Microsoft Eases Financing, Licensing Terms For SMB Market

At the company's first Small Business Summit in Redmond, Wash., Microsoft touted its next-generation Windows Small Business Server 2003 R2 with specific SMB features such as Green Check that monitors health and provides networkwide patching and update management.

While that won't ship until summer, the software giant also announced that it will provide a free upgrade of R2 to anyone who buys SBS 2003 SP1 after March 1.

Microsoft Financing also announced special financing terms that go into effect for all of its SMB software immediately--including a decision to lower the minimum transaction size required for financing to $3,000, slashed from the previous requirement of $10,000.

Microsoft Financing also extended its 90-day deferred payment promotion until June 30, 2006. That promotion was scheduled to end March 31, 2006.

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The financing can be used to pay for hardware, software and services, which will benefit channel partners, Microsoft said. The deals will be fulfilled through Microsoft partners, the company said. Microsoft offers 12.5 percent financing on its software.

The software giant is also turning up the heat with retailers to grow its SMB business more aggressively in 2006.

As part of that, Microsoft will be pushing existing products at retail such as Small Business Accounting, Microsoft Point of Sale and Windows Small Business Server 2003 as well as future offerings like SBS 2003 R2 and Windows Vista Business. Microsoft's recently named COO, Kevin Turner, was formerly an executive at Wal-mart.

For example, Microsoft announced an expanded alliance with retailer Best Buy that calls for the retailer to stock 115 of its stores with Microsoft Point of Sale and train its Geek Squad to sell and implement Microsoft Point of Sale to small retailers. Microsoft Point of Sale shipped in May 2005.

While Microsoft said it will push that POS solution though Best Buy and other retailers, executives said it won't cause any conflict with its solution providers and value-added resellers.

"I don’t think so," said Steven Van Roekel, a director in Microsoft's midmarket group, estimating there are 42 million small businesses in the United States. "The addressable market for small business is so large. Most partners have been focused above small business, to midmarket or small enterprise, but partners can sell the POS solution as well. "

One consultant said SBS, in its ninth year, is a mature product and that challenges partners' ability to sell services.

"Immature business models predicated on the mere installation and deployment of the product aren't cutting it, and those partners aren't making it since setup and deployment is very simple now. So we have to make our money different ways and, like the mature consumer-electronics market, the new Microsoft financing package provides a mature market strategy for a mature SBS product," said Harry Brelford, a technology consultant with expertise in Microsoft's Small Business offerings and author of books about Microsoft SBS. "We'll make our money on the financial terms and conditions and we will be getting new customers. Lowering the bar to $3,000 total package opens up new customers."

While Microsoft offers Enterprise and Select Agreements to larger customers, the company also offers a special licensing package for small businesses called Open Value. Open Value is a volume licensing deal with Software Assurance at a discount of roughly 30 percent, according to Microsoft.

At the summit, the company touted Microsoft Small Business Platform for desktops. The license covers Office Small Business Edition, Microsoft Small Business Server 2003 Client Access License and Microsoft Windows XP Professional upgrade with three years of Software Assurance.