News

Microsoft Works to Sharpen its Small Business Focus

• By Stuart J. Johnston
• September 20, 2005

Microsoft has always tried to nab every sale it can, but it hasn’t always been great about servicing the SMB channels, particularly channels for small businesses. That’s changing, according to senior Microsoft officials, or at the least, the company is renewing its emphasis on those smaller customers.

Earlier this month, the company held its first ever Microsoft Business Summit, followed back-to-back by a third-party conference called SMB Nation. Both events were held in the software giant’s plush campus conference center.

At the first ever Business Summit, Microsoft aimed to demonstrate a renewed commitment to serving mid-sized businesses’ needs. (See related article.)

But not to ignore the “S” in SMB, Microsoft also announced general availability of its Office Small Business Accounting 2006 and Office Small Business Management Edition 2006 packages (the Office Small Business Management Edition includes Small Business Accounting). These products are “designed to enable small businesses to manage all their sales, marketing and financial processes within the familiar, easy-to-use Office environment,” the company said in its press release.

“Microsoft has had small and mid-sized efforts going back over the years, but I think they lost of bit of focus over the past couple of years,” says Rob Enderle, principal analyst for technology research firm the Enderle Group. “Now they’re rebuilding that focus.”

Even Microsoft executives frankly admit that the company hasn’t always been as attentive to those markets as customers would like.

“Five years ago, the small business owner was not very much on our radar,” Steve Guggenheimer, vice president of Microsoft’s small business group, told SMB Nation attendees in his opening keynote.

Microsoft defines any company with 25 or fewer PCs as a small business and, as such, those companies often don’t have an actual person whose job is specifically to act as the IT person. Usually, the job is done by someone who already has a full-time role at the small business doing something else.

In fact, that’s a market that Microsoft doesn’t service directly, relying virtually completely on small third-party firms to meet that need. The company started off its efforts to service that sector eight years ago when it introduced Small Business Server. The latest version is Windows Small Business Server 2003 Service Pack 1, which came out this summer.

Enter Harry Brelsford -- entrepreneur, author of multiple tech books, and veteran technology consultant – and CEO of one of those small partner firms. SMB Nation is his brainchild, and he apparently struck a nerve with that underserved audience when he held the first SMB Nation three years ago.

Attendance has jumped by more than 300 percent since then, with this year’s total coming to about 450 small business consultants and resellers. Before this year’s show was over, 75 attendees had already signed up for next year’s event, according to Brelsford.

The attendees, of course, were mostly members of the choir. Many at this year’s event were Microsoft Small Business Specialists, a designation the company only began conferring earlier this summer.

“Over the past two and a half years, the SMB sector has gotten hot,” says Brelsford, whose company shares its name with the event – SMB Nation, Inc. “Microsoft is very eager to get traction in that space.”

This is especially true among the myriad of small firms that service the small business market. One major characteristic of their clients is that, just as they can’t afford full-time IT support, it’s also true that capital costs for software licenses comprise a more significant percentage of their IT budgets than is typical at larger companies. Thus, it’s no surprise that many of the third-parties that service those clients are big Linux proponents.

Microsoft has to find ways to enable small business consultants to deploy more sophisticated Microsoft-based applications to their customers. The idea is to give small businesses the kinds of tools and, thus, the quality of business intelligence that large enterprises are able to muster.

Besides, Microsoft doesn’t want to miss the opportunity to cash in with as many as 41 million small businesses worldwide that have PCs.

Guggenheimer dropped a few interesting tidbits during his speech, including the statement that 80 percent of small businesses have no server. For that reason, the two new Office small business offerings can function in a peer-to-peer environment.

The company will also ship an R2 release of Small Business Server 2003 in fiscal 2006. (The 2006 fiscal year began on July 1 and runs through the first half of calendar 2006.)

“The message here is We’re not done,” says Guggenheimer. “One of the things that we’re doing with Small Business Accounting is we have services woven in so if you want to do payroll it’s from an ADP service that’s woven in,” Guggenheimer says.

Additionally, Microsoft is collaborating with several service providers, including Chase Merchant Services LLC, to offer processing of credit and debit card payments from within the Office Small Business Accounting software.

And tax software vendor Thomson Creative Solutions said it will provide integration between its software and Small Business Accounting, enabling accountants to import data from Small Business Accounting directly into Creative Solutions’ Write-Up CS program.

Microsoft’s new Office Small Business Accounting 2006 costs $179. Microsoft Small Business Management Edition 2006 lists at $669, and existing Microsoft Office customers can upgrade for $399. Finally, ADP Payroll for Microsoft Office Small Business Accounting is priced at $169 per year.