Executive Summary:

As IT spending in the small-to-midsized business (SBM) market increases, Microsoft focuses its efforts on related software and services, such as Windows Essential Business Server (EBS), Small Business Server (SBS), and Microsoft Online Services (MOS).

IT spending in the worldwide small-to-midsized business (SMB) segment will grow by 7 percent annually through 2011, according to IDC. Compare that specific segment’s figure with IDC’s prediction of an annual growth rate of 5.2 percent for overall IT spending worldwide in the same period, and you can see why Microsoft is increasingly focused on growing its revenue and market share in this fertile field. The company is approaching this segment with both software, such as the new Enterprise Business Server family (which includes Windows Essential Business Server—EBS—and Small Business Server—SBS), and hosted services such as Microsoft Online Services (MOS—for details on MOS, see Paul Thurrott’s article on page 12). So how do these offerings fit together for Microsoft, and what does it all mean if you’re in IT in an SMB organization?

SMB and Microsoft Products
Microsoft Vice President of Worldwide SMB Mike Risse recently explained that the SMB segment accounts for “straight up revenue of $50 billion for Microsoft overall. This represents about 20 percent of the company’s revenue. But it’s growing the fastest of the segments. From a profitability perspective, SMB has all the big core products in it—Windows Server, Office, Windows client. We’ve also got many of the smaller products, and we’re growing the business rapidly in areas such as security, management, PerformancePoint, Unified Communications. We have grown the business 50 percent over the last three years.”

The SMB pivot on Microsoft’s business is interesting. But the company is also investing in products specifically targeted at SMBs, such as EBS and SBS. And Microsoft is keeping SMB in the spotlight as it introduces new offerings such as MOS.

How does Microsoft’s strategy for EBS and SBS dovetail with its Software Plus Services (S+S) strategy and MOS hosted services? Risse said EBS and SBS will form the foundation for businesses to use S+S solutions: “SBS (which is good to 75 employees) and EBS (which is good to 250) are the hub for service consumption and distribution. Say you have 50 employees in your organization. Are all 50 employees going to bypass the IT network and infrastructure and go straight to the cloud? No. They will all go through their AD structure or file-management structure or network logon and then the Internet access structure. Their access will be managed, appropriate, and so forth. To do that you need a modern infrastructure for managing the employees and what services they get to. SBS and EBS are that modern plumbing infrastructure. As an example, not only \[do SBS and EBS\] have services built in for security, but also the ability to build an Office Live site locally and propagate it.”

SMB and Microsoft Partners
Because the majority of Microsoft’s SMB customers rely on partners, and because partners are so important to Microsoft’s success, Risse emphasized the role partners will play in the S+S world, with EBS in particular: “It’s incredibly beneficial if this box, which services these employees, can be remotely managed through a browser. We’re putting this functionality into EBS so that a partner now has a services relationship \[with EBS customers\].”

How many SMB customers will want this type of service arrangement? Risse said, “The SMB market will want remote management because IT is not their core competency as a business. This is the 90 percent case of a 100-person company: They’re going to have a server. It will be the point of control for all IT resources and services provided to the user community. That server, which could be onsite or offsite, will be remotely managed by a partner. It will provide both cloud-based services and services the partner may provide uniquely. The combination of partner services, cloud services, and local software will be the typical configuration.”

The IT Impact
If businesses rely increasingly on partners and hosted services, what happens to IT jobs? In Risse’s opinion, the IT jobs simply move from being inside a company to being on the outside. “This is IT, as well. The only question is, ‘Who are they working for?’ This new approach increases the importance of the IT person as it becomes part of that trusted advisor relationship rather than an employee relationship. Frankly, there’s generally more power in the trusted advisor relationship as having a broader perspective and having the ability to not just fix things but see what can be brought to the organization.”