Beth Schlanker  /  AP
Microsoft CEO Steve Ballmer speaks at the company's Worldwide Partner Conference Sunday in Minneapolis.
updated 7/10/2005 7:05:53 PM ET 2005-07-10T23:05:53

Microsoft Corp. will expand its software offerings for small businesses, even though that will turn many of its current partners into competitors, CEO 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 in Minnesota. (MSNBC is a joint venture of Microsoft and NBC.)

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

The company has hired more than 200 people including doctors, bankers and 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 believes business software will increasingly become a product that is ready to use off-the-shelf, rather than written for individual businesses as is done now, often by small software firms.

Ballmer said the products it plans will fit naturally with its current Office software. Still, some competitors are wary.

Paul Kaeser, head of product development at Lexware GmBH & Co. KG of Germany, said there is no question Microsoft’s new small-business push will snatch some of his customers.

“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.”

He said he was not sure Microsoft will be able to succeed. The Redmond, Wash.-based company will have to compete with Lexware's local expertise on matters such as complicated German employment and accounting rules, for example.

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

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

Ballmer also pledged Microsoft’s Internet search engine would catch up with rivals Google Inc. and Yahoo Inc. in coming years. Its MSN search engine currently lags both.

“We’re very serious about investing in a way that puts us out in front of Yahoo and Google,” Ballmer said.

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