Microsoft’s Windows Server Foundation, a small-scale version of Small Business Server, is anticipated for release in early May. Windows Server Foundation is a server-class operating system built on Windows Server 2008 and aimed at the bottom end of the small business market. To get a sense of where the idea for Server Foundation came from and where Microsoft sees it offering value in the existing range of small business server products, I recently interviewed two Microsoft representatives involved in the server product range-- Iain McDonald, is a director in the Windows Server Group, and Martin Gregory, director of server and tools for Microsoft Australia.

Interview with Iain McDonald
Iain McDonald: The idea for Server Foundation came from when we were looking at some of the fast-growing countries like Brazil, India, Russia and China. We saw a disparity between what people could afford to pay for IT systems and what they were being charged, and we felt that there was room for a reduced-functionality version of Windows Server which came in at a lower price point. Interestingly, while we started down this path with our focus on countries like the ones I’ve mentioned, when we went through some of the product reviews with Steve Ballmer, he asked why we wouldn’t make this product available globally.

When you look at server-class hardware available for under $1,000, the capabilities are generally more than enough for any small business, but given the high cost of a Windows Server license on top of that, it’s strange that such a high percentage of the overall cost of a low-end server should be the software. We felt that there was clear market space for a low-end, entry-level server product.

James Bannan: What sort of limitations are we talking about?

Iain McDonald: A 15 user connection limit, which is not that different from the client product space which has a 10 user connection limit; there is no virtualization role; if the server is to be a domain controller, it has to be a single-DC domain (i.e., it can’t be in a domain with multiple controllers); and there’s a simplified licensing model around terminal server connections. Server Foundation isn’t designed to take over from Small Business Server or Essential Business Server, which offer richer and more complex environments.

James Bannan: Are the other current small business product SKUs going to continue in their current form, with Server Foundation coming in as a new offering?

Iain McDonald: Yes, they will carry on as normal. EBS and SBS are built for businesses that need extra functionality, and there is a lot of great work happening in those spaces with both Microsoft partners and community. Server Foundation is really aimed at those businesses that are using Windows XP or Vista as a server platform. We’re also requiring OEMs that sell Server Foundation systems to build them on a solid hardware base before it can ship with the server logo--many instances of system crashes we see are due to bad memory, so we’re looking to improve the reliability of systems available in the small business space, as well as offering greater functionality.

James Bannan: What sort of price point are we talking about?

Iain McDonald: I don’t know about the Australian market, but in the US market we’re looking at an OEM license for Server Foundation costing around $150 to $200, and it will only be available as OEM.

The business meetings we’ve been having around this product have been really interesting, because we’re changing the way in which we do business. In all my years of working with servers I never looked at a system which could be purchased for less than $3,000, but there is now a very clear space in the market for servers operating at well below this price point. The sort of cheap, accessible hardware available to home users to store their photos and music on is also more than adequate for small business needs.

James Bannan: It shows a very interesting blurring of the boundaries between the low-end business market and consumer space.

Iain McDonald: Definitely. With the increased “consumerization” of IT, gone are the days when small business owners relied on a third person for all their computer knowledge and support. Operators these days tend to know quite a lot.

On page 2: interview with Martin Gregory, director of server and tools for Microsoft Australia.

Interview with Martin Gregory
James Bannan: The concept of Server Foundation is great. Where do you see it fitting in to the current range of server products?

Martin Gregory: Over years, we’ve broadened out the Windows Server family to provide better solutions for particular workloads. A good example is Small Business Server, which suits a certain size of company with particular business needs. This is the path we’ve taken with the entire Window Server family, and Server Foundation fits well into the very small business niche.

In Australia, looking at the figures from the ABS (Australian Bureau of Statistics) website, there are approximately 1.9 million small businesses, which represent around 95% of businesses in Australia and employ around 3.6 million people. Additionally, approximately 35% of those businesses operate in regional Australia and 70% operate from home. If you look at the small business market segment, you can’t see it as a homogenous unit--it’s very diverse. Small Business Server works really well for a company with around 15 staff and business needs built around file storage, mail and collaboration, but smaller businesses are more likely to have their email hosted by an ISP and only have requirements for basic secure file and print services. That’s the gap in which we saw Server Foundation having a clear role.

From a server perspective, it enables us to offer a solution at a much lower price point. Not all small businesses are small businesses, and it’s silly to compare a small law firm turning over a few million per year to a corner flower shop. Think of Server Foundation as Flower Shop Server, or Hairdresser Server.

James Bannan: When I spoke to Iain, the pricing for Australia had yet to be confirmed, but he spoke about the US pricing at around the $150 point. Is the pricing for Server Foundation going to be per CPU or is the assumption that businesses at this level will not be implementing multi-CPU solutions?

Martin Gregory: Server Foundation is certainly aimed at single CPU server-class hardware from OEM providers. The pricing will definitely be cheaper than a SBS solution and while the final pricing is very much up to the OEMs, the pricing for Server Foundation will allow them to provide solutions at the $1,000 mark.

James Bannan: What are Server Foundation’s practical limitations?

Martin Gregory: There is an absolute limit of 15 connections. But when you consider that, in Australia, 1 in 4 small businesses are using a PC operating system as a server, not only will 15 connections more than meet their needs, but using a server OS will also remove certain risks in their current model, such as memory space restrictions and the potential for data loss.

Although Server Foundation is built on Server 2008 and can do more than just file and print, if customers need more than that then there are more suitable products, like Small Business Server.

James Bannan: In the type of businesses you are aiming for with Server Foundation, the level of internal IT knowledge is often very low, even non-existent. What sort of customer support will be offered with the product?

Martin Gregory: You’re right--a lot of small businesses don’t have an IT capability. Often, the business owner or a staff member takes on that role de facto. In this situation we will be looking towards the partners to meet their customers’ support requirements. Microsoft is built around working through partners, and our partner community has certainly been very excited about Server Foundation, not only in terms of the potential speed of delivery but that it gives them an ongoing relationship with small business. Having said that, we are talking about quite simple IT environments so we would be expecting less ongoing support required than in a more complex environment, which has cost benefits for the customer.

James Bannan: Many small businesses are likely to seek support from other local businesses like the computer store on the corner, rather than approach a Microsoft partner, so what you’re proposing is something of a paradigm shift in the way small businesses source IT solutions.

Martin Gregory: We would still see that relationship holding. Rather than a small business having to approach, for example, HP directly for a whitebox solution, they are still going to deal with a reseller. The accessible price point of Server Foundation fits in well with these existing business practises.

James Bannan: The product would seem to offer a good opportunity to also deliver some sort of online service to customers, perhaps delivering extra local knowledge about available services, or even about other Server Foundation customers in their area. It could potentially be a good value-add.

Martin Gregory: That’s certainly true, and as Microsoft moves more into the realm of software plus services that’s something we could look at delivering, perhaps the model that you’ve envisioned or even something more akin to a self-service product. But at the moment we’re very clear on our vision for Server Foundation as a simple, functioning device.

James Bannan: Is there going to a mandatory minimum hardware profile for a Server Foundation system?

Martin Gregory: There will be a minimum hardware spec of course, but really it fits into the existing spec range for Small Business Server, which is convenient for partners and OEMs.

To learn more about Windows Foundation Server, Small Business Server, or Essential Business Server:

To read more interviews with Microsoft representatives: