Small Business and the Cloud: It's Now or Never

When Microsoft canceled its Essential Business Server (EBS) product line last month, I noted that the implications of this decision would, perhaps, have even more far-reaching ramifications for small businesses (see On-Premise Servers Not So Essential After All). The reasoning is simple: Small businesses--defined by Microsoft as those companies with 50 or fewer PCs and no formal IT staff--are even less prepared than the midmarket to deploy and support, let alone pay for, complicated server products in-house.

Flash forward to this week. In an otherwise unrelated briefing the other day, I was told that Microsoft's midmarket customers loved the integrated management functionality in EBS but weren't interested in purchasing and deploying three or four servers at one time. This was an interesting bit of feedback that might have shaped EBS differently had Microsoft caught wind of this before the fact.

It was hard not to let my mind drift over to Windows Small Business Server (SBS) and the small business market again. I still feel that SBS is an inappropriate option for the majority of small businesses, or the market it purports to service. Don't get me wrong here, SBS 2008 is a huge improvement over previous versions, and includes some important advantages, functionally and from a cost perspective, over trying to roll your own solution with Microsoft's mainstream servers. But come on, its 2010.


Today's small businesses can barely eke out an existence let alone afford forniceties like partner-based deployment, monitoring, and support of in-house, on premise servers. I always use my friend Jay as a frame of reference here. Jay owns a local real estate business and employees several people that exist in a highly mobile, ever volatile workplace. People are in and out all day long. They need to be connected--often via smart phone. They need laptops and Internet connections. When they're in the office they need desk space and the like. You get the idea.

Asking Jay--the typical small business owner--to pay someone to install physical servers in his office so that he and his workers can access email, shared calendars, and other services is a stretch. But that's Microsoft's primary solution for his business today.

Microsoft does, of course, also offer hosted versions of Exchange, SharePoint, and other servers. These, I feel, are a far more compelling offering, especially for small businesses, because it removes the need to install local servers, pay ongoing monitoring and support feeds, and worry about future upgrades. The problem with these hosted services, however, is that they're still too expensive for smaller businesses. Prices have come down over time, as functionality (and things like email storage space) have gone up. But the sweet spot for the hosted services comes far above the user level of a very small business.

What I'd like to see is an SBS offering that is entirely cloud-based, one that incentivizes very small businesses to move to the cloud. This is aggressively different from my previous take on this offering, which in my original idea would include some local storage option. Perhaps there are small businesses that would need such a hybrid product. But I think moving entirely to the cloud makes more sense for more small businesses. Especially if that offering is free or at least very inexpensive.

The odd thing about hosted Microsoft servers is that small businesses would likely move to this model far more quickly than would the enterprises that Microsoft originally targeted. That's because small businesses are driven almost purely by cost. But enterprises have specialized IT staff that have as much stake in keeping their jobs--i.e. supporting local servers--as they do in serving the needs of the business. In some ways, being very aggressive on pricing results in a more pure business model.

I was curious whether something like this could happen as soon as Windows SBS 2008 R2, so I asked about the timing for such a product. What I received back was the following statement: "Microsoft is actively working on the next version of SBS 2008, but hasn't announced any specifics with regard to timing."

I hope Microsoft is working on both pure cloud and hybrid model SBS versions right now. This is an idea whose time has come. When I think about Jay and his business, and other small businesses like his, I can imagine him signing up for inexpensive, fixed-cost hosted services. But I can't see him planting one or more servers in his office.

One final thought: Whether Microsoft does or does not enter this market as aggressively as I think they should, its biggest competitor, Google, already has. And while Google Apps may not offer any viable competition to Microsoft Office, as we discussed last week, it very much competes with Exchange, and that's more painfully true the further you move into small business territory. This is a market that Microsoft can compete in if it so choose. Otherwise, they can simply hand it over to Google.

An edited version of this article appeared in the April 6, 2010 issue of Windows IT Pro UPDATE. --Paul