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Small.biz goes a bundle on SBS 2003?

Microsoft packs in the extras

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It’s been nearly a year since Microsoft launched a Small Business Server - a strategic move into a market that everyone wants a piece of.

For those who missed the announcement, SBS 2003 is a normal Microsoft server with a load of extra stuff bundled in – Exchange and SharePoint Services, and for anyone who still uses such things, Shared Fax.

Upgrade to ‘Premium’ edition and you get Internet Security and Acceleration (ISA) Server 2000, SQL Server 2000, and Office FrontPage 2003 thrown in. It’s tightly restricted to the small business. You’re limited to 75 desktops and a single domain, so you can’t even use it for the branch office of a larger enterprise.

So is this a real product, or just a bundling exercise? “It is not just a marketing model,” says Derek Brown, appointed nine months ago as director of product management for the small business server, and formerly marketing chief for Windows Mobile. “There is lots of engineering we have done there. It is an integrated install. There are lots of admin tools. It has simplified the experience.”

Logically enough, SBS 2003 was launched a year ago, replacing Microsoft’s previous offering, SBS 2000. It’s sold better than its predecessor. “It sold more in its first four months than SBS 2000 sold in a year, and this year it has 262 per cent more SBS 2000 sold in 2002,” says Brown.

But it still doesn’t represent the majority of Microsoft’s sales to Small Businesses in a year. “Not today, but we’re heading in that direction,” says Brown. "Most of them are still buying servers separately, and sticking Exchange and whatever else they need on top."

So VAR so good

Any Small Business product depends on the community of large and small resellers, to convince buyers that it’s a good idea and get it working for them. So while less integration sounds good for the customer, it can be a mixed blessing for the reseller, who depends on integration work for the payments on his banana yellow Porsche.

SBS 2003 doesn’t mean downgrading to a Skoda, says Brown. “Certainly some VARs looked at it and thought, ‘How do I make money on a low end server?’ But the business models are different. The opportunity is to go and build a long-term relationship.”

In other words, go sell servers to people who don’t have them yet, do a good job, and then see what else you can persuade them to install. Brown quotes a typical reseller, who has seen the light: “After thirty days, they’re telling me that all their pain points as a business have been taken away. After sixty days, they’re saying that they’ve achieved full ROI (return on investment). After ninety days, I’m their most trusted adviser, and their asking me what project I should do next.”

A bundle of trouble?

This is all IT business as usual – products become commodities, margins fall, so new customers have to be discovered and new products invented to keep the whole circus ticking along. But there’s a piece of Microsoft business-as-usual at work here too. Any kind of bundling exercise involving a dominant industry player is bound to be controversial (especially if that player is based in Redmond, Washington).

The logical next step for future releases is to bundle other elements of Microsoft business software into future SBS bargain buckets. This could be instant messenger and presence services from Live Communication Server. But more interestingly, it could be SME accounting or CRM software. Of course there are no “plans” to do this – or at least nothing has been announced.

“We think about it,” says Brown. “No decision has been taken, but we think about great integration that adds value. I think potentially CRM is a great opportunity. Getting and retaining customers is a number one issue for SMEs.”

It’s a pretty important issue for Microsoft, too. And this looks like another example of Microsoft using its dominance in the platform area to muscle into areas of the applications market, where Microsoft is far from the dominant player.

It’s unlikely that a few wizards and a discount could persuade a dedicated customer of Sage or Quicken to switch to Microsoft.

But it could be something for Neelie Kroes, the EU’s incoming anti-monopoly commissioner to think about, now that the fuss about the Doctorate she gave Bill Gates has died down. ®

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Build a business case: developing custom apps

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