Microsoft’s Big Picture of Small Businesses

Twenty years ago Microsoft brought applications to the desktop that revolutionized the way businesses communicate with each other and their customers. But the company hasn’t rested on the laurels of Word and Excel. Today, Microsoft consists of seven different product segments — Client, Server and Tools, Information Worker, Microsoft Business Solutions, MSN, Mobile and Embedded Devices, and Home and Entertainment — of which the client and server segments should be of great interest to small businesses.

So how does Microsoft go about tailoring its server and client software to meet the needs of small businesses?

It isn’t enough to look at research, and different product segments. Microsoft has to be willing to listen to its small business customers in order to understand their business goals.

The Small to Midmarket Solutions and Partners (SMS&P) division at Microsoft is a relatively new group built around an old concept — they listen. The group is basically the link between Microsoft’s product development and end users, in this case, small businesses. Steve Guggenheimer, Microsoft vice-president of SMS&P explained the part the group plays in reaching small businesses.

“Our role is to sit between business product groups and the field, to translate customers’ needs into products,” Guggenheimer said. “We spend our time listening and then thinking about how to enable Microsoft to best serve the small-business community.”

After all, the small business “community” is a vast, disaggregated gallimaufry of organizations, which tends to complicate things a bit for the most companies, let alone a global conglomerate like Microsoft. Guggenheimer explained where Microsoft draws the line with small businesses.

“We consider a small business to be any organization with 1-to-25 PCs or 1-to-50 people,” Gugenheimer said. “The difference a business with 500 people and 50 people is huge. As a result, there are very big differences in our products. For example, Outlook 2003 with Business Contact Manager is a fine tool for a 10-person organization, but a full CRM solution has to be used in larger companies to create the same benefits.”

The company further splits small businesses into upper and lower segments. A lower small business consists of 1-to-5 PCs or 1-to-10 people. Microsoft’s core small business target consists of a company with 5-to-25 PCs or 10-to-50 people.

“We segment the small business market like this because of how we reach the audience,” Gugenheimer explained. “A 25-PC shop has IT professionals on staff and we reach them differently than a business owner or sole proprietor.”

In order to determine how small businesses are using its products and what software solutions they need now and in the future, Microsoft counts on its channel partners. Guggenheimer said this no small task.

“Our efforts are to address small businesses customers needs through our 800,000 worldwide partners,” he said. “But it’s a challenge to work with all the different partners that a small business might turn to for help, so we also spend a lot of time working with different business groups, affiliations and professional associations that cater to smaller businesses.”

After determining key influencers to differentiate its marketing approach as it relates to core software products, Microsoft next looks at owner management profiles, vertical industries, and level of IT sophistication to determine which of its solutions suit which small businesses.

“We look at these elements in order to determine where the small business is in its life cycle, because this will impact how they buy what they buy,” Guggenheimer said. “We focus on segmentation and preference points of contact to reach small businesses and determine who their influencers are — associations, value-added resellers, etc.”

The hardest thing to do with small businesses is to reach them at the right time. And for Microsoft, geography plays a role, too. For example, in the U.K. the best way to reach small businesses is through the U.K. Chamber of Commerce. In the U.S. there is a lot more fragmentation — but that’s what makes it interesting.

Toward that end, Guggenheimer said Microsoft focuses on three things.

“How do we help small businesses become more efficient? How do we help small businesses reach new customers? And how do we help small businesses interact with their own community? Technology actually complicates part of our world — how do we help small businesses wade through the clutter and reduce the noise? At least the noise coming from Microsoft,” Gugenheimer said.

According to Guggenheimer, small businesses have three top business concerns.

“Small businesses are very time-pressured and this is influenced by where they are at in their business life cycle,” Guggenheimer said. “Financing is always an issue for small businesses, but they understand the value proposition as long as there is a tangible return on investment. Our concern relates to small business concerns — how to cut through the clutter and help them at the right time.”

For Microsoft, the difference between today and 20 years ago is really about writing better, more efficient code that influences how with the Web, small businesses are able to reach more customers and become more efficient. Technology can make a small business appear much larger than it is. A lot has changed and technology has moved a long way from the enterprise, to the midmarket, and now small businesses.

“We’re doing some good work on the new products for small businesses,” Guggenheimer said. “Ten years ago we worked hard on building out credibility in the enterprise server market, which is good but doesn’t scale down for mid-market enterprises. We basically had to start from scratch for small businesses.”

Consequently, Microsoft’s 2003 lineup of client and server software focuses on delivering tailored solutions that help smaller businesses address their unique business challenges.

For example, the addition of Business Contact Manager to Outlook 2003 is designed to help small businesses get more done in less time. Outlook with BCM is just part the Small Business Edition of Microsoft’s Office 2003 system, which includes new versions of Word, Excel, PowerPoint, and Publisher. Taken as a whole, the SBE of Office 2003 is designed to help small businesses communicate and work more effectively with customers, business partners and employees. The system also allows small businesses to get work done from anywhere they have access to a PC.

Additionally, Microsoft’s Windows Small Business Server 2003 is designed to help small businesses better manage end-to-end business processes. Used in tandem with Microsoft’s desktop software for small businesses, the entire computing solution can effectively drive down the cost of doing business. Whether it’s saving time by allowing all employees to access a shared print server, or using online collaboration tools to forgo business travel expenses, Microsoft’s 2003 software systems are all about creating new efficiencies.

From infrastructure, to desktop applications, and integrated solutions, Microsoft has devoted significant resources to understanding small businesses. Joe Wilcox, Jupiter Research Senior Analyst, said Microsoft is banking big-time on its 2003 releases.

“The Office market has more headroom with SMBs than anywhere else,” Wilcox said. “Nineteen percent of small businesses with fewer than 10 employees have no productivity suite at all.”

Wilcox added that from his perspective, Microsoft’s Windows 2003 Small Business Server is a pretty good fit for small businesses, representing an even greater opportunity for Microsoft to gain traction in the SMB market.

“The small business server market is under penetrated,” Wilcox said. “Only 51 percent of U.S. SMBs operate server-based systems. That means 49 percent aren’t, so there’s a lot of groom to grow.”

Ultimately, new technologies can be a key differentiator for small businesses. Equally so, the small business technology market is a key differentiator for Microsoft.

Jupiter Research is a division of JupiterMedia Corp., the parent company of

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