The Associated Press
updated 11/23/2003 11:18:46 AM ET 2003-11-23T16:18:46

Microsoft is to invest $10 billion over the next five years to develop its software offerings for small and medium-sized businesses, according to Germany’s Euro am Sonntag Sunday newspaper.

Orlando Ayala, Microsoft’s SMB sales strategy chief, told the paper in an interview Microsoft was taking a long-term view of the sector, which consists of some 40 million companies around the world, and expected its investments to turn profitable in 2005. (Microsoft is a partner in MSNBC.)

Microsoft is the operating software on more than 90 percent of desktop computers around the world but is now pushing into the market for more powerful and expensive computers as growth in its core Windows business slows.

It aims to sell up to $10 billion in software to smaller businesses by the end of the decade and is investing two billion dollars in research and development for SMB software this year.

Asked about his R&D spending plans for the future, Ayala told the paper: “It should remain in this order of magnitude for the next five years.”

He confirmed that meant a further $10 billion by 2008.

Microsoft’s move into server software that it says gives smaller firms the ability to run big-business computer systems for a fraction of the cost will bring it increasingly into competition with such firms as SAP and Oracle.

German giant SAP, which specializes in so-called enterprise or ERP software to help big companies rationalize processes and integrate departments such as customer relations and human relations, is also looking to smaller firms for expansion.

SAP’s finance chief Werner Brandt told Reuters this week he saw no reason to be worried about competition from Microsoft as the largely untapped market was big enough for both of them.

Ayala said: “We’re not aiming to oust SAP or Oracle from their core ERP business.”

“In the next five years, we will concentrate on the market for companies with 2,000 to 5,000 employees, or maybe up to 8,000.”

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