Microsoft executives have repeatedly stated that the company is "all in" when it comes to cloud computing. But the software giant also continues to rake in record revenues from its traditionally-delivered software products. This creates an interesting divide between its current successes and the direction in which it believes the industry is heading. Rather than choosing one over the other, Microsoft is simply splitting the difference when and where it can, creating both cloud-based and on-premises-based versions of some products. This strategy has led to some confusion, of course, but it also provides customers with choice. And because Microsoft is pushing a unique and compelling hybrid deployment model, in many cases it's also possible to mix and match local on-premises servers with hosted online services.
To date, Microsoft's most successful push in this direction has been its hosted versions of Exchange and SharePoint, which are currently being marketed under the Business Online Productivity Services (BPOS) umbrella, though that will change to a more expansive set of services called Office 365 starting in 2011. These services follow the hybrid model in that customers can choose between on-premises servers, hosted services, or a mixture of both. It's a proven strategy, one that is both technically excellent and popular with customers.
Microsoft will employ this strategy with the next generation Windows Small Business Server (SBS), the company's integrated solution for smaller businesses. Since its inception in 1997, SBS has had a modest if compelling goal: Integrate Microsoft's most popular business server products into a single package that is simpler to deploy and manage than traditional servers and that is also much less expensive. SBS has always risen to this challenge nicely, and I've often lamented the fact that the more approachable and centralized SBS management tools weren't available elsewhere in Microsoft's products.
Over the past decade or so, SBS followed a predictable trajectory, with updates providing the then-current versions of Microsoft's popular on-premises servers and adding capabilities that met the evolving needs of its customers. Each SBS revision also added evolved versions of the management tools and further simplified deployment.
However, by the time SBS 2008 was released over two years ago, the product line was a bit out of step with the then-emerging trends in cloud computing. That version of the product offered basic integration with Office Live Small Business (also soon to be swept into Office 365), which provided a public-facing storefront or other website, but little else in the way of online services integration. And in an age where many small businesses were turning to inexpensive hosted email, contacts, and calendar management from Google and elsewhere, SBS still offered a more complicated on-premises infrastructure that, for most customers, would require the constant care and maintenance of a Microsoft partner.
For the next-generation version of Windows Small Business Server, Microsoft is splitting the product in two. At the high end of the product line is a traditional SBS offering, called Windows Small Business Server 2011 Standard, which maps very closely to previous versions and provides an obvious upgrade path for existing customers. Microsoft is also introducing a lower-end version of SBS, Windows Small Business Server 2011 Essentials, that targets the smallest of small businesses and provides very little in the way of on-premises infrastructure. With this version of SBS, customers are expected to subscribe to hosted online services such as Office 365, or even to competing Google services, in order to obtain email, contacts, calendar, and collaboration services. Essentials is all about user and computer management, centralized PC and server backup, storage, and remote access only.
Despite being based on the same underlying Windows Server 2008 R2 core, neither version of SBS has much in common with the other. They feature completely different management experiences, offer different sets of capabilities, and target different audiences. In fact, my one major concern with this product split is whether it makes any sense. Looking at the market broadly, we see companies adopting cloud services in different ways that vary, yes, by company size, but also by market type and need. New businesses, which tend to be among the smallest businesses, tend to embrace the cloud more quickly because of cost concerns. But for larger companies, cloud adoption varies mostly according to needs. Companies with regulatory, privacy, or other legal concerns about data storage tend to be more wary of the cloud and of the presumed complexity of Microsoft's hybrid solutions. Companies without such concerns are discovering they can save a lot of money and time by moving their infrastructure to cloud services.
Microsoft's SBS 2011 split neatly divides the market like this: The very smallest businesses, those with 25 or fewer employees, can pick the cloud-based Essentials solution and save a lot in up-front costs, picking the cloud infrastructure pieces they want a la carte. Of course, there are advantages to going the Microsoft route (including management integration with Essentials), but there are also cost disadvantages compared to, say, Google Apps, which is about $12 cheaper, per user per year, for small businesses compared to Microsoft's Office 365.