In-Depth

Microsoft and Small Businesses: Still Too Little?

Redmond has been reaching out to small businesses, but some partners say they're still getting mixed messages.

• By Anne Stuart
• April 01, 2006

A: Depends on whom you ask.

If you ask Harry Brelsford, Microsoft is doing plenty these days for both its smaller partners and the SMBs they serve. "In true Microsoft fashion, they're responding en masse to demand," says Brelsford, CEO of SMB Nation Inc., a training and consulting service based on Bainbridge Island, Wash. Brelsford cites the new Microsoft Small Business Specialist (SBS) designation as just one example of Redmond's intensified interest in companies whose fortunes are far below those of the Fortune 500. "You can't even keep up anymore with Microsoft's [offerings for] the small business," says Brelsford, among the first to earn the new designation (see RCP January 2006, "Microsoft SBS: What's in It for You?").

But if you ask Roman Pawnyk, "Microsoft" and "small business" still don't belong in the same sentence, at least not when it comes to how the company treats partners who are SMBs themselves. "You don't have clout because you're not a million-dollar-plus partner," says Pawnyk, CEO of the R.M. Pawnyk Corp., a Cleveland, Ohio-based Microsoft Certified Partner that sells and supports only Microsoft products. "Your partner account manager [PAM] doesn't want to talk with you because you're too small," he adds, noting that his company has five employees, including himself and his wife. "You bring in revenue, but if you have a problem, they don't want to talk to you because you're too small."

And if you talk to almost anyone else, you'll probably get an answer somewhere in between, something like Bob Hood's. "Does Microsoft get it -- or does any vendor get it -- when it comes to SMBs? By and large, no," says Hood, who heads the Chicago-based Hood Consulting Group, a Microsoft Registered Member. "Microsoft has gotten better. They're getting there. But they're not there yet."

Mediocre Track Record
If there's one thing that nobody disputes, it's that, for most of its 30-year history, Redmond hasn't had a stellar relationship with SMBs. If the company didn't exactly ignore smaller partners and customers, it didn't exactly pursue them, either. "There is a legacy resentment in the SMB channel, and there's a basis for that resentment," Brelsford notes. One example: Small Business Server. "It's in its ninth year of life, and for six years, [Microsoft] did a poor job of embracing the SMB customer and reaching out to partners," he says. "I think our people hold onto that."

Arlin Sorensen, president of Heartland Technology Solutions Inc., a Microsoft Gold Certified Partner based in Harlan, Iowa, has been in business for 21 years, selling Microsoft products for most of that time. But until a few years ago, he wasn't convinced that anybody in Redmond realized his 40-person IT support and service company existed. "It was 16 or 17 years before I ever had a Microsoft person get engaged with us directly," he says. "I'm not sure they really believed small companies were out there."

Even a key point person for Microsoft's fast-growing Small Business Specialist Community -- himself a former small-business partner -- acknowledges that Microsoft traditionally overlooked its smaller partners and customers. "If you go back several years, there weren't a whole lot of resources dedicated to that market," says Eric Ligman, now the Redmond-based U.S. senior manager for small-business community engagement, but previously the owner of a Chicago-area Microsoft partner company.

Today, Microsoft is clearly trying hard to ditch that legacy, reaching out to the very companies that, whether by strategy or accident, it has traditionally overlooked. And the mandate to do so comes straight from the top: In announcing the launch of Office Small Business 2006 last fall, Microsoft Chairman Bill Gates said: "We see small business as something that's a big opportunity for us, that's something you'll see us carry through in all the things that we do."

Whether they're succeeding is a question that, again, depends upon whom you ask.

Small Business, Big Opportunity
Gates wasn't kidding about the market's potential. Microsoft -- which defines small businesses as those with 50 or fewer employees -- estimates that there are 5.5 million such companies in the United States alone. "It's a huge market that's underserved," Ligman says.

And as Ligman himself notes, it's also a market that's historically taken care of its own. "When I was a partner, the resources we had were each other," he recalls.

To some extent, that's still the case. Small partners who specialize in serving small companies remain a remarkably cohesive and self-motivated bunch. The attendance figures for Brelsford's annual SMB Nation conferences -- primarily designed for Microsoft partners who focus on SMBs -- best illustrate that grassroots growth. The first event, held in Indianapolis in 2003, attracted 101 attendees. In 2004, 225 people showed up for the Seattle event. More than 600 people signed up for last year's conference in Redmond. And Brelsford has capped attendance for this year's event, scheduled for Sept. 8-10 in Redmond, at 800 -- the maximum the local fire marshal will allow. He's also scheduled smaller gatherings in New York and Amsterdam, the Netherlands, this spring.

Then there are several dozen small-business "user groups," such as the Chicago-area one co-founded by consultant Bob Hood that grew out of that first SMB nation event in 2003. "Here 100 people from around the world show up, and they're all having the same problems we're having," Hood says of that conference. "We all said, ‘It would be a shame to lose that sense of community -- let's stay in touch.'" So they did, going to Microsoft partner gatherings and asking their peers whether they'd be interested in getting together independently. Apparently, they would: "At our first meeting, we had 39 people show up," Hood recalls one cold February night as he's driving from a client's server crash in Chicago to a user group meeting in suburban Vernon Hills. The group now has 170 people on its mailing list and still attracts 25 or 35 to every session, where they eat dinner, network and listen to speakers. Many drive two hours or more to more to attend. Why do they bother?

"We finally realized the power of community and you have to pay a price for that. And the price for that is time," Hood says. "One of us really isn't going to get Microsoft's ear. Even my user group, with 35 [regular members], is going to have a rough time getting Microsoft's ear. But if you get the combined voices of 90 user groups around the world, Microsoft's going to listen big time."

In fact, Microsoft is listening. While the Chicago group organized spontaneously, its leaders always invite Microsoft representatives to attend and the group often meets at Microsoft's local offices. Says Hood: "We want [Microsoft] to be an active participant because we want Microsoft to know what our pain points are."

In some cases, Microsoft has followed the groups' lead in addressing those pain points. For example, many partners had long complained about the lack of SMB-specific Microsoft messaging. Brelsford, whose SMB Nation Web site serves as kind of a hub for SMB partners, says that, a couple of years ago, the Portland, Ore., user group took matters into its own hands. "They took the initiative to establish a tax, a user-group fee," he says. "They took that money and used it to purchase a radio ad on an AM news station in the Portland area because they felt that Microsoft wasn't doing anything" to help them reach SMBs. The grassroots ad campaign successfully raised local awareness about partners' offerings, Brelsford says, "and they did it a full two years in advance of Microsoft itself running a radio ad for the small-business market."

"In the last two years, there’s been a lot of engagement. We have a lot more positive relationship with people in Redmond who are helping us approach our customers and serve our customers." -- Arlin Sorensen, President, Heartland Technology Solutions Inc.

Now, though, there's plenty of evidence that Microsoft is taking a proactive approach to reaching partners who server SMBs. In addition to creating Ligman's national-level job as an SMB engagement manager a few years ago, the company has created 14 similar regional positions across the country within the last year. As a team, their goal is to tap into those user groups and the mushrooming ranks of Small Business Specialists (more than 1,500 partners nationwide have qualified for the designation since it became available last year). The new regional liaisons provide "a connection between corporate and the field, a direct line of communication and feedback," Ligman says.

More Microsoft Initiatives
Brelsford points to two other recent indications that Microsoft is hitting its stride with small businesses.

First, there's the new sales strategy for Small Business Server, which is now available off the shelf at Best Buy retail electronics stores. "That's a mature market strategy that's in line with the age of the product," Brelsford says. And while that might initially sound like bad news for channel partners, there's a twist. About 130 of the chain's stores will have "business centers" staffed by Microsoft Small Business Specialists. "Best Buy has committed to having three Small Business Specialists per store in order to make sure things are done right," Brelsford says. "This is great thinking."

He and others also cited the first-ever Microsoft Small Business Summit, which was scheduled to take place in mid-March. Like similar conferences designed for executives from larger companies, the four-day event's agenda was packed with presentations on finance, sales, productivity, security and other topics. But in developing the conference, Microsoft acknowledged its target audience's tight budgets. So unlike other summits, the small-business event was free to all. And the event was scheduled to take place entirely online, allowing participants to save a bundle on travel costs. (The agenda did include a face-to-face opening-day gathering in Redmond, but that, too, was offered as a live Webcast for those who couldn't attend in person.)

Along the same lines, Microsoft is sponsoring a variety of SMB-oriented workshops that are either free or a fraction of the cost of past events. Brelsford, a Microsoft Certified Trainer, teaches a Small Business Specialist certification-prep workshop. The two-day course costs $175, which Brelsford calls " a far cry from the old days when a five-day course would cost $1,500" – a price simply out of reach for most SMBs.

Ligman says all those efforts -- combined with the estimated millions of dollars that Microsoft has spent researching the market -- indicate that the company now understands very well that small companies are far different creatures than their larger brethren. "They're not just a ‘light' version of an enterprise customer," he says. "Our approach is specifically targeted to their needs." One example: The resource-stocked online Microsoft Small Business Center, launched last year in response to feedback from small businesses who found the company's main Web sites too overwhelming or too enterprise-oriented. "It's not just ‘Here's [Microsoft] Office,'" Ligman says of the content. "It's giving them ideas about how they can leverage technology to do the things they want to do." And because SMBs often prefer to work with other local businesses, the site includes a searchable Small Business Specialist locator allowing small customers to find the specialist closest to their own ZIP codes.

Has all this made a difference in terms of Microsoft's relationship to its smaller partners -- and to their relationships with their small-business customers? Once again, that depends on whom you ask.

Better Than Before
Sorensen, of Heartland Technology Solutions, no longer wonders whether Microsoft knows his company. "In the last two years, there's been a lot of engagement," he says. "We have a lot more positive relationship with people in Redmond who are helping us approach our customers and serve our customers."

Microsoft also seems to know those SMB customers better these days.

Even a few years ago, if Microsoft "ran ads in the SMB channel space, it was still an enterprise message. They didn't understand small business pain points," Sorensen says. "It really boils down to a few simple things: They're looking to simplify, they don't have an IT staff and they just want [the problems] to go away. Microsoft used to say, ‘Here's the next set of new features.' Small businesses would say, ‘We can't get the old stuff to do what we want, so why would we care about the new stuff?'" he recalls, then adds: "That's changed. They now understand that small business customers have different needs than enterprise customers."

And those SMB customers seem to be receiving Microsoft's messages, Sorensen adds. Just a few years ago, "customers were pretty much in the dark about products being brought to market because there was no advertising in their space. It was a tough sell. It required a lot of education," he recalls. "Now they all know there's a new desktop operating system coming up. We don't have to fight the battle of what it is and what it does. It's a lot simpler for us to focus on process of helping their individual businesses than having to do ‘Microsoft 101' for them."

Hood, the Chicago consultant, views the creation of the registered level of the Microsoft Partner Program as an important outreach effort for smaller partners. "That has gotten us plugged into a whole lot of things," he says. "We are being invited to TechNet and TS2 meetings. Most recently, we've started to be invited to the Microsoft quarterly partner briefings and we've been rubbing shoulders with the big guys. They're recognizing us and inviting us to come inside the barn door." And, he adds, being able call your company a Microsoft partner -- even on the program's lowest rungs -- "carries a little bit of weight" with customers and prospects.

Still Room for Improvement
But Pawnyk, the Cleveland-based Microsoft Dynamics reseller, isn't feeling the love. Several years ago, when his company sold Real World accounting software, he says, he could pick up the phone and call that company's president. (Real World was acquired by Great Plains, which was later acquired by Microsoft.) "Whether it was about a marketing plan or a client or something I needed to communicate to him about the direction the channel was taking, I always had direct access," Pawnyk recalls. "I realize it's not possible to have that at Microsoft, but the organization is so closed it's impossible to establish even minimal communication channels. Contacting Microsoft is basically shooting into a big cave. You hear something reverberating in there, but nothing ever comes back out."

When Microsoft does reach out to its smaller partners, Pawnyk says, the message is often still off-target. "I've attended any number of partner programs where folks say that if you want to bring in 12 prospects, you need to spend $200,000," he says with a snort. "Come on, folks. This isn't the enterprise environment." Meanwhile, he says he gets his best leads and opportunities from neither Microsoft nor ad-hoc partner groups, but through a $110-a-year networking organization sponsored by his church.

While acknowledging that Microsoft's legacy has been far from perfect, Brelsford, of SMB Nation, says the company has moved ahead light years in dealing with smaller partners and customers. Much of the criticism "doesn't reflect the progress Microsoft has made in the last 18 months," he says. "When Microsoft makes a decision, they go for it. They really do."