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SBS 2008 Pricing: More Money, More Servers

The headlines screamed this week, as they tend to do: Windows Small Business Server Prices Going Up! Prices Increasing Up To 80 Percent!

Read past the headline, though, and you'll find -- as, to be fair, most reporters and bloggers did -- that there's a lot more to Microsoft's SBS 2008 pricing scheme than just a price hike. A lot more. In fact, in some cases, it might not even involve a price hike at all.

SBS 2008 pricing will be very complicated, with all sorts of possible permutations and licensing combinations, all of which will probably lead to a lot of extra work for partners. But we'll get to that in a minute.

First, the numbers. A Microsoft press release this week revealed the list prices for SBS 2008 and its new mid-market cousin, Windows Essential Business Server, both due by the end of this year. Quoth the press release:

"Windows Essential Server Solutions pricing is as follows:

  • Windows Small Business Server 2008 Standard Edition software, including five CALs, $1,089 (U.S.); additional CALs $77 each (U.S.)
  • Windows Small Business Server 2008 Premium Edition software, including five CALs, $1,899 (U.S.); additional CALs $189 each (U.S.)
  • Windows Essential Business Server 2008 Standard Edition software, including five CALs, $5,472 (U.S.); additional CALs $81 each (U.S.)
  • Windows Essential Business Server 2008 Premium Edition software, including five CALs, $7,163 (U.S.); additional CALs $195 each (U.S.)"

So, there you go; those are the numbers. But there's a lot more to the new pricing scheme than just prices. Microsoft has built new flexibility into how customers can purchase client access licenses, or CALs. Once again, because it explains it as well as we could, we go to the Microsoft press release:

"Examples of licensing improvements over the current Windows Small Business Server 2003 R2 product include these:

  • Customers will be able to purchase single client access licenses (CALs), so they will pay only for the exact number of employees using the product.
  • Customers can cost-effectively purchase a mix of Standard or Premium CALs, as appropriate to the technologies that individual employees are using.
  • CALs now apply to other copies of Windows Server, SQL Server or Exchange Server on the network, eliminating the need to purchase additional CALs."

All of those CAL policies are new: Customers currently have to buy five CALs at a time, and users of SBS Premium have to buy Premium CALs. So, the price hike isn't as stark as it might seem at first. It's more of a price shift, really.

"There are some things we've done to the product that have been reflected in the pricing -- more cost on server software and less on CALs," said Joel Sider, senior product manager in the Windows Server Solutions Group at Microsoft. Sider noted that customers asked to have the cost of SBS shifted away from licenses and to the software itself.

On top of that, SBS 2008 Premium will be a major upgrade from its predecessor. The new Premium edition will include two servers, not just one, and will also include SQL Server 2008.

"On the Premium side of SBS, we've made a lot of changes," Sider told RCPU in a phone chat this week. "It's a big addition to premium, and the price reflects that."

IDC analysts Al Gillen and Raymond Boggs summed up the changes pretty well in a report released this week:

"As is often the case in product evolutions, the feature changes and the related pricing changes imply higher costs for end customers. Yet further analysis reveals cases, particularly for the standard edition, where customers will find their costs are actually lower, or at worst, relatively unchanged from previous price points they have paid. With the two-server format of the premium edition, the comparison leads to generally higher prices, but with the upside of improved functionality for customers."

More money, more server(s) -- and more functionality. That's the main theme here, and it seems entirely sensible. But what does it mean for partners? In a chat with RCPU this week, Boggs, vice president of small and medium business and home office research at IDC, said that the smallest customers might shy away from SBS.

"For the pure, basic customer just kind of starting out, it's not going to be very attractive," Boggs said. "For the folks that are more advanced, it's going to be more interesting. It is pretty up-market. It's not the truly simple and affordable solution that you as a five-person company with one server are going to be thinking about. By the same token, we are still talking list prices. There may be some wiggle room for partners."

And Microsoft is also building in opportunities for partners to up-sell customers to the Premium edition. Expensive though it might be, SBS 2008 Premium packs a lot of functionality, and Boggs noted that the flexible new CAL policies can take some of the bite out of licensing costs for customers.

"If I move from the old Premium to the new Premium, suddenly I'm getting two servers," Boggs said. "I can extend Basic [CALs] to 80 percent [of users]. There's something of a grow lamp encouraging you to move in that direction."

But Boggs also noted that the pricing schemes are very complicated -- he compared them to a Rubik's Cube, the kind of '80s reference we just eat up here at RCPU -- and that partners are going to have to do a lot of explaining to customers when it comes to pricing and licensing. A lot more, possibly, than they've done in the past: "It means that you as the channel partners are going to be obligated to have a better understanding of the customer's business," Boggs said.

And that's what every partner is trying to achieve, anyway...right?

What's your take on Microsoft's SBS 2008 pricing scheme? Sound off at lpender@rcpmag.com.

Posted by Lee Pender on May 14, 2008 at 11:54 AM