Microsoft Bundles Up for SMB Channel Blitz

Offered exclusively through its resellers, the software giant is selling all three components under a single SKU for $922 (a 28 percent discount), along with three years of Software Assurance benefits, including upgrades to Windows Vista and Office 12 when those products are released.

Customers also receive a subsidy, through Microsoft's Open Value program, payable directly to the reseller for consultancy.

The program is designed to attract the sizeable number of small business owners who have been reluctant to accept business-class technology, said Cynthia Bates, general manager of the small-business division of Microsoft's U.S. Small and Mid-market Solutions & Partners Group. It is aimed at companies with 50 workstations or less.

"We want to make it as easy and affordable as possible for them to take advantage of the software that will give them the business advantage," she said.

Resellers will be crucial to Microsoft's goal of infiltrating the 6-million strong small business market, Bates said. The bundle is offered only through partners, and the company said it intends to add marketing and training resources to boost the effort.

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Microsoft said its 1,000 Small Business Specialists, participants in a months-old program, will receive top priority in the company's Web-based partner search, the company's primary promotional vehicle.

Click here to read Channel Insider columnist Elliot Markowitz's reaction to Microsoft's Small Business Platform SKU.

Microsoft said it intends to use the Web as its main marketing arm, driving small businesses to its Small Business Center site and from there to a partner locator, where Small Business Specialists will receive priority status, Bates said. Microsoft has set a goal of adding 14,000 additional Small Business Specialists in the next 10 months, to help facilitate the push into the market.

For resellers, the bundle and price advantage should be key to attracting new and current customers to a technology they have thus far been shy of, said Marc Harrison, president of Silicon East Inc., a Manalapan, N.J., Small Business Specialist specializing in construction and real estate outlets.

"There are certain people you can talk to until you are blue in the face and they won't budge, because they just don't want to spend that money," he said. "That's who we are going to go approach with this … They know they need to upgrade or die, but they start hearing that they need an XP upgrade or Office to enjoy the full benefits and they start thinking here are all the add-ons no one told me about. The fact that it is bundled together makes it psychologically attractive; it's together and it's one price, it's a huge psychological impact."

Sean Ayre, of Zelfanet Inc., a Small Business Specialist based in Union, N.J., said the opportunity for the bundled solution is ripe and growing daily. He estimates that about 20 percent of small businesses fall into the category Microsoft is aiming at.

"There are plenty of people out there who don't have a server yet. There are people out there running on Windows 98," he said. "Most doctors' offices, small law firms, anyone who started a business in their garage a year ago; they're probably ready for a server and some business-class applications."

Microsoft Small Business Server offers distinct advantages over the simple peer-to-peer networks many in this category are surviving on, Ayre said. In addition to networking, the software adds Windows SharePoint Services for collaboration, Exchange Server 2003 for hosting a company e-mail system, Microsoft Office Outlook for managing individual e-mail accounts, Microsoft Share Fax Service and Routing, and Remote Access Service.

The Premium Edition includes ISA Server 2000 Technology for firewall security, SQL Server 2000 for database management and Microsoft Office FrontPage for creating and managing Web sites. Office 2003 adds business-class applications such as templates for designing advanced marketing programs.

Read the latest details here about Microsoft Vista and Office 12.

Microsoft and current small business VARs expect the bundle to provide an introduction that could lead to professional service opportunities.

Microsoft has taken real steps in the past year to address the concerns of small businesses, a market that has been largely ignored by vendors, said Jim Locke, owner of J.W. Locke & Associates LLC, a Small Business Specialist in Pasadena, Calif., and president of the Small-Medium Business Technology Network, an advocacy group for small business VARs.

"[Vendors] sold enterprise for so long, they're having a hard time adjusting," he said. "Trying to simply scale down for SMB is different from coming up with an SMB offering. You have to understand the specific needs of SMB customers and resellers, and we think we see Microsoft improving on this front … There is an effort going on within Microsoft to listen to SMB providers, resellers and customers to get something done."

Microsoft went so far, Bates said, as to hire an anthropologist and employ several focus groups to watch how small businesses spent their day.

"We watched them work, right down to the way they used Post-it notes," she said. "We watched them and asked questions and developed technology based on what they were already doing. We let the business needs drive the technology. We built software around making their business process easier, faster and better within the context of what they're already doing."

To that end Microsoft has launched a series of small business offerings including the server and Microsoft Small Business Accounting. Future offerings will likely include CRM (Customer Relationship Management) for small business.

The key to attracting small businesses to business-class applications will be marketing, another area in which Microsoft has lagged but made recent progress, Locke said. "It has to be more than just 'look at all the wonderful toys we have,'" he said. "You have to show them here is a new way of doing business."

Microsoft's online office workplace offers such an initiative, with examples, tips and tutorials on best practices.