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How to lose friends

Microsoft's #1bn offer for Navision is stirring up strong opposition from many other accounting software vendors - including a number of loyal Microsoft technology partners.

Microsoft’s play for Navision, a Danish software vendor with strong continental but little UK presence, is interesting not only because it is the second-largest deal in Microsoft’s history, but because it signals that the company has broken its promise not to compete with partners.

Microsoft has always prided itself on its relationship with technology partners and for companies like SquareSum, which have long advocated Microsoft, its change of heart will feel like a betrayal.

Philip Taylor, SquareSum’s founder, sent an email to Financial Director outlining his views. “The acquisition of Navision by Microsoft, shows that Microsoft has made a major change in direction and policy. Bill Gates’ claim that Microsoft, unlike Oracle, would never go into competition with its partners is dead,” he says. Microsoft refused to comment on the allegation.

The announcement of the Navision acquisition comes only a few months after Microsoft’s £750m purchase of another software vendor, Great Plains.

This has been taken as a clear indication that Microsoft is looking to clean up in accounting software.

Executives of UK accounting software vendor Sage have been so incensed by Microsoft’s actions that they conducted a whistle-stop tour of EU competition authorities and the Office of Fair Trading in an attempt to block the deal.

The worry for vendors like Sage – which is itself a Microsoft technology partner – doesn’t stem from the technology Microsoft will acquire from Navision, but from the money Microsoft can afford to spend re-packaging and marketing it. If Microsoft bundles its new accounting technology into its existing Office applications, then European customers need only buy an off-the-shelf Microsoft suite of software.

But power plays in the software market are nothing new. Indeed, accusations of hypocrisy have been levelled at Sage from rivals which state that the company attempted a similar coup when it tried to buy Pegasus in 1996, a deal that fell through after complaints that it was anti-competitive.

So, at the moment, Microsoft is probably confident that its aggressive new strategy will deliver increased market share. But perhaps it should beware of resistance, not from the competition authorities, or from the public noise-making of Sage, but from its partners. If they, and its competitors, gang up on the US giant, then it could have a real fight on its hands.

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