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For those of you who are still running Windows Small Business Server 2003 – and note that my own employer is in that group – be warned that the Windows Server 2003 product family lapses into “extended support” as of this summer.

What’s the difference between mainstream and extended support? Here’s a handy chart (about half-way down). Summary: with extended support, non-security hotfixes are only available via a paid support contract, and you have to enter into the contract within 90 days of the end of mainstream support.

How many small businesses are still running SBS03? A lot. It was a successful product, and there’s been little incentive to upgrade: the SBS03 to 08 upgrade procedure is complex, and hence expensive, and there’s a lack of compelling new features.

Why is SBS08 a let-down?

On the other hand, why doesn’t it bother the typical small business to run almost-10-years-old operating system technology? Heck, we shouldn’t be surprised; there are plenty of firms out there still running critical applications such as accounting software that were originally purchased when the firm was founded, even if that was 20 years ago.

But small businesses do adopt new technologies: VoIP, Yelp, Google Apps, and BPOS all come to mind.

VoIP is a great example because it requires equipment purchase, software setup, and training. So there’s a significant investment there. And yet small firms are buying it in droves. (In fact, the main barrier to adoption of VoIP right now is a lack of qualified IT providers.)

In other words, there are plenty of opportunities still in the SMB market, but they’re changing.

How does this apply to SBS? Why is SBS08 a let-down?

Well, small businesses still need onsite servers: there’s data that can’t be stored offsite, the firms need somewhere to run that 20 year old accounting software, and they need AD for managing their workstations. But they don’t need a new version of Windows Server in order to accomplish those things.

What they need is a Windows Server that offers new things:

  • VoIP
  • Easy install and upgrade
  • Convenient backup features like Home Server

And – can’t forget this “feature” – clear messaging for the partner community, upon whom Microsoft is 100% dependent for SBS sales and servicing, about why SBS is and will continue to be the best platform for an IT servicing business, and why customers should upgrade (end of life doesn’t cut it).

Lacking those things, what has happened is that the rich feature set offered by SBS, which was so compelling 7 years ago, is showing its age. Indeed, it’s seeing stiff competition from Microsoft’s own cloud offerings.

As an advocate of cloud computing, I find myself ironically questioning this apparent assumption on Microsoft’s part: innovation on the Windows Server line is no longer profitable in the SMB market, so let’s ramp that down and migrate those customers to our cloud offerings.

One minor problem with that assumption: IT service providers don’t like the cloud offerings because there’s little revenue opportunity for them there. I think the theory is that they can suck it up and adapt.

But the major question is whether customers want the cloud offerings. How many businesses are ready to store their files offsite, especially with an entity that doesn’t share that “trusted advisor” relationship? In what verticals and scenarios will that migration make sense, and when?

I’m torn on this, because on one hand I believe it’s inevitable. On the other hand, I get more and more feedback that small business customers aren’t ready to move their key LOB data offsite. Is this just the IT service providers talking, or is there really something to this customer pushback? Are these the same customers that are already running hosted Exchange? What’s the difference they see there, and why? (And, again, my employer has some experience with that dichotomy, but it’s not clear to me how it plays out across the market.)

I’m left with the distinct impression that Microsoft is cannibalizing the Windows business in favor of a concept that’s unproven. Don’t get me wrong – Microsoft must invest aggressively in the unproven concept. But if you decrease investment in the current product too dramatically, and then get the timing wrong, you’ll lose the customers on the migration.

Here’s an interesting exercise: compare Microsoft’s net margin to that of Salesforce.com. Spoiler alert: it’s 27.7% versus 6.1% for the most recent reporting.

Hey, Microsoft, do you intend to make software as a service your only offering? No? Well, is the software + services strategy going to work if you don’t continue to treat segment-leading products like SBS like segment-leading products?

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1 Comment »

  1. Dan, I hear you loud and clear! I feel the same about SaaS. I understand how, in some instances it sure can help and keep costs reasonable, but I see it all the time where folks don’t want their files in the cloud. Accountants, Doctors, Lawyers, etc. I get it, but you are correct we need something more in SBS.
    Add to that it only runs x64. Just to make a decent system for learning it all you need fairly new hardware and about 8 gigs of RAM to make a couple VM’s for testing. That is an awful lot of horse power and few laptops can handle it. For your SMB consultant it means having an extra high end, new, pc around just to get recertified. For the customer, you can’t really put out a test scenario they can play with because of the cost of the hardware.
    For some friends I have recommended moving other, less used, servers to virtual machines hosted with a local provider. So far, the ROI for the clients is huge. The ROI for the local ISP is great, and the recurring stream is a nice thing for sure.
    My company has a new application for our market place we will be rolling out shortly. It can easily be hosted in a VM on their lan or someone else’s. we shall see if the marketplace warms to the idea.

    Comment by Richard Roy — February 17, 2010 @ 11:06 am

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