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Partners May Face Challenge From Microsoft

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From Associated Press

Microsoft Corp. will further expand its software offerings for small businesses, even though that will turn many of its current partners into competitors, Chief Executive Steve Ballmer said Sunday.

“We do believe that the business application market will continue to get consolidated,” Ballmer told thousands of Microsoft partners from smaller technology companies at a conference here. Many of those partners could soon be competing with Microsoft.

While Microsoft has sold millions of copies of business programs such as Word and Excel, other companies write software that is often customized for individual companies.

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On Sunday, Ballmer signaled that Microsoft had its eye on that market.

The company has hired more than 200 people, from doctors to bankers to plant managers, to help it write software for specific industries, and it plans to roll out a program called Small Business Accounting this fall that will compete with accounting programs such as Intuit Inc.’s QuickBooks.

Ballmer said he believed business software would increasingly become a product that was ready to use off-the-shelf, rather than needing to be written for individual businesses the way it is now, often by small software firms. He said the additions it planned were natural fits with its current Office software.

Still, some competitors are wary. Paul Kaeser said there’s no question that Microsoft’s new small-business push would snatch some of his customers. Kaeser is in charge of product development at Lexware of Germany.

“It will definitely take business away,” he said. “We used Microsoft as a platform until now, but with the launch of this small-business accounting program, we will become competitors.”

Kaeser, however, said he was unsure whether Microsoft would succeed. The Redmond, Wash.-based company would have to write software dealing with complicated German employment and accounting rules. That would make it hard for Microsoft to replace the kind of local expertise of companies like Lexware, Kaeser said.

“We know that things coming from Microsoft in Redmond sometimes don’t have the right feel for the European market,” he said.

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Brad Allen of Dublin, Ireland-based IT Force said that since most of the world’s companies are small businesses, Microsoft’s move makes sense. IT Force helps smaller businesses outsource their technology work.

Allen said he’d be more nervous if IT Force competed directly with Microsoft. As it is, Allen said Microsoft’s marketing efforts to woo small-business owners helps him convince those same owners that he and Microsoft can come up with solutions for them.

In other comments, Ballmer also pledged that Microsoft’s Internet search engine would catch up with rivals Google Inc. and Yahoo Inc. in coming years. Its MSN search engine currently lags behind both. “We’re very serious about investing in a way that puts us out in front of Yahoo and Google,” he said.

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