FT.com / Companies / IT - Microsoft line extended to small business

FT.com / Companies / IT - Microsoft line extended to small business

Microsoft line extended to small business
By Richard Waters in San Francisco

Published: March 3 2008 05:03 | Last updated: March 3 2008 05:03

Microsoft will on Monday take the wraps off a new service designed to repel Google’s incursion into one of its core markets, selling software applications to small and medium-sized businesses.

The plan will involve delivering a service over the internet for small companies to do things such as manage corporate e-mail and let workers collaborate on documents, rather than requiring them to buy the software. Users of the new internet services will be charged a flat annual subscription fee per worker.

The move marks a response to Google’s launch a year ago of a set of online applications for business customers, for a fee of $50 a year for each worker. Google executives have suggested that even if companies don’t end up using their services, the presence of an alternative could still lead companies to negotiate lower prices from Microsoft.

Chris Capossela, head of Microsoft’s Office desktop applications and related server software businesses, dismissed the threat from this new low-priced competition. He refused to disclose what Microsoft would charge for its online services, but said: “We’re really not worried about cannibalisation.”

The new Microsoft services involve two of its main server products – the Exchange e-mail software and SharePoint, which is used to manage documents centrally and make it easier for workers to collaborate.

Internet-based versions of this software were made available to big companies last year. It will now be extended for a test period to the smaller companies that have traditionally formed the backbone of Microsoft’s business.

In spite of the experimentation with offering online versions of its server-based software, Microsoft has so far retained its traditional business model for its dominant Office suite of PC applications.

It is counting on the functionality of its software to counter Google. “Looking at their software, it’s incredibly basic,” said Mr Capossela. “It isn’t good enough for a 50-person company.”

He also said Google, which has been building a sales force to improve relations with business customers, had a long way to go before being taken seriously as a business software supplier.

“The reality is, it takes a very long time to build the credibility with [chief information officers],” he said.
Copyright The Financial Times Limited 2008