Microsoft is expected to announce on Wednesday a renewed effort to target SMEs with a specially tailored package of server software.
Code-named Centro, the mid-market server software will combine the Windows Server operating system, Exchange email server and a set of management tools. The package, based on the company's Longhorn version of Windows Server as well as the next release of Exchange, Exchange 12, isn't expected to arrive until 2007.
Microsoft will detail the new software at a conference for midsize firms being held at its headquarters. Also at the event, Microsoft will launch a new online resource centre and rebrand several of its Microsoft Business Solutions products under a new "Dynamics" moniker.
Microsoft has been down this road before. The company has in the past attempted to crack into the software market populated by companies employing between 50 and 1,000 people. The software giant's interest is understandable: There are roughly 1.4 million such firms worldwide, according to AMI-Partners, that are potential customers for Microsoft's new products.
However, past efforts by Microsoft have not gone far enough, said Orlando Ayala, senior vice president of Microsoft's Small and Midmarket Solutions & Partner Group. He acknowledged that although the company has profited from SME customers, it has not done enough work to get to know the needs of such businesses so that it can create more products tailored for them.
"These companies are kind of in a sandwich. They are not quite like a big enterprise with all of the resources and all of the stuff. They are not quite a small enterprise — they cannot basically put all of their stuff in one server," Ayala said.
Of course, that precarious position is not new. For years, large technology companies have noted that small and midsize firms are a fast-growing but underserved market. However, analysts and customers have complained that in many cases, they were offered largely the same products.
Ayala said Microsoft is taking a different approach this time. "I think it starts with R&D," he said, pointing to the improvements Microsoft was able to get with its Small Business Server, noting that the software package enables small businesses to get up and running in 20 minutes — a process that used to take two days.
"That kind of stuff has not been achieved for midmarket customers," he said.
The art of thinking small
Microsoft says it has spent the last several years studying such firms, looking specifically at individual job roles. In an email to customers, chief executive Steve Ballmer said the company's research included following workers around as they did their job and taking pictures of their desks.
"And we learned an important lesson: Today's business software doesn't look enough like today's businesses," Ballmer said in the email.
Ayala did not have an estimate on how much Microsoft is investing on specific engineering for SMEs, however. "We have people doing it full-time," Ayala said. "I don't have any number to quote."
In addition to spending, though, Microsoft also needs to make a cultural shift, IDC analyst Ray Boggs opined.
"The R&D challenge is a bit different," he said, noting that smaller customers are less interested in whiz-bang features and more so on tools that make the technology easier to manage. That runs somewhat counter to Microsoft's typical way of doing things. "As an engineer, you want to do the neat, advanced stuff," he said. "It is, in effect, a cultural change, and it's one that is driven, in fact, by senior management at Microsoft."
Steven VanRoekel, who has been heading up Microsoft's midmarket server efforts, said the internal work has been his initial focus. "We view our first job as really changing the mind-set within Microsoft on behalf of small and midsize customers."
The products themselves will take longer. It will be at least 2007 until Centro arrives and, although the MBS products will start sharing a brand and some visual similarities, the work to unify their underlying code will also take years.
In the meantime, Microsoft plans to keep in place a mid-market promotion that gives customers a discount on a specific bundle of server software. Such pricing helps make sure that mid-market customers aren't paying more than both small businesses that can run Small Business Server and larger enterprises that can take part in Microsoft's most heavily discounted volume purchase programs.
As for having the event now, VanRoekel said it is designed to share the work that Microsoft is embarking on with both customers and Microsoft's resellers.
"It's to let customers know the cavalry is coming," VanRoekel said. "We're focusing. We're investing."
Boggs said there is some logic to the work, including rebranding the MBS products even before they are fully integrated.
"In some respects, it is kind of like a moon shot," Boggs said. "You don't aim your rocket where the moon is now but where it is going to be when you get there."
Although Microsoft's event is centred on midsize firms, Microsoft is also using the event to launch its Small Business Accounting product. That product takes aim at Intuit's QuickBooks. Ahead of Microsoft's move, Intuit outlined some of the planned features for an updated version of its package, dubbed QuickBooks 2006, that is slated to launch in the autumn.
Microsoft is launching the mid-market push with 55 events around the globe. At the main event chairman Bill Gates and chief executive Steve Ballmer are both slated to speak, something Ayala said is something that "we very rarely do".
"It's trying to signal how important we think this is," Ayala said.
