Small-to-midsize businesses (SMBs) have different business models and different resources, so they need solutions specially-tailored to their needs. On the IT side, SMBs must consider whether they will outsource, or use managed services, for all or part of their IT infrastructure. Michael Risse, former vice president of the Worldwide Small and Midmarket Business Group at Microsoft, discusses how SMBs can be more efficient through Microsoft software and services.
Michael Risse: Now we're back together on the topic of Windows IT, I guess IT in general and also the small business perspective. And certainly we've heard from our customers, partners, and press as well, "What's Microsoft's perspective on the economic situation with respect to software, with respect to IT, and with respect to what customers can do and should do?" You have the research from the flash poll that we did in terms of how this economic issue is impacting customers, particularly small-to-midmarket customers. The thing that really defines them is their ability and their need to do so much with so little. They frequently have many of the same challenges or needs as a larger organization, but they just don't have the same resources from an IT perspective in house that a larger organization does. That's why the partner role is so incredibly important, because the trusted advisor role, having people that can help them sort out all of the complexities and technologies and opportunities out there is incredibly important. We've absolutely seen the impact and their need to respond.
Michele Crockett: So I know that you've just launched Essential Business Server and Small Business Server. You are highlighting, especially recently, some of the capabilities and tools that Microsoft has available that can help these companies conserve resources in a tight economy. Some of these things have always been built into Microsoft products or at least they've been in the background. Is there anything different in what Microsoft is highlighting or what is new in these products, or is it more about evangelizing the cost-saving capabilities that Microsoft has talked about for awhile?
Michael Risse: There's definitely the cost savings abilities we've now stated with a new product: Essential Business Server. It's a brand new product; sort of a big brother to Small Business Server. And then there's also an additional set of work in Small Business Server. The first thing it has is the new product, and it's been since we worked on SQL Server since we had all the new versions of our enterprise class server products assembled in Small Business Server/Essential Business Server. So, the new version of SQL Server, new version of Exchange Server, the new version of Windows Server; those are all the new versions for the first time in several years. You get the benefits of those products, from virtualization to new SQL Server capabilities, the new version of Exchange with mobile access, so one it is a new version. Two, it's a new set of integration and ease of use to automate many of the tasks that IT people do routinely in small-to-midmarket businesses, or that partners do on behalf of customers, which is what the remote management capabilities are about. We've absolutely improved those version over version, because one of these key conversations for small-to-midmarket IT shops is "What should I do and what should I outsource?"
Now, when you're a big company you call it outsourcing—when you're a small-to-midmarket company you call it managed services. And managed services is one of the fastest growing parts of the partner market over the last couple years, as more and more these organizations will outsource or set up remote management capabilities for partners to manage their infrastructure on their behalf, which is really a big question for any organization. What's your core competency and what should you have somebody else doing for you? If a company has a great core competency in Exchange and in managing infrastructure and keeping uptime, maybe that's the business they should be in, and allow the lawyers to be lawyers and the farmers to be farmers and the manufacturers to be manufacturers. So the remote management and automation of simple tasks is a big step forward in this version of Small Business Server and Essential Business Server. And the third thing, and this is the fun conversation, is beginning to integrate web-based services and capabilities into Small Business Server and Essential Business Server products. What's interesting is that you mentioned Small Business Server and Essential Business Server a minute ago. What I'd add to that new offering set is what's essentially known as BPOS. And if you like OLAP you'll like BPOS. We're into four letters now. This is basically the business productivity online services. That's Microsoft hosted Exchange, SharePoint, Live Meeting. That would be taking some of the capabilities of Small Business Server, and adding them and putting them in the sky on behalf of the organization. So one of the questions could be, "What do I want locally?"
You and I will, for the rest of our lives, be working on local software. We need local servers for backup, for file-in-print, for storage and sharing capabilities. But we will also increasingly pull services from "the cloud," which we locally use and access. I put BPOS in there as a sort of "Hey, we can put all of this or much of this in the cloud." But even Small Business Server and Essential Business Server today, they include, for example, the ability to set up an Office Live website from your local PC, so what you can do is either bring your own domain name or acquire one in the process, but basically from your desktop, managed through Small Business Server or Essential Business Server, you can access Office Live and create your web presence for your organization. And you can get reporting back on that website, coming back to your employees. You can also set up, as a service, remote email access, so anybody with a browser can access their email across the Internet. What you start to set up is this new way of working or organizing IT functions. It's essentially locally administered, locally managed, rights and authentication, with a local set of capabilities—file-in-print, network sharing, networking, and so forth—and at the same time setting up access to features that are cloud based for your organization—your website, your remote email, your mobile email functionality, and so forth—so that's the third thing that I think is critical about these new products. The steps they take towards a Software + Services world. And the ultimate one possible endpoint would be actually using BPOS as the Software + Services model for your email, your collaboration and your instant messaging functionality. And Office Live remote email are not the only features, we also include other services like security services included in Small Business Server and Essential Business Server, so that's another example of the services model playing into those products.
Michele Crockett: I noticed that one of the top things that businesses were looking for, according to your survey, was making employees more productive. When small-to-medium sized businesses are trying to figure out a technology investment that's going to help them, how do they hone in on something like making employees more productive? What kind of things do they do to evaluate their situation? I bet you guys have some wizards that are available that small-to-medium sized businesses can use to assess their business, but how do they get at what is really holding them back on the IT side?
Michael Risse: That's an interesting question, because they have a sense of productivity. The most expensive resource, unless they're in the diamond business, is their employees. Employee productivity really is the conversation. It's interesting that they're saying that, because if you look at the Forresters, IDCs, Gartners of the world, and if you look at the top IT spend for SMBs, what you'll see is employee productivity is the second largest spend. The first spend is core infrastructure—the security and reliability infrastructure. The second is employee productivity. The other two spends have to do with customers, adding new customers/customer relationships, and basically digitizing their infrastructure, which is the whole accounting, ERP, supply chain management, and so forth. So those are the top four spends, the second is as I said employee productivity. That maps out the spends in this survey we got back. So what do they mean when they say productivity? What they usually mean is mobility, which is access to information everywhere, which is why that mobile access to email and mobile applications matters so much. The second thing it has to do is sharing—both sharing within the organization and sharing with partners. This is something SharePoint Web Services does, or where SharePoint Services in SBS or EBS comes into play. Can people collaborate, can they work together, and can individuals get information to wherever they want it? I don't know that they have good metrics for evaluating the organization, which is why we put the wizards out, providing the questions for people to start thinking about and considering if they are productive. But those would be the top two scenarios that they're referring to.
Michele Crockett: That was one of my questions, as well as what hardware decisions come into this. It does seem to us that there is a lot of activity in times like this, and kind of hunkering down and getting ready for the long haul, trying to make decisions that will take them through the next four or five years.
Michael Risse: So in 2000, we had a great comment on the Small Business Server launch from one of the customers that we had as part of the launch: "In my business, you survive the bad times and thrive in the good times." The word survival was sort of the operative word in terms of tough economic situations you survive, good times you thrive. What is interesting in that hunker down period that you referenced is that relative to other investments, software is still the best. It may be a decreasing bet, but it's still relatively the best. What I mean by that is you've probably seen the news and heard about the GDP, that we've been in a recession for a year, and if you look at the IT spend and the analysts' reports, what they're saying is that IT spend is either going to be slightly up or flat, or maybe a little down. But if you break it down the largest spend is people costs, so anything we can do to increase the efficiency of the employees is super important. The second one is hardware, and hardware spending is not going anywhere. There's a lot of shifts in the hardware market, particularly in servers, and I think there will be more excitement in the market related to blade servers, which are really being designed for small businesses, and we think that's a great thing. And the third thing is software, and software is actually still growing. And over the course of the year from the summer it was 7 percent, now maybe it's 4.6 percent, that might be a little lower or higher depending on geography right now, but software relative to IT spend and relative to business spend and relative to IT is still a bright spot. Software is what can make organizations survive the tough times. It can help you save money, help you make money, and help set you up for future spend. Software can do that. And I think with this hunkering down and the tough time, people are taking a new look at what software can do.
The example I use for that is virtualization. Virtualization has been around for a couple years, but it's kind of like going to the gym. You've been thinking about it for awhile, but you might not have gotten around to it. Well, now might be the right time to go to the gym, given the holidays, and if you're in the IT organization it might be the right time to think about virtualization. Windows Server is included, but it's a way that you can actually lower several costs. You can lower IT costs, in terms of management time because you have one box instead of several. You can lower electricity costs, because you're not running as many servers. You can lower your air conditioning cost, because you don't have to cool the room as much because you're running fewer servers, and a closer look now at what virtualization can do could mean saving money, even though virtualization has been around for a few years. Now is the time where you can really be motivated by the benefits it can provide. Travel was a big expense for organizations, looking hard at travel and saying "What can we do with Live Meeting, what can we do through better communication infrastructure?" You don't have to pay for travel, you don't have to pay for the lost productivity that people have. Let's take a closer look at what does presence mean, what does instant messaging mean, what does collaboration mean from an infrastructure perspective. We definitely see the hunkering down, and we and the analysts see software as still continuing to grow, and being a lever for setting up future success. We think we've got some very compelling technologies both from a technology perspective as well as from a financing perspective that are going to help make these things more accessible, and help save these organizations money.
Michele Crockett: Were there any surprises in the data about the investments SMBs said they were going to make in the next 6 months to help them compete? For you and your team, were there any surprises in this data about what their priorities were?
Michael Risse: No, if you look at the top couple investments. One, simplify infrastructure, energy costs and network admin, boom that's the number one software spend core infrastructure—reliability. If you see the ones around employees and productivity, greater mobility of employees, boom that's the productivity spend that's right there. Employee software to increase sales and customer satisfaction, that's the CRM that's the fourth largest spend. So most of these were very in line with analysts and our research, but what's interesting is they continued to be the same priorities with respect to the more interesting economic environment that made some of those services redundant.