Researcher: SMBs Wary Of Depending On MicrosoftResearcher: SMBs Wary Of Depending On Microsoft

Microsoft Corp. has failed to win the hearts of a significant portion of small and midsize businesses that remain wary of the software maker despite it's huge push to sell them run-the-business applications, a market research firm said Wednesday.

A web-based survey late last year of 600 SMBs in the U.S. found 43 percent of key decision-makers of information technology purchases concerned about becoming overly reliant on Microsoft's products and services, the Yankee Group said.

Of that group, 72 percent said they were actively seeking other vendors to diversify their product portfolios. Yankee defined small and midsize businesses as organizations with two to 499 employees.

Two factors were key to the respondents' reluctance to buy Microsoft, security and the cost of upgrades, Yankee analyst Helen Chan said.

The constant battering Microsoft Windows and other software get from virus writers has cost SMBs money in lost productivity from infection. In addition, keeping up with the steady stream of security patches can be difficult for organizations with very limited IT staffs.

Just as needling is Microsoft's Software Assurance upgrade program introduced in May 2001, but not implemented for more than a year later after an outpouring of customer complaints. The plan effectively favored paying an annual fee for future upgrades over the pay-as-you-go approach favored by small and medium-sized companies.

"SMBs like to purchase software or other technologies at their own pace," Chan said. "Typically, they don't like the vendor to determine for them what the upgrade cycle should be."

SMBs buy technology usually to fix a problem or to add efficiencies to their operations to cut costs. Neither problem associated with Microsoft helps the group save or make money, Chan said.

The findings are significant because Microsoft has targeted the SMB market, believed to include 45 million businesses worldwide, as a major growth area. The company estimates it can get $10 billion in revenue from SMBs by 2010.

Last year, high-tech researcher Gartner Inc. estimated SMBs would spend $420 billion on technology. Such a huge market has become very attractive to vendors that have found large companies cutting back in the economic downturn that began in 2000.

In charging into the market, Microsoft spent $2.5 billion over the last several years buying Great Plains Software and Navision, both makers of business software for SMBs. They were the largest acquisitions in Microsoft history.

Microsoft, however, can easily lose sales to competing vendors that have also released products for SMBs, Chan said. On the database side, Oracle Corp. and IBM are selling products comparable in price to Microsoft SQL Server. For business software, SMBs can turn to competitors SAP AG, Intuit Inc., Siebel Systems Inc., Best Software, Salesforce.com Inc. and many others.

"Some of the key things any company can do to differentiate itself in the SMB market is really strong customer service support, and the ability to demonstrate that you're really focused on SMBs and not just trying to reach down and get some quick revenue," Chan said.

Microsoft was not immediately available for comment.