Small Business Server 2003: Nice, But Pricey

Microsoft’s Small Business Server 2003 is designed
for the approximately 40 million small and medium businesses in the world,
and a new report from Jupiter Research said that’s a smart move on the part
of the Redmond, Wash., software company.

According to Jupiter (which is owned by Jupitermedia, as is, only 51 percent of small to mid-sized businesses (SMBs)
run a server operating system (OS). In the largest segment, the estimated 31
million businesses with less than 10 employees, that number dropped to 34

“That means there’s incredible sales potential,” said Joe Wilcox, who wrote the report, “Will Microsoft Win Over SMBs?” with Research Director Michael Gartenberg and analyst Janis Kim. The new version of Small Business Server was launched in October of this year as part of Microsoft’s $2 billion investment in the small and medium business (SMB) market.

With SMBs as hard-hit by the recession as large
enterprises, many of them are struggling with reduced staffs. A
10-person company feels the loss of an employee a lot more than a
100-person business. “Automation can help alleviate some of that burden and
theoretically increase productivity,” Wilcox said.

However, many of these businesses may not understand the
benefits of such big-company tools as server-based e-mail, calendars and
contact lists. Microsoft has added some nice remote access features as well,
he said, such as the ability to host a temporary Web site from the server,
so that a company could post such things as work that needed client approval
or a customer interface for order status.

Wilcox found that the software was easy enough to set up, which is a boon
for the approximately 74 percent of SMBs who don’t have a dedicated IT
person. Unfortunately, an awful lot of these smaller businesses won’t be
able to enjoy all the benefits of Small Business Server 2003 because they’re
not running the right desktop OS.

Too many features rely on Microsoft Office software that many SMBs don’t
have. According to the Jupiter report, the most suitable customers for the server
product are SMBs with between 25 and 75 employees. But its research found
that about 16 percent of them don’t run any productivity suite at all, with
that number jumping to 19 percent for operations with less than 10
employees. And 46 percent of the companies surveyed had no plans to upgrade
to Office 2003, without which they couldn’t fully use the collaboration

“Microsoft has done a really excellent job with horizontal integration on
the server side,” Wilcox said. However, it’s also doing another kind of
integration — vertically between the desktop and server. There’s a high
number of businesses in this market that don’t use any productivity suite at
all. “The best of the best situations would be a businesses running Office

While 55 percent of SMBs runs Windows 2000 Professional and 56 percent
run Windows XP Professional (most SMBs run multiple operating systems),
Wilcox said companies running older versions of Windows software,
particularly older IE, could have problems.

These businesses will still get benefits from moving to server-based
systems, Wilcox said. But the twenty-two percent that use Windows XP Home Edition don’t have the necessary built-in networking capabilities.

Then there’s the money issue. According to Jupiter, SMBs dedicate just 5 percent of their computing budgets to servers or server software.
Twenty-five percent goes to desktop software, which includes Office and
other products, like accounting programs.

While the actual server software is cheaper, at $599, than the previous
edition, the per-seat licensing cost got upped from $60 to $99, so many
companies could end up paying more.

Meanwhile, Linux’s lower cost appeals to many SMBs, even though the open source OS lacks many of
Small Business Server 2003’s integrated features, the report said. Linux appears on 26 percent of SMB servers, compared to 11 percent for Small
Business Server 2000, and 5 percent for Mac OS. This compares to 45 percent
for Windows 2000 Professional and 29 percent for Windows NT 4.

But while Linux is moving into the mainstream, Wilcox said, it’s not a
contender in the small business server space. “In many ways, it still is for
geeks.” It’s a good choice for small businesses where there’s someone who
knows technology and likes to work with software, he said. Sun Microsystems’
Star Office doesn’t have the same kind of server
component as the Microsoft line, while Open Office is doing better, thanks
to being free, but also doesn’t have the nice, tight product integration
that Microsoft has provided, he noted.

Jupiter Research said it believes that Small Business Server will at least
maintain its current share and add on some growth, but shouldn’t expect
any huge gains in market share for the foreseeable future. “The product
offers a lot of value and benefit to many small businesses,” Wilcox said.
But “this market is very cost-sensitive, and businesses may be too quick to look
at what it costs to add new tech rather than the value they might get from

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