Financial software tug of war

During its 25 years in business,Deltek Inc.'s solutions for managingprofessional finances andaccounting systems have carved out asubstantial market share. More than12,000 organizations, including manygovernment contractors and federalagencies, use Deltek products.About three years ago, Microsoft Corp.took notice of the increasing growth inthe professional services vertical market.Deltek is now dueling with the softwaregiant from Redmond, Wash., forsupremacy."To their credit, Deltek has done agreat job of really being known in thecommunity," said Christine Zmuda,strategic engagement manager atMicrosoft Dynamics in Washington, D.C."They've done some interesting thingsaround branding their solution.""And when we dug under the coversand started to talk to more of these customers,what they essentially told us wasthat they were underserved," she added."There wasn't another option in terms offinancial management for governmentcontractors."So Microsoft set out to design softwarethat more closely meets the needs of contractors,especially those with commercialand government clients that wereusing different accounting software foreach sector.The result was Microsoft Dynamics, asuite of four products: AX, GP, NAV andSL. Originally they were to be bundledinto one product, but Microsoft decidedagainst that approach, Zmuda said.NAV and SL are best suited for governmentcontractors because they can dodeep project cost accounting and manageindirect costs, general and administrativerates, overhead rates, and other fringecosts, she said.Customers can do complex fiscalreporting because NAV and SL includeMicrosoft's analytical tools and the standardreport forms a government contractorneeds to meet federal regulations,Zmuda said."The Microsoft Dynamics solution canhandle both commercial accounting aswell as government contracting," sheadded. "That's really important for a lotof even our certified partners [and] forour technology companies who need onesolution that can handle both ends oftheir business.""We also see that there is a greatopportunity for government contractorswho do professional services but alsohave products, product sales and domaybe a little bit of manufacturing,"Zmuda said.Dynamics SL has 15,000 customersand Dynamics NAV has 65,000, she said."Both of those solutions grew at the rateof 21 percent last year," she said, addingthat it is difficult to provide specific governmentcontractor sales figures becausethey are fragmented across the manyStandard Industrial Classification codes.Bernard Mustafa, president and chiefexecutive officer of Pleasant ValleyBusiness Solutions LLC, a Reston, Va.,Microsoft reseller to government contractors,said Microsoft's commitment to theprofessional services market is evidentfrom its investment of more than $1 billiona year in its enterprise resource planning(ERP) systems."You're going to see in the next sixmonths Microsoft coming out with a new version of NAV. It's calledDynamics NAV 2009," Mustafasaid. "It's a whole new interfacebased on a lot of research thatMicrosoft has done."Earlier this year, Gartner Inc.placed Microsoft among its MagicQuadrant for Business IntelligencePlatforms. The analysis firm saidthat although Microsoft was late tojoin the business intelligence platformsmarket and is still catchingup, its platform provides "infrastructure,development tools,workflow and collaboration capabilitiesthat are held in higherregard than those of many of itscompetitors."Deltek officials are not worried about the competition."If you ask us whether we'rehappy Microsoft exists or not, wegive a hearty yes, because they're farmore valuable to us from a technologystandpoint as a partner thanthey are worrisome from a competitionstandpoint," said Warren Brown, Deltek vice president of strategic communications.Deltek became a member ofMicrosoft's Managed PartnerProgram in May, Brown said. It'sthe highest partner level a companycan attain. "We're actually upfor some innovation awards forhow Microsoft technology is bundledinto our applications," he said. "Ifnothing else, we're getting closer toMicrosoft all the time."Zmuda agreed that the two companieswork together from time to time. "As anexample, they use [Microsoft] SQLServer in a number of their products," shesaid. But she added, "It's interesting to methat Deltek does not see Microsoft as acompetitor. If you look at their annualreports and so on, in the ERP space, theydon't see it.""We haven't seen Microsoft be anymore competitive than they were a coupleyears ago," Brown said. "And now thatthey're not moving all things into oneplatform, we run into [SL] sometimes,run into NAV sometimes and GreatPlains, but we haven't seen any majorcompetitive shift at all there."NAV is a Deltek competitor "at somelevel, but it's really not the best fit," Brownsaid, adding that as a project-related solution,SL most closely matches Deltek."The problem with [SL] is they haven'treally invested much in it so it's kind offloundering out there," he said. NAV "isone we run into, but only because it ismore a development environment thanan actual product. There are someMicrosoft partners and resellers that take[NAV] and build things on top of it andthen sell that."Deltek unveiled the latest release ofGovWin in September. It is businessdevelopment and capturemanagement software designedspecifically for government contractors.The company also introducedfour new packaged servicesplans ? upgrades of Deltek'sGCS Premier Billing PackageService, Costpoint QuickstartImplementation Service, CostpointUpgrade Service and PerformanceManagement Quick Start Service? to help manage commercial orgovernment projects.Richard Boden, president andCEO of the Boden Group, a professionalservices provider inWoodbridge, Va., has used Deltekand Dynamics products.Government auditors are used tousing Deltek, and they know howits programs enter and use data, hesaid. "From a compliance perspective,it makes it easy to audit," hesaid.Deltek's main problem is it is aproprietary system and not easilyadaptable, Boden added. "If youwanted to, say, go with an outsidesource that could do your [humanresources work] or your payroll orsomething like that, you'd have to haveguys come in and basically write code," hesaid. That is in contrast to Dynamics NAV,an open system to which it is easy to addapplications.Boden said he believes Deltek is beginningto lose market share because the biggerclients want to do more things themselveswithout having to hire outside consultantsor programmers."If they're still going to remain a proprietarysystem," Boden said, "I think they'regoing to have problems."