Project Madeira: I Kinda Get It, But Not Really

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Microsoft recently announced project Madeira, a cloud-based small business accounting package built on the Navision code base. I applaud Microsoft for finally tweaking one of their accounting technologies to be cloud-enabled, a project that’s been in the works for over a decade. In my discussions with design engineers, they’ve done an amazing job in the architecture and user design to make cloud adoption a possibility like never before.

But will companies buy it? There are many seasoned cloud-based accounting packages out there, with a rich customer base and proven track record. In order to be successful, Microsoft will need to price the product high enough to generate sufficient revenue and pay partners a decent margin, but low enough to attract customers away from competitive offerings. There isn’t a price point I can see that can achieve both of these goals at the same time. And given the bridges Microsoft has burned with the Dynamics partner channel, what partners are going to sign up to carry this new offering?

More importantly, there have been at least half a dozen attempts from Microsoft to create a compelling SMB (small- to medium-business) accounting solution that sits between QuickBooks and Dynamics GP, all of them failures. Most notable for me was Small Business Financials (renamed Small Business Manager) built on the Dynamics GP stack as “project blue”. At Rockton Software, we naively joined the excitement and invested heavily into SBF, only to find Microsoft had dismal sales and eventually killed off the product in about two years. Worse, from 2006-2009 Microsoft had an impressive and amazing QuickBooks competitor called Microsoft Office Accounting, but killed that off in short order because they could only reach 10,000 customers. The usability was so good on the free version that few upgraded to pay for the full version. So what do you do with a successful product that customers love but makes no money? You kill it off.

For the past five years, it’s been hard to listen to Microsoft’s “enterprise only” mantras. Having them decimate Convergence (geared for SMB customers) and replace it with Envision (geared for Enterprise customers) is only one small sign of their disdain for the SMB market. Hands down, enterprise sales are incredibly profitable and make business sense, and since all that matters to Microsoft is money, it’s a sound strategy for them. But I argue that every enterprise-level customer started out as an SMB. Why not harness loyalty for the next enterprise level mega-hit business by proving Microsoft can handle, and maybe even care a little bit, about the SMB market? You know, the market that makes up over 90% of the economy?

Given Microsoft’s history, I fear there will be some small resellers or ISVs who join the Madeira bandwagon who will be cruelly crushed when Microsoft discontinues the product in two to three years. After watching this scenario play out like Groundhog Day over my past 17 years in the channel, I have no plans to embrace this new product. Yes, the product looks amazing and has sound technology, but it’s being carried by a company with a proven track record showing it is incapable of sustaining such a product in the market.

It makes me wonder why project Madeira was named after a famous 1905 shipwreck on Lake Superior. Hopefully this is not a harbinger of things to come.

Written By Mark Rockwell, President of Rockton Software, small business accounting in Dynamics CRM.

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