Microsoft gears up for small-business push

Microsoft gears up for small-business push<= /span>

By Ina Fried
Staff Writer, CNET News.com
http://news.com.com/2100-1012-5085236.= html

Story last modified October 1, 2003, 3:00 P= M PDT

Small business does not mean small potatoes.

That's the conclusion reached by an increasing number of technology companies. Both hardware makers, such as Hewlett-Packard, and softwa= re makers, such as Oracle, have been pledging devotion to the small- and midsize-business market. As large companies have clamped down on their tech spending, smaller firms have started to spend more, in part because the lar= ger companies they deal with are demanding that they be more tech savvy. <= /o:p>

The marke= ts are especially important to Microsoft, which earlier this year put then sales c= hief Orlando Ayala in charge of a $2 billion effort to boost = sales to small and midsize businesses.

This is a= space that everyone is rushing into," Ayala said. "There have been announcements by everyone, pretty much, coming into the market--for good reason.

Ayala sai= d the market, made up of businesses that have fewer than 1,000 workers, currently accounts for more than $420 billion in spending, with that figure projected= to reach more than $690 billion by 2008. The figure includes hardware, softwar= e, services and other IT spending.

But before Microsoft can sell customer relationship management software and other high= -end applications to smaller companies, it has to get them to install servers, A= yala said. According to the company, two-thirds of small businesses have more th= an one PC, but only about one-fifth of such companies has a server.

"Ser= ver technology has been very complex, very cumbersome," Ayala said in a telephone interview Wednesday.

In order = to try to change that, Microsoft next week will start selling a simplified bundle of its Wi= ndows Server operating system and Microsoft Exchange e-mail software. Ayala said = both Microsoft's internal sales force and resellers will have their compensation tied to their ability to sell the bundle, which is called Microsoft Small Business Server 2003.

"For= our sales forces around the world, this is basically a barrier that they have t= o clear before they get paid (bonuses for selling) any other type of product," Ayala said, adding that Microsoft is also planning a new program for resell= ers that will tie their pay to the ability to push the small-business product. =

The new program--dubbed the Next Generation Partner Program--is designed to look at= the different ways Microsoft's partners do business and also the areas in which they specialize. Microsoft will divide its partners into 16 specialties, wi= th areas such as information worker software and security. <= /p>

Security = issues are likely to get an inordinate amount of attention at Microsoft's partner conference, with executives planning to outline a revised strategy in the wake of recent Windows vulnerabilities and attacks. The new security effort, Ay= ala said, will shift the focus from patch management to "securing the perimeter," which will see Microsoft more closely tied to the world of Internet firewalls.

Security = is just one area where Microsoft can do a better job of serving small and midsize businesses.

Ayala sai= d tech companies have not done enough to make technology that appeals to smaller companies, instead offering scaled-back versions of the same programs that = are sold to large businesses.

Microsoft= faces a host of competitors in its effort to win new small- and midsize-business customers. The strongest competition comes from software maker Intuit and f= rom Linux and other open-source software.

Ayala = said he is somewhat encouraged that the battle between Linux and Windows seems to be shifting from an emotional one to a more fact-based one--the type of competition he said Windows can win.

"I a= m ready to take up that challenge any time," Ayala said, adding that with a se= t-up time of 15 minutes, the Small Business Server package is an example of how Microsoft can make it easier for customers and harder for rivals.

"Pri= ce is an element, but in the end, it is all about resolving customer pain," Aya= la said. "If Microsoft doesn't do it better than the Linux stack, then, s= ure, we will be in trouble."

In the mi= ddle market--companies that have more than 75 but less than 1,000 workers--Ayala said the competition is more diverse, with <= st1:stocktickerca w:st=3D"on">IBM and Oracle among Microsoft's chief rivals, along with business applications leader SAP.

Ayala sai= d the online world, in which software is provided as a hosted service, is also important to Microsoft, although he sees it remaining just a small slice of= the overall software market during the next two years. "You will hear from= us in the next six months," he said.

Microsoft= also wants to partner with new types of companies, such as telecommunications companies that can offer Internet service that's bundled with Microsoft software.

2/14/2004= 6:58:42 AM