Microsoft's Two Tracks For Big Software JobsMicrosoft's Two Tracks For Big Software Jobs

When microsoft issued preview code for its Indigo communications software last week, it marked another step toward delivering the Longhorn Windows operating system, due next year. Microsoft wants to keep its money-making flagship product on schedule.

But Microsoft won't be as punctual with its next-generation business-applications suite, which has been delayed indefinitely. Officials with Microsoft's Business Solutions division revealed earlier this month that the in-development Project Green enterprise-resource-planning suite--once planned for the Longhorn time frame--is being pushed further into the future, and they're noncommittal about when it will appear. "We don't have an end date," says Satya Nadella, VP of development with Microsoft Business Solutions.

Microsoft is taking different approaches in dealing with the development challenges posed by Longhorn and Green, both complex, multiyear projects. With Longhorn, it's dropping features to meet a target date. With Green, the delivery timetable is being stretched out, potentially by several years.

Why the difference? Microsoft's business model depends more on Longhorn than Green to keep the revenue wheels spinning. In the most recent financial quarter, its client and server businesses, where the operating system drives sales, generated $5.7 billion in revenue and $3.4 billion in operating income. By comparison, Microsoft Business Solutions, the applications unit, posted a $29 million operating loss on only $211 million in sales.

"The business dynamics are quite different," says Jim Shepherd, an analyst with AMR Research. "Something like Longhorn really does have a critical time frame that's more important than the set of features that do or don't get into it. That's never been the case with ERP suites."

Partners are a factor, too. An ecosystem of computer makers and distributors, independent software vendors, and services firms gets a lift each time Microsoft releases a significant Windows upgrade. "The major concern for Microsoft would be its partners," Jupiter Research analyst Joe Wilcox says. "They need a new operating system."

When Microsoft disclosed in August that it was dropping the much-anticipated WinFS storage system from Longhorn, group VP Jim Allchin acknowledged the company was making trade-offs in order to deliver the operating system "in a reasonable time frame." With time of the essence, WinFS would have to wait.

Likewise, a key middleware layer called Microsoft Business Framework slipped beyond Longhorn's projected delivery date, causing a ripple effect on Project Green, whose apps need the framework to function.

Project Green is intended to replace the four ERP suites Microsoft acquired over the past few years--Axapta, Great Plains, Navision, and Solomon. ERP market leaders SAP and Oracle also are working to revamp their application suites, but it's a development race Microsoft doesn't need to win because its target customers tend to be smaller companies that don't upgrade as fast anyway, Shepherd says.

"They can actually afford to lag SAP and Oracle a bit, not a whole lot," he says. "Sliding a year or two or three on something like Project Green is just not a big deal."

Microsoft officials aren't characterizing Green's revised road map as a delay at all. Instead, they say, Microsoft Business Solutions will inject functionality once planned for Green into upgrades to Axapta, Great Plains, Navision, and Solomon that will appear around 2008.

Ultimately, though, Microsoft still plans to deliver a single set of internally developed applications--Nadella refers to them as the Microsoft Business Suite--that one day will replace the four acquired lines. Microsoft promises to support its existing ERP lines until 2013, giving it plenty of time to get Green out the door.