Hitting The Server Sweet Spot

indows Small Business Server 2003 got a rocky start out of the gate, but partners are forgiving of the distribution and technical glitches because of the big gains it offers customers at a lower price point.

The newest Small Business Server has at its core value the upgraded Windows 2003 and Exchange 2003 as well as performance and security improvements, heralded remote access, enhanced Internet features and a new version with a starting price point of $599.

Still, SBS 2003 was launched at perhaps the height of Microsoft’s security woes, at Microsoft Momentum, where CEO Steve Ballmer spent more time at the podium detailing the company’s planned response to the outbreak of virus attacks on Windows than on the server launch.

What’s more, following the launch, partners had a tough time getting their hands on client access licenses for the new standard edition. The full-priced premium edition, at $1,499, didn’t ship until Oct. 27. There was confusion about the availability of two SKUs, and some distributors didn’t have the right part numbers, partners said.

But the biggest glitch was the discovery of a bug in Windows SharePoint Services that made it impossible for some solution providers to install the product.

While Microsoft’s loyal solution providers dismissed the bug as a minor inconvenience with an easy workaround, the glitch compromised one of the key selling points of the upgrade: faster installations. Microsoft made a fix available in mid-December and promised to slipstream it into the product.

Solution providers acknowledge the rough start caused by distribution woes and the bug, but say the suite’s key new features— especially Remote Web Workplace and SharePoint Services—and lowered prices make it an easy sell.

“It was disappointing and hindered things a bit,” said Roger Otterson, president of Qualitec, a San Diego solution provider who experienced problems getting client access licenses for the standard edition after the server was released. “We were just so confident of its ability to just load up and work. It has become a major bump in the road we have to get past.”

Still, Otterson, like many other solution providers, said the remote-access capabilities will make it an easy sell and it will be the star of his services business in 2004. “We sold six copies already and for us, that’s huge,” he said.

Silicon East, a solution provider in Manalapan, N.J., stopped doing new Microsoft installations in August and spent several months deploying patches to customers. Then Marc Harrison, president, ran into major installation problems on the server at a customer site over Thanksgiving weekend because of the bug. But he’s not complaining. Harrison said he could appreciate the improved installation and new features once he got the workaround.

“Although I described a difficult SBS upgrade from 4.5 to 2003, which was due in part to a now-known bug, our experience in general has been much better,” Harrison said. “One in-place upgrade we did from SBS 2000 to 2003 took a total of just three hours. We were very impressed.”

The VAR executive said he has signed many SBS 2003 deals and is so busy he is not taking on any new customers at the moment.

“We postponed a lot of hardware upgrades during 2003 in anticipation of the release of the product, and now we’re rolling out a lot of those upgrades. It’s impacted our SBS sales and our hardware sales,” Harrison said. “We’ll do 20 or 25 upgrades to SBS 2003.”

The crown jewels of the suite—Windows Server 2003 and Exchange 2003—offer existing and new customers a vastly enhanced operating system, terminal services and e-mail features and enhanced security, said Jason Harrison, owner of Harrison Technical Consulting, Nashville, N.C., which has signed six deals since October. He overlooks the bug and points out that Microsoft turned off many services in the Windows server version with the small business suite to make it more secure.

“The first version was messy. Small Business Server 2000 was a good leap forward, and now Windows [SBS] 2003 hits the sweet spot,” said Harrison, who has been working with the suite since the first NT-based version, Small Business Server 4.5, was released. “It’s amazing how far they’ve come in three releases.”

Arnie Bellini has been serving small businesses in the Tampa, Fla., area for 22 years.

He sees an interest in SBS 2003 from a growing cadre of new clients looking to upgrade from peer-to-peer networking to a server-based solution. Some will opt to deploy the enhanced terminal services in Windows 2003 on a separate server, while other will choose to give extended remote desktop access to their workforce using the new Remote Web Workplace and the SharePoint intranet services.

Remote Web Workplace is a single URL that give users options for connecting remotely to a server. Remotely connecting users to SBS 2000 is a manual, time-consuming process, Microsoft executives acknowledged.

“Windows [SBS] 2003 is a better operating system, and the terminal server in Windows [SBS] 2003 is a home run,” said Bellini, owner of ConnectWise, Tampa, noting that offering server-based solutions for mobile workforces and the other Internet features make it easy to extend remote access for his customers’ small and very busy workforces. “Small-business owners have employees who multitask, and terminal services give them access to their data wherever they are, from home and on the road.”

Frederick Johnson, president of Ross-Tek, Cleveland, said Remote Web Workplace and SharePoint Services are the primary benefits and extend many mobile and team benefits to small businesses. The new version, for instance, enabled him to introduce Outlook RPC over HTTP to clients who are not big fans of Outlook Web Access.

When asked about the return on investment for SBS 2003, Johnson paused and noted that customers in the small-business space are different from enterprises because they usually don’t have an IT staff. The cost of the solution is fair given the quality-of-life payoff, he said.

“I don’t believe in ROI for small businesses, especially since most small businesses don’t have an IT budget to begin with,” said Johnson, who has sold five copies of Windows SBS 2003 and has done seven installations.

“Our SBS 2003 clients are starting to take advantage of these features to improve matters that are more important to them, such as spending more time with their family and not missing their kids’ school events. They no longer have to trek back to the office at night to finish up a project. To them, that’s the ROI that they can see, feel and is attainable.”

Complaints? Partners say the tape backup feature is weak. They also hope Microsoft will offer a low- priced bundle with Office 2003 because many small businesses won’t migrate to the server before moving to Office 2003, Johnson said.

The $599 price of the new standard edition gives Microsoft and OEM partners Dell and Hewlett-Packard marketing ammunition to turn the heads of small-business owners, who are often more sensitive to sticker shock than large corporations. And for small businesses that support advanced applications, it’s cheaper to run SQL Server 2000 offered with SBS 2003 on a separate server than to buy the database separately because of the client access license benefits.

“It’s a no-brainer to buy SBS even if you use Exchange or SQL on a separate box,” said Silicon East’s Harrison. “This is the great Microsoft giveaway of 2003.”

SBS 2003 is a rare example of a price slashing by Microsoft, which is fighting to preserve its overall cost structure even as it attempts to curtail potential competition from Linux in the growing SMB space.

Interestingly enough, solution providers say the price cut removes a potential barrier to the sale, but they are careful not to pitch it because the overall cost of a full solution package with software, hardware and services typically falls between $3,000 and $10,000 depending on the implementation and the number of users.

Meanwhile, as penance for the early snags, Microsoft handed over a belated holiday gift in early January of five free client access licenses to SBS 2003 in addition to the five free ones that come bundled with the server. The freebie, valued at roughly $500, is Microsoft’s way of atoning for the bug in the server and its Windows SharePoint Services that derailed many installations.

 Published for the Week Of January 12, 2004