Financial software tug of war
Microsoft designs product suite in quest to grab market share from Deltek
EDITOR'S NOTE: This article has been updated to correct attribution from Deltek officials.
- By David Hubler
- Oct 30, 2008
During its 25 years in business,
Deltek Inc.'s solutions for managing
professional finances and
accounting systems have carved out a
substantial market share. More than
12,000 organizations, including many
government contractors and federal
agencies, use Deltek products.
About three years ago, Microsoft Corp.
took notice of the increasing growth in
the professional services vertical market.
Deltek is now dueling with the software
giant from Redmond, Wash., for
"To their credit, Deltek has done a
great job of really being known in the
community," said Christine Zmuda,
strategic engagement manager at
Microsoft Dynamics in Washington, D.C.
"They've done some interesting things
around branding their solution."
"And when we dug under the covers
and started to talk to more of these customers,
what they essentially told us was
that they were underserved," she added.
"There wasn't another option in terms of
financial management for government
So Microsoft set out to design software
that more closely meets the needs of contractors,
especially those with commercial
and government clients that were
using different accounting software for
The result was Microsoft Dynamics, a
suite of four products: AX, GP, NAV and
SL. Originally they were to be bundled
into one product, but Microsoft decided
against that approach, Zmuda said.
NAV and SL are best suited for government
contractors because they can do
deep project cost accounting and manage
indirect costs, general and administrative
rates, overhead rates, and other fringe
costs, she said.
Customers can do complex fiscal
reporting because NAV and SL include
Microsoft's analytical tools and the standard
report forms a government contractor
needs to meet federal regulations,
"The Microsoft Dynamics solution can
handle both commercial accounting as
well as government contracting," she
added. "That's really important for a lot
of even our certified partners [and] for
our technology companies who need one
solution that can handle both ends of
"We also see that there is a great
opportunity for government contractors
who do professional services but also
have products, product sales and do
maybe a little bit of manufacturing,"
Dynamics SL has 15,000 customers
and Dynamics NAV has 65,000, she said.
"Both of those solutions grew at the rate
of 21 percent last year," she said, adding
that it is difficult to provide specific government
contractor sales figures because
they are fragmented across the many
Standard Industrial Classification codes.DEEP POCKETS
Bernard Mustafa, president and chief
executive officer of Pleasant Valley
Business Solutions LLC, a Reston, Va.,
Microsoft reseller to government contractors,
said Microsoft's commitment to the
professional services market is evident
from its investment of more than $1 billion
a year in its enterprise resource planning
"You're going to see in the next six
months Microsoft coming out with a new version of NAV. It's called
Dynamics NAV 2009," Mustafa
said. "It's a whole new interface
based on a lot of research that
Microsoft has done."
Earlier this year, Gartner Inc.
placed Microsoft among its Magic
Quadrant for Business Intelligence
Platforms. The analysis firm said
that although Microsoft was late to
join the business intelligence platforms
market and is still catching
up, its platform provides "infrastructure,
workflow and collaboration capabilities
that are held in higher
regard than those of many of its
Deltek officials are not worried about the competition.
"If you ask us whether we're
happy Microsoft exists or not, we
give a hearty yes, because they're far
more valuable to us from a technology
standpoint as a partner than
they are worrisome from a competition
standpoint," said Warren Brown, Deltek vice president of strategic communications.
Deltek became a member of
Microsoft's Managed Partner
Program in May, Brown said. It's
the highest partner level a company
can attain. "We're actually up
for some innovation awards for
how Microsoft technology is bundled
into our applications," he said. "If
nothing else, we're getting closer to
Microsoft all the time."
Zmuda agreed that the two companies
work together from time to time. "As an
example, they use [Microsoft] SQL
Server in a number of their products," she
said. But she added, "It's interesting to me
that Deltek does not see Microsoft as a
competitor. If you look at their annual
reports and so on, in the ERP space, they
don't see it."
"We haven't seen Microsoft be any
more competitive than they were a couple
years ago," Brown said. "And now that
they're not moving all things into one
platform, we run into [SL] sometimes,
run into NAV sometimes and Great
Plains, but we haven't seen any major
competitive shift at all there."
NAV is a Deltek competitor "at some
level, but it's really not the best fit," Brown
said, adding that as a project-related solution,
SL most closely matches Deltek.
"The problem with [SL] is they haven't
really invested much in it so it's kind of
floundering out there," he said. NAV "is
one we run into, but only because it is
more a development environment than
an actual product. There are some
Microsoft partners and resellers that take
[NAV] and build things on top of it and
then sell that."PROPRIETARY DILEMMA
Deltek unveiled the latest release of
GovWin in September. It is business
development and capture
management software designed
specifically for government contractors.
The company also introduced
four new packaged services
plans ? upgrades of Deltek's
GCS Premier Billing Package
Service, Costpoint Quickstart
Implementation Service, Costpoint
Upgrade Service and Performance
Management Quick Start Service
? to help manage commercial or
Richard Boden, president and
CEO of the Boden Group, a professional
services provider in
Woodbridge, Va., has used Deltek
and Dynamics products.
Government auditors are used to
using Deltek, and they know how
its programs enter and use data, he
said. "From a compliance perspective,
it makes it easy to audit," he
Deltek's main problem is it is a
proprietary system and not easily
adaptable, Boden added. "If you
wanted to, say, go with an outside
source that could do your [human
resources work] or your payroll or
something like that, you'd have to have
guys come in and basically write code," he
said. That is in contrast to Dynamics NAV,
an open system to which it is easy to add
Boden said he believes Deltek is beginning
to lose market share because the bigger
clients want to do more things themselves
without having to hire outside consultants
"If they're still going to remain a proprietary
system," Boden said, "I think they're
going to have problems."David Hubler (email@example.com) is
associate editor at Washington Technology.
David Hubler is the former print managing editor for GCN and senior editor for Washington Technology. He is freelance writer living in Annandale, Va.