Orlando Ayala, Microsoft's senior vice president of small and mid-market solutions & partner group, discusses the business model, competition and vision behind the forthcoming Small Business Server 2003.

As Microsoft Corp. prepares for its first ever Worldwide Partner Meeting here in New Orleans on Thursday—where it will announce the general availability of its Small Business Server 2003 product to the more than 5,500 partners expected to attend—Orlando Ayala, Microsoft's senior vice president of small and mid-market solutions & partner group, sat down to discuss the new product and some of the issues with eWEEK Senior Editor Peter Galli.

eWEEK: Microsoft has been talking a lot about the integrated innovation that SBS 2003 brings to the market. Does this mean you are actively using that product to push the sale of other products on them as well?

Ayala: SBS brings great value to our customers and partners. The connectivity and wiring we have done in this product brings a new level of integration. But products like Office are the window from which customers run their businesses. So broad customer connectivity is very important and our task is to show them the value that SBS and the client bring. We need to help them understand the value the whole stack brings and how each part works well with the other.

eWEEK: Some people are saying that SBS 2003 is nothing more than the Microsoft BackOffice product, which was discontinued in 2001, revisited. Is that the case?

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Ayala: Absolutely not. BackOffice was targeted at a very different set of customers. The major breakthrough of SBS 2003 is the simplicity it brings to the small and midsize market through the enormous integration work we have done.

eWEEK: Obviously Microsoft needs to have its partners on board to promote and sell this product and your vision. But some of the former Great Plains partner-base are apparently uneasy and worried about their future and role in promoting this solution. Are you addressing that?

Ayala: Absolutely. We cannot do this without them. We have invested very deeply in our SMB products. We had 42,000 SMB 2000 resellers and already have 5,000 on board for SBS 2003, and we expect this to grow to 10,000 over the next year.

But this space also provides a number of benefits for partners, like the low entry point for them. They can also shift their investment dollars up the chain and put their dollars to work on the broad connection side of the value proposition. T

Thirdly, the new business models we have created around services and which were not available before will benefit them and, lastly, the fact that Microsoft is investing in the SBS and CRM space allows our partners to sell up the value chain to their customers.

eWEEK: Linux is very successful in the small-business space due to the fact that many customers perceive it to be free. How do you compete with that perception?

Ayala: This is all about customer value. We have a lot of work to do with the channel to show that our integrated stack is really the way to add value. But the reality is that, in the end, the customer will have the last word and the vendors will win based on how they respond to customer pain.

eWEEK: IBM and Linux distributor SuSE Linux AG are both aggressively going after the small-business market. How do you differentiate and distinguish your message to those customers?

Ayala: IBM and Microsoft have different visions. IBM is focused on the mid- to larger-client base. We believe there is a good opportunity for us in the SMB space. IBM will continue to aggressively sell their solutions and so will we. But their play is about maximizing revenue from services and only time will tell if that strategy will win. We believe our channel will continue to deliver for us as they have done for the past 20 years.

eWEEK: Who do you see as the biggest competitor for SBS 2003?

Ayala: The question for us is what companies can deliver a software stack with full value? Not SAP, Sun Microsystems' solution is way too complex and doesn't have the necessary channel base. So, at the low-end its Sales-force.com, IBM at the high-end and on the full-value stack it's Oracle and IBM.

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