This is the ninth installment in a 10 part blog on Microsoft as a practitioner of asymmetric marketing.
9. M&A
It's recently come to light that Microsoft and fellow software giant SAP were in merger talks at the end of last year. The decision was not to go forward with a merger because of the integration challenges the 2 companies would face but the two companies agreed to closely connect their respective web services strategies going forward. This underscores another element of Microsoft's style of asymmetric marketing, which focuses on rapid integration and tribal leader oversight of acquired assets.
This Microsoft M&A approach reinforces its asymmetric advantage. They acquire technology that serves as an implant of new digital ‘genetic material’ that catalyzes targeted organic growth in the Microsoft corporate ‘organism’. Here’s a few examples in the key market segments of portal services, SMB applications and web services.
Portal Services: At the end of 1997, Microsoft acquired Hotmail, which at that time was the fastest growing web-based free email service in the world. Microsoft still uses the brand name, 6 plus years later. Hotmail provided Microsoft with an ‘anchor’ application for transitioning MSN from its original proprietary AOL model, to a web portal model like Yahoo. Hotmail also provided a way to bootstrap Microsoft’s Passport single sign-on and identity management technology while providing them with an opt-in list for targeted advertising by MSN commerce providers. MSN is now about a $2.5 billion business for Microsoft, not far behind asymmetric marketer Yahoo which also has grown via acquisitions like Overture and Inktomi.
SMB Applications: In 2000 Microsoft acquired Great Plains, a long term MS partner, to bootstrap their .NET offensive in the SMB (small medium business) market. In 2002, they added Navision, based in Europe, for the same reason. These two acquisitions are still a relatively small part of Microsoft’s business, about $600 million annually, still losing money and still underperforming. But these acquisitions are now receiving the personal touch of tribal leader Steve Ballmer because they have placed Microsoft in the high potential SMB application space while also enabling them to roll out Windows Server 2003 and its multi-year subscription model into a network of new channel partners. I'm convinced that Microsoft will keep working this deal until they get it right and have an SMB applications strategy that really capitalizes on their Windows Server marketing programs.
Web Services: In 2003, Microsoft acquired Placeware, the number 2 behind Webex in the hot online conferencing market. Placeware is now re-branded Microsoft Live Meeting. In his 2003 annual speech to the CEOs of top Microsoft customers, Bill Gates had a top staffer demo Placeware as a core web service for enterprise collaboration. Placeware provides Microsoft with a way to ‘annex’ the conferencing category by integrating other Microsoft applications and web services into and around Placeware. While Webex is still the leader with 67% of the worldwide conferencing market, Microsoft’s reach will widen that market over time and make conferencing more ubiquitous. Webex has to adapt accordingly and decide how to defend itself. It can become another Novell and decline, or become another Adobe or Intuit and capture asymmetric advantage for itself. It will depend on how it develops countermeasures to deal with the Placeware acquisition.
This year, Microsoft has continued down the path of it's 'genetic material' acquisition strategy by acquiring ActiveViews, a small provider of business intelligence and reporting software for MS SQL Server. Look for them to do more of these types of acquisitions, usually from among their base of existing partners.
Comments