Increased focus an security of systems, trustworthy computing and business practises

Business Process Outsourcing (BPO)

Current purchase drivers

Future purchase drivers

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Behavior

Windows 'Longhorn'

Process Integration

Application Service Provision (ASP)

Radio Frequency Identification (RFID)

Wireless Networking

Open and De-coupled Value Chain

Took and Customization

Business lntelligence

Empowered Users

Connected Community

Adaptive Business Processes

Insightful

Best TCO

Business Management Phase

Sales (Including all phases: Qualification, Positioning, Diagnostics, Proposal and Commitment)

Implementation Including on going support

ISV Categories and Classification

ISV Pains and Requirements in Summary

Manufacturing

Distribution

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Service

Background

Positioning Statement (preliminary)

Top 5 competitors for Green R1

Local competitors

Product analysis of competitor products

APPENDIX 1: Target market for Green R1, broken down by geography and vertical

APPENDIX 2: Customer Pains and Requirements Pillar Tables

APPENDIX 3: VAR Pains and Requirements Tables

APPENDIX 4: ISV Pains and Requirements Table

APPENDIX 5: Archetype Pains and Requirements

APPENDIX 6: Future Research

APPENDIX 7: Competitor Research/Review

APPENDIX 8: Emerging Technologies Assessment

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After more than 20 years and at least 3 generations, business applications are still considered expensive, complex and disruptive to implement, maintain and use. The Return on Investment (ROI) is not laid out clearly or realized to the extent it should be. As a result, the value derived from a business application is continually being questioned or dismissed by both potential and existing customers.

Life with Project Green
'Project Green' is a multi-year Investment from Microsoft Business Solutions aimed at delivering the next generation business application on the next generation of the Windows operating system codename 'Longhorn'. Project Green is crucial to the strategic goal of Microsoft Business Solutions (MBS) to become the industry leader in the global business application market by 2011. 'Project Green' 1s about delivering a breakthrough in business applications based on a ground-up redesign of the architecture and application functionality. In order to achieve the overall goal of Project Green, the following strategic objectives are set out. Project Green should:

1. Introduce high volume into the packaged business application market, which currently is a highly fragmented, relatively low volume market
2. Grow the packaged business application market potential by increasing the penetration and adoption of business applications in the SMB space
3. Secure the Microsoft technology platform true integrated innovation
4. And introduce a new category (new generation) of business applications

This MRD outlines the market requirements for Green Release 1. The content of this document is based on Input from several Internal and external sources including analyst research, internal desk research and external qualitative research. It also takes into consideration the more than 20 years of knowledge held within Microsoft Business Solutions.

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Green R1 Objectives
Green Release 1 (R1) will be the first of three major releases to achieve the overall strategic objectives for Project Green. Specific objectives for this first release are:

1. Target new customers for Microsoft Business Solutions (MBS). There will be no specific effort yet to convert existing MBS customers to Green
2. Make Green the natural choice on the new Longhom Client Operating System
3. Offer the Lowest TCO in its class
4. Deliver a foundation for business application ISV's to build their unique offering on top of (embed).

(Read more in the Objectives section...)

Target Audience
This section Introduces the view of the world applied in this MRD; the customer segments and opportunities, but most important - it defines the target customer for Green R1.

The first major release delivered from 'Project Green' will be targeted at delivering end to end business applications for companies between 10 to 500 employees (Core Small Business (CSB) up to Core Mid Market (CMM), in Microsoft standard taxonomy).

When choosing our geographical expansion strategy for Project Green and Green R1 specifically, we will prioritize geographies based on the market potential based on the number of entities (in connection to introducing high volume goal of Green), IT readiness of a geography, the local Microsoft Execution power, current competitive environment and economic factors depicting the economic status of a geography.

Within the target audience for Green R1 {CSB to CMM in top 10 target countries), the Manufacturing, Wholesales and Business Service industries hold the greatest potential.
(Read more in the Target Audience section...)

Market Trends
Leading industry analysts ¹have identified several market trends and technological developments that will effect the development of the ERP software market over the next 2-5 years. This section focuses on those trends and developments that we believe will have the greatest impact on customers in the SMB market and which, if addressed in our development of Green, will present the greatest opportunities for transformational breakthroughs. The requirements² to meet each of the market trends are also described in this section.
(Read more in the Market Trends section...)

Customer Buying Behavior
Today's potential business application customers are mostly driven by Price/TCO, improved productivity and improved customer service when making the purchasing decision. Future purchase drivers will set requirements more related to the "now" economy and customers will look more and more to systems to improve their response to fluctuating customer demands.

This section looks into the current and future purchase motivators of business applications (for SMB customers), the purchase behavior of SMB customers and the resulting requirements for Green R1.

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"Knowing your destination is half the journey" - Anonymous

This section introduces the view of the world applied in this MRD; the customer segments and opportunities, but most important it defines the target customer for Green R1.

Audience taxonomy⁵

As per the Market Opportunity Document for Microsoft Business Solutions⁶, the following taxonomies of companies are applied when describing the target segments and markets for Green R1, The primary characteristic used for identifying a company is the number of employees.

Green R1 will target the following customer segments:

• Core Small Business (CSB)
• Low Mid Market (LMM)
• Core Mid Market (CMM)

The version of Green following R1 will expand the target market, and over time Green should fit the entire market up to the Corporate Account Space (CAS), except for the lower small businesses, which will be serviced by the REDACTED⁸ initiative.

[Unreadable text] classification of customers existing and potential) that remains consistent over time, applies across all business groups and subsidiaries, and is quantifiable in size. The audiences in total are exhaustive, meaning the cover the entire market. hey are also exclusive meaning there is no overlap between audiences (a customer or user cannot be in two audiences [Unreadable text] .

[Unreadable Text] MBS Market Opportunity [Unreadable Text], September 2003

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Competition

Top 5 competitors for Green R1
Given its positioning in the core small business and lower mid-markets, Green R1 will come across both local/regional and global competitors. In order to determine the top five competitors in this space, the Gartner 2002 ERP license market share data (released July 3, 2003) was used in conjunction with the financial statements of the leading vendors. Note that revenues from off-the-shelf lower small business segment products (for example Intuit Quicken) were not considered as SMB revenues.

Mergers and acquisitions will also create new competitors. An example is Epicor's recent acquisition of Scala. The result is a very Microsoft centric ISV with 20,000 customers, 400 partners, and a 2004 target of $250M in revenue, which comes from the SMB space. Their combined revenue will make move them into the #3 competitor position.⁵¹

Looking to the vendors competing in the market today, the top five competitors to Green R1 will be:⁵² (minus Scala/Epicor).

A brief positioning overview of these companies and their product portfolio is given in the figure below:

[D]

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FOOTNOTES

1 Following analyst where used for this section: Gartner, IDC, AMR

2 All requirements identified throughout the MRD have been gathered in an Excel overview - Green R1 MRP Requirement Overview - so that they exist in a single list, without duplication. Their placement in the MRD is referred to in the Excel found on the external Product Management Green site.

51 They do not target the Enterprise space, but have a very small clientele in the CAS space. For the last 12 months, Epicor posted revenues of $148.1M, while Scala recorded $69.5M in revenue. The remainder of the $250M is expected to come from Epicor's recent acquisition of ROI systems.

52 Gartner, Company Reports