Channelnomics

Why Microsoft was Right to Kill SBS

To say the channel isn’t happy with Microsoft’s decision to discontinue Windows Small Business Server would be an understatement. The loss of the bestselling product has rankled many solution providers who say Microsoft is turning its back on partners and customers who have come to rely on the popular product tailored for small office environments.

Instead, Microsoft believes solution providers should either support small business customers with the new Windows Server 2012 as an on-premise deployment or a cloud service.  At the Microsoft Worldwide Partner Conference in Toronto, Microsoft used one of its main stage keynote presentations to show off the new operating system as a cloud platform, revealing where Microsoft wants its small business customers to go.

Many solution providers are upset that Microsoft is essentially compelling them to sell their customers into either more expensive server solutions or a hosted server. Already, several hosting companies, including Rackspace, have announced initiatives to expand their hosted server offerings using the new Windows Server 2012.

“I take it emotionally because I care. The vendors are starting to be as bad as the government by telling us what is right for our clients. What if everyone said that Google was the only proper cloud-based spam filter solution, would that make you smile? Of course not. The cloud has its place, it’s just another way of delivery of services; I get that, but it’s also not the answer for all,” wrote Don Bentz, co-founder of Preferred IT Group, in Facebook discussion.

As some solution providers have expressed, SBS may have been good for one more updated release. Another upgrade would have provided the market with a satisfying product while simultaneously providing the channel and their customers a little more time to adapt to the cloud realities of the future.

The reality is Microsoft is doing its channel partners – hosting and resellers – a favor by compelling cloud migration through the SBS discontinuation. By making the choice between on-premise and cloud easier by eliminating SBS, Microsoft is looking to accelerate cloud adoption, which will benefit end users and help stimulate cloud sales.

Beyond Rackspace and the other tier-1 hosting companies, there are scores of hosting providers struggling to engage the channel in reselling and supporting their hosted servers and services. They are often rebuffed by solution providers who still see a vibrant business in selling and supporting on-premise hardware, namely servers. In many regards, hosting providers aren’t competing against other hosters, but rather on-premise servers flowing through solution providers.

True, moving to cloud servers doesn’t always meet the customers’ current need, which is why Microsoft says Windows Server 2012 – available in September – will remain a viable offering. However, the majority of small businesses can be supported with cloud-based servers more efficiently from an administrative and cost perspective.

Solution providers will benefit from this migration as reselling space and support services in a hosting environment creates an annuity revenue stream for their business and more deeply entangles their sales and support teams with customers. Solution provider may not have that same one-time revenue from the sale of a server, but they will gain incremental revenue and profit benefits over time.

Like all things related to cloud computing in the channel, this change will require solution providers to make tough decisions about their business operations and structure. Those solution providers making the transition will find their administrative and technical support burdens decreased by the hosted model, thus lowering their cost of sales and operations. That alone is worth following Microsoft’s lead.

For customers that don’t want cloud, there’s still Windows Server 2012, a more complicated product for sure. But, as Vlad Mazek, CEO of Own Web Now, wrote on his Facebook wall, complicated means more professional services revenue for supporting solution providers.

Change is often painful. In the case of Microsoft’s Small Business Server, change is painful for the ultimate betterment of the partner and customer.

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9 Responses to “Why Microsoft was Right to Kill SBS”

  • Dave Crawley:

    I love how this article is also telling me that this is a good thing. You do not know my client’s concerns or needs. A cloud solution is not always best, and it is not always cheaper.

    I so remember when microsoft asked me to push sbs and tell me how dedicated they were to the channel, and after all most of their income comes from the channel.

    In a nutshell – SBS was a great solution since SBS 2003 – 2008 & 2011 have been very stable as well. After initial setup there is very little administrative overhead…

    I will be researching alternatives… Who knows perhaps the MAC Mini with the Server app will be the answer

  • Im in Western Canada. Many of our clients are doctors. Its illegal for them to store client data outside of Canada for one, and many of them DO NOT want cloud services at all due to the nature of the info they want to save. I think its a poor move by MS to try and force the hand of many businesses to rebuild their structure in this method. I for one am encouraging clients to renew their licenses or make a move to SBS 2011 if they haven’t yet, before it is pulled from the market.

  • Matt:

    …and for the majority of our customers in Rural England with poor unreliable internet connections and large amounts of data, what for them??? Server 2013, with local data, and then resold Exchange mailboxes(i.e. no money for us either in such small numbers)? So the customer still has hardware costs, still has license costs, they still have to maintain backups etc etc, but now their data is in 2 places and one of these places means taking what little bandwidth they have? Yeah that’s progress. Time for a career change to somewhere where cloud means those fluffy things in the sky….. and remember clouds usually bring rain!

  • I honestly believe that Microsoft has no clue at all of what really happens in the SMB market. Killing of SBS has nothing to do with serving customers. It is a decission purely made trying to cut costs for Microsoft.

    Where Microsoft thinks that all SMB customers will now run to the clouds, they will be surprised within some monthes that their market share in the SMB segment has decreased dramatically. Surelly the SMB market will still buy Windows server version xxxx. The e-mail, database and other collaboration services will on the other hand come from:
    Oracle (MySQL)
    Firebird (Firebird SQL)
    ALT-N (Mdaemon mail)
    Kerio Technologies (Kerio Maliserver)
    MailEnable Pty. Ltd (Mail, webmail, calander)
    Google Apps
    etc etc

    And offcourse:
    Citadel Groupware Server
    Open X-change
    SOGo
    Zarafa

    The mistake many big companies like Microsoft make, is to think that SMB is the same as home office. This is not true. A company sized between 5 – 50 is nothing like a home office. And it, offcourse, is nothing like a down-sized enterprise environment either. It needs mature solutions for a fair price. Most of them have to many specialties to be moved to the cloud.

    I still remember Microsoft calling me some time ago to ask if I would endorse Windows 7 which would come on the market. I asked: “what do you mean by endorse?” The man said: “Will you ‘help’ your customers to upgrade to Windows 7?”
    I have tried to explain the man that an Operating System for an SMB customer is the desktop on which the IE-icon and the Word-icon is. Nothing more and nothing less. For me as a technician it is more than that. But the customer couldn’t care less about what OS they use. It should work. The Microsoft man couldn’t understand this. His final try was to argue that it would make me rich. I answered: I have children. Richer than I am now, I will never get.

    Microsoft simply doesn’t understand a single thing about the SMB market. They have grown to big to be able to understand. To be able to be in close, direct and true contact. To big to care anyway.

    As someone wrote here before me: We have said goodbye to Novell LANs before because they didn’t understand the market. I think the time has come to say goodbye to the next one.

  • I have to argue that SBS was a best selling Microsoft solution. I know many of my coaching clients who never touch SBS and last time I heard Windows and Office were Microsoft’s top sellers, not some server they sell for a one time $600 hit and maybe get lucky on the odd license here and there.

    I can feel the pain of many SBSers out there, but I once supported Banyan networks and Novell LANs. Time change and I for one live in a smaller city in Ontario Canada, not the hub of technology Toronto and the cloud seems to work on my small Gogeco network where I have 1 MB up and down.

    Here is the last thing I know to be 100% true. Small business craves operational cost expenditures and would love to bonus and have another skilled labourer to meet their goals. Subscription based services using the cloud or other SPLA based license model provide this. If the solution provider is not willing to go down this road…someone will introduce the concept. We are seeing solution providers lose business because a cloud provider talks to their client at the Chamber of Commerce and steals the business away. Not Microsoft or DELL…but a 2 or 3 person cloud provider with 24 hour help desk and a few additional value add services.

  • Ted, Richard and Brett,

    Despite this development, there are still products in the market that will enable you to serve your SMB clients. The MDaemon Messsaging Server was developed back in 1996 specifically for SMBs that need affordable and reliable alternatives to Exchange and SBS and it has been deployed by a global channel of companies just like yours.

    We are committed to the SMB channel and as an SMB company, we welcome any frustrated partners to give our company and its product a test drive.

    Kevin Beatty
    VP, Marketing & Business Development
    Alt-N Technologies, Ltd.

  • The assumption that cloud based services are mandatory going forward is correct. Whether or not I can “re-sell” is not important in terms of whether the product is physical or virtual. However clients that have limited access to online services, contractors building major projects in remote areas (for example), or small oil dealers in remote areas rely on SBS.

    I suspect the “Appleization” of Microsoft will be a long term strategic and financial boon for MS. That said, I dropped an Apple dealership back in the day because of similar decisions by Apple.

    Windows 8 and dropping SBS is just the first volley as MS morphs into a new business model becoming part wireless carrier, part data repository, part search engine, part device manufacturer, and they begin their departure from the traditional channel, taking with them as many partner obtained, maintained, and sustained accounts as they can carry.

  • Richard Potter:

    I agree. What am I suppose to do when i have customers with 4mb internet lines. Cloud is no option for me or my customers. If have to use server 2012 do we get a discount for the exchange and sql… i guess not.
    In this hard time we are all facing lets make everything too expensive and destroy the recovery of companys by making it so they cant have a computer network to make them work effiently….

  • Even after all the positive articles I have read on this development, I still can’t help but think that Microsoft is making a huge mistake.
    Forcing all SMB customers into the cloud is hubris. We support dozens and dozens of SBS servers. These customers are very comfortable with on site hardware and a well built DR plan and the performance that accompanies it.
    This is not a good thing. Microsoft basically looked at its SMB channel and flipped us off.

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