Bill's Excellent Adventure

Tweet

What's more, small-business owners still feel a residue of fear from Microsoft's long history of abusing power in its quest for total dominance. They remember how the company tried to hijack their websites in 2001 with SmartTags, an aborted Windows feature that would have turned many of their own words into links to Microsoft's sites and advertisers' without asking their consent. And they read about Microsoft's vendetta against guitar-string maker Ernie Ball, based in San Luis Obispo, Calif. Four years ago, the founder's son and CEO, Sterling Ball, was a victim of a "nail your boss" campaign by the Business Software Alliance, a trade group that Microsoft co-founded. BSA raided the operation and found that a few of its 80 computers had unpaid copies of Microsoft products. Ball said it was an accident, a case of unused programs left over on old PCs when they were passed from engineers to clerks. But he still had to pay $90,000 in fines and legal fees. Microsoft sent the news clips to other small companies as a threat.

Since switching to Linux, Ball has saved more money than he lost in the contretemps. "The money that I'm not spending on new versions of Office and on fighting viruses is going into marketing and R&D," he says.

Now that it fully grasps the Linux threat, Microsoft isn't being so heavy-handed with small businesses. Instead, the company is trying shrewdly to make its own claims of parity or superiority. Executives dispute Linux's claims of better security and reliability and point out that "free software" isn't actually free because you need to hire people to install, maintain, and customize it. (That's how rivals, particularly IBM, are looking to profit.) Still, Linux is "a real threat, and we take it seriously," says Darren Huston, the Microsoft vice president who leads U.S. initiatives for small and midsize businesses.

The stakes are stunningly high -- a $400 billion-a-year global market! -- and this is going to be an epic battle waged over a long time. Krammer says that Microsoft will continue to dominate that market for several years because smaller customers are often slow to switch to new software and most buyers won't really consider Linux until it becomes more mainstream. Besides, there aren't yet many business programs based on Linux, and those that are available, such as Sun's StarOffice, aren't as good as Microsoft's offerings.

Microsoft remains vulnerable, however, because small-business owners resent being captive to such a powerful force and not having viable choices. A January Yankee Group survey of companies with fewer than 500 employees found that 43% of them are concerned about becoming overly reliant on Microsoft's products and services; of those respondents, 72% were actively seeking alternative vendors. "Microsoft's challenge," says Krammer, "is to go from being a necessary evil to something that small businesses like to invest in."

Improvements are being made, but there is always room for more. In April Microsoft launched a revamped and much easier-to-use Web portal at www.microsoft.com/smallbusiness. Still, you might have to wait half an hour when calling customer service. Even more frustrating is how Microsoft keeps smaller customers at arm's length by forcing them to work through intermediaries -- local consultants who sell Microsoft's software, set it up, show buyers how to use it, or write their own software to work with it. There are some 325,000 of these folks, who go by awkward acronyms and names such as "VARs" (value-added resellers), "ISVs" (independent software vendors), and "certified partners" (individuals who have passed training courses run by Microsoft).

Small businesses hook up with these "partners" mainly through word of mouth, but if you're an entrepreneur with little tech savvy, it's hard to know whether your accountant's sister-in-law or your lawyer's fraternity brother is the best person to apply software to the challenges of your business. To help, Microsoft's newly redesigned Web page has a "partner finder" to identify local consultants and their areas of training and expertise.

The cottage industry of Microsoft's partners is getting some big new players. Both HP and Dell are starting to hawk their consulting services to businesses with fewer than 500 employees. IBM is reaching out to entrepreneurs too, but rarely dips below the 500- to 1,000-employee range. While all three companies embrace Linux, they also promote Microsoft's products as part of their overall packages for clients.

Although finding the right partner and setting up a new software system can be stressful, there's a compelling reason for sticking it out: Microsoft now offers many extremely useful products for small and midsize businesses.

Microsoft divides this huge market into two parts: The 7.5 million "small" businesses with fewer than 50 employees, with no more than 25 PCs and with a maximum of $5 million in annual revenue. The 330,000 "midmarket" companies with fewer than 1,000 employees have up to 500 PCs and up to $500 million in revenue.

 PREV  1 | 2 | 3 | 4  NEXT 

Read more:

Sign-up for our Technology Newsletter

Email Address: