Microsoft executives have repeatedly stated that the company is "all in" when it comes to cloud computing. But the software giant also continues to rake in record revenues from its traditionally-delivered software products. This creates an interesting divide between its current successes and the direction in which it believes the industry is heading. Rather than choosing one over the other, Microsoft is simply splitting the difference when and where it can, creating both cloud-based and on-premises-based versions of some products. This strategy has led to some confusion, of course, but it also provides customers with choice. And because Microsoft is pushing a unique and compelling hybrid deployment model, in many cases it's also possible to mix and match local on-premises servers with hosted online services.

To date, Microsoft's most successful push in this direction has been its hosted versions of Exchange and SharePoint, which are currently being marketed under the Business Online Productivity Services (BPOS) umbrella, though that will change to a more expansive set of services called Office 365 starting in 2011. These services follow the hybrid model in that customers can choose between on-premises servers, hosted services, or a mixture of both. It's a proven strategy, one that is both technically excellent and popular with customers.

Microsoft will employ this strategy with the next generation Windows Small Business Server (SBS), the company's integrated solution for smaller businesses. Since its inception in 1997, SBS has had a modest if compelling goal: Integrate Microsoft's most popular business server products into a single package that is simpler to deploy and manage than traditional servers and that is also much less expensive. SBS has always risen to this challenge nicely, and I've often lamented the fact that the more approachable and centralized SBS management tools weren't available elsewhere in Microsoft's products.

Over the past decade or so, SBS followed a predictable trajectory, with updates providing the then-current versions of Microsoft's popular on-premises servers and adding capabilities that met the evolving needs of its customers. Each SBS revision also added evolved versions of the management tools and further simplified deployment.

However, by the time SBS 2008 was released over two years ago, the product line was a bit out of step with the then-emerging trends in cloud computing. That version of the product offered basic integration with Office Live Small Business (also soon to be swept into Office 365), which provided a public-facing storefront or other website, but little else in the way of online services integration. And in an age where many small businesses were turning to inexpensive hosted email, contacts, and calendar management from Google and elsewhere, SBS still offered a more complicated on-premises infrastructure that, for most customers, would require the constant care and maintenance of a Microsoft partner.

For the next-generation version of Windows Small Business Server, Microsoft is splitting the product in two. At the high end of the product line is a traditional SBS offering, called Windows Small Business Server 2011 Standard, which maps very closely to previous versions and provides an obvious upgrade path for existing customers. Microsoft is also introducing a lower-end version of SBS, Windows Small Business Server 2011 Essentials, that targets the smallest of small businesses and provides very little in the way of on-premises infrastructure. With this version of SBS, customers are expected to subscribe to hosted online services such as Office 365, or even to competing Google services, in order to obtain email, contacts, calendar, and collaboration services. Essentials is all about user and computer management, centralized PC and server backup, storage, and remote access only.

Despite being based on the same underlying Windows Server 2008 R2 core, neither version of SBS has much in common with the other. They feature completely different management experiences, offer different sets of capabilities, and target different audiences. In fact, my one major concern with this product split is whether it makes any sense. Looking at the market broadly, we see companies adopting cloud services in different ways that vary, yes, by company size, but also by market type and need. New businesses, which tend to be among the smallest businesses, tend to embrace the cloud more quickly because of cost concerns. But for larger companies, cloud adoption varies mostly according to needs. Companies with regulatory, privacy, or other legal concerns about data storage tend to be more wary of the cloud and of the presumed complexity of Microsoft's hybrid solutions. Companies without such concerns are discovering they can save a lot of money and time by moving their infrastructure to cloud services.

Microsoft's SBS 2011 split neatly divides the market like this: The very smallest businesses, those with 25 or fewer employees, can pick the cloud-based Essentials solution and save a lot in up-front costs, picking the cloud infrastructure pieces they want a la carte. Of course, there are advantages to going the Microsoft route (including management integration with Essentials), but there are also cost disadvantages compared to, say, Google Apps, which is about $12 cheaper, per user per year, for small businesses compared to Microsoft's Office 365.

 

If your company is bigger than that, SBS 2011 Standard is your only choice. Like previous SBS versions, Standard is aimed at companies with 75 or fewer employees. But it also provides on-premises email, calendar, contacts, and collaboration services, which will generally require an ongoing partner contract as well. So it's more expensive out of the box, and more complex. The question is whether you can save money in the long run by paying for partner management oversight instead of hosted infrastructure, as you would with Essentials.

This is a big question. For businesses that are already on SBS, Microsoft is further muddying the waters by only supporting a migration path to SBS 2011 Standard. So if you want to embrace the cloud, you could find yourself on your own, or at the very least employing the services of a very specialized Microsoft partner. SBS 2011 Essentials isn't just for very small businesses. It's for small businesses that have never adopted a server infrastructure of any kind.

Consider another odd bifurcation in the product lines. With Essentials, you're free to purchase and deploy on-premises versions of Exchange or SharePoint, though of course doing so would be expensive and complex. And with Standard, you're free to decommission the included Exchange and SharePoint offerings and move to the cloud, though doing that would also be expensive--you've paid for products you're not going to use--and would work outside the centralized management experience that is a hallmark of the SBS product line. That's because while Microsoft will create management add-ons for its hosted services that are targeted at Essentials customers, it won't be doing so (for obvious reasons) for Standard customers.

Looked at simplistically, one might think that SBS 2011 Essentials is the future, whereas SBS 2011 Standard is the past. To be fair to Microsoft, the strategy is more nuanced than that, and in the software giant's decidedly customer-centric way, it is in fact addressing two very real needs with this next generation of the SBS product family. And from what I can see, both have a very strong future indeed, though depending on your needs and current infrastructure, the decision about which to adopt might have already been made for you.

 

Windows Small Business Server 2011 Standard

Windows SBS 2011 Standard (previously code-named SBS 7) is, of course, the more familiar of the two products because it's a technical follow-up to the previous generation of products. It offers Windows Server 2008 R2 (essentially the Standard edition), Microsoft Exchange Server 2010 with Service Pack 1 (SP1), Microsoft SharePoint Foundation 2010, and Windows Software Update Services (WSUS) 3.1. No surprises there, of course, though it should be noted that these are all 64-bit versions of the products.

As with previous versions of SBS, the adoption of current-generation Microsoft server products brings with it a number of new capabilities, as if by osmosis. That includes such things as the nicer, Outlook-like Outlook Web App in Exchange 2010 SP1 as well as the inclusion of internally-hosted Office Web Apps (simple, web-based versions of Word, Excel, OneNote, and PowerPoint) with SharePoint Foundation 2010.

From a management perspective, the SBS 2011 Standard console is very familiar in both look and feel. It features the now well-worn summary of the network's overall health with specific callouts for security, software updates, backup, and other alerts. User and group management is a bit less complex than going directly through the Active Directory consoles, but offers a familiar level of granularity that is missing from the Elements product.

As Figure 1 shows, the Windows Small Business Server 2011 Standard management console is very similar to that of its predecessor.

Deployment is also familiar, with clean install and migration options only. Unlike Essentials, SBS 2011 Standard assumes that it will sit at the center of your network, logically and technically, and will thus attempt to take over DNS and DHCP duties and usurp the capabilities of the typical home or small-business router. This, too, is the way SBS has operated for years, but it's worth mentioning only because SBS 2011 Essentials does not do this.

"Small Business Server 2011 Standard is the traditional onsite offering, or what our customers have generally asked for," SBS senior product manager Michael Leworthy told me in a recent briefing. "It's a super-simplified suite of popular server products that's easy to deploy and administer." This is a fair enough statement, with the understanding that it will generally require some form of Microsoft partner contract, as the small businesses that this product targets won't generally hire someone specifically for IT management. Certainly, SBS 2011 Standard deployment and management is easier than “rolling your own” with Microsoft's standalone servers. It's also considerably less expensive. It is, in other words, a great update to the existing SBS product.

It should also be noted that SBS 2011 Standard is a clear upsell for Microsoft's partners, and one with which they are already very familiar. And for businesses that are looking to expand, or for businesses that have specific database and line-of-business (LOB) needs, there is a new Windows Small Business Server 2011 Premium Add-on, which we will describe later in the article.

 

Windows Small Business Server 2011 Essentials

If self-hosting your own email and other IT infrastructure seems untenable, despite the ease of use and cost benefits of SBS 2011 Standard, take heart. For the first time, Microsoft will offer an alternative product, SBS 2011 Essentials, which is in many ways more forward-leaning and cloud-centric. Code-named "Aurora," this version of SBS 2011 also runs on a Windows Server 2008 R2 core, but it dispenses with virtually everything else that is found in SBS 2011 Standard. As a result, it is considerably less expensive up front, though the cost of ongoing cloud subscriptions for email and other services will have to factor into any budget.

But the biggest advantage of SBS 2011 Essentials is simplicity. Based on the same underlying infrastructure as the next Windows Home Server product (code-named "Vail"), Essentials is almost too simple. I mean this in the sense that it masks some incredible complexities, which is great, but it also masks some of the more granular functionality that we've come to expect from Windows Server-based products. For example, in Aurora, there are only two types of users available from the management console, standard users and admins. This compares to the numerous user types in SBS 2011 Standard, which again map more closely to the system's underlying user account types.

 

If you're familiar with Windows Home Server, SBS 2011 Essentials works very similarly. However, under the covers, it's working with Active Directory domain objects and not a simpler (but less manageable) workgroup. Indeed, the SBS 2011 Essentials and Vail management consoles are almost identical and can almost certainly be utilized by in-house personnel on an ongoing basis, making the long-term partner picture here a bit hazy. Users can be configured for shared folder and remote web access from a single, simple UI. Connected computers—and the server itself—can be centrally and automatically backed up, a capability that is far more seamless and capable in this product than in SBS Standard.

Windows Small Business Server 2011 Essentials is as simple as it can be, with few granular options but plenty of automated capabilities that will keep the smallest businesses up and running.

SBS 2011 Essentials also sports an excellent new extensibility model--also missing from SBS Standard--that is identical to that in Vail, and Microsoft showed me a number of early add-ins from third parties that will provide such things as cloud-based server backup. But most exciting in this vein, perhaps, is the arrival of add-ins for managing Microsoft hosted services such as those offered by Office 365. This way, customers can take advantage of the services that need to be local (storage, backup, and user management, for example) locally, while accessing and managing applicable hosted services such as Exchange, all from the same central UI. The effect will eventually be quite seamless, though it will take some months for the cloud pieces to come together. What I saw in an early preview was quite encouraging.

 

Windows Small Business Server 2011 Premium Add-on

In addition to the two new core SBS products, Microsoft is also delivering something called the Windows Small Business Server 2011 Premium Add-on. This add-on requires SBS 2011 Essentials or SBS 2011 Standard and provides licenses for both Windows Server 2008 R2 Standard and SQL Server 2008 R2 Standard Edition for Small Business. The latter product is unique to this release and maps identically to SQL Server 2008 R2 Standard Edition from a functional perspective. The only difference is that it is licensed for use in this package with SBS only. These products must be installed together on a separate server, and cannot be installed on the primary SBS machine, regardless of which version you're using.

 

Availability and Pricing

Windows Small Business Server 2011 Standard will ship in December 2010 as a standalone software product and will be bundled on new server hardware starting in February 2011. It requires a Server License, which costs about $1,096, plus Client Access Licenses (CALs) for each user, at a cost of approximately $72 each. It can be used with up to 75 users.

Windows Small Business Server 2011 Essentials will ship in the first half of 2011. This product was delayed somewhat because of the removal of a major feature, Drive Extender, which is discussed in the sidebar. Essentials will cost $545 for the standalone software version but does not require any CALs for user access. It can be used with up to 25 users.

The Windows Small Business Server 2011 Premium Add-on will ship in December along with SBS 2011 Standard. It will cost $1,604 for the standalone software and will require Premium Add-on CALs at a cost of $92 per user. (This covers access to SQL Server only; Windows Server CALs are covered by the SBS version that you implemented.)

 

Final Thoughts

With this generation of products, Windows Small Business Server seems well poised for the future. Microsoft is doing a nice job of addressing the two most important segments of the small business market—those with in-place server infrastructure and those without--though the division between cloud-based and on-premises-based capabilities seems a bit arbitrary. Still, this is a far more aggressive play than the previous SBS version, especially if you have your eye on the cloud. What the company needs to bring it all together is cloud-based services that exceed the capabilities of the competition while meeting them on pricing. The combination of Windows SBS 2011 Essentials with Office 365 very definitely achieves the first goal, while coming up a bit short in the pricing category. I feel that the benefits of the Microsoft solutions outweigh the cost issue, but in the current cash-strapped economy, that could be a tough sell. Regardless of which route small businesses choose, however, Windows SBS 2011 offers some compelling choices.