There's a Cloud in Microsoft's Forecast for Small Business

Small and midsize businesses are big business for Microsoft. Just how big, it won't say. But they represented a big enough chunk of change in the company's annual revenues of $62.48 billion for fiscal 2010 that the folks in Redmond have assembled a team and created a website, Microsoft Business, dedicated solely to marketing the software company's wares and services to the small and medium business (SMB) market.

"It's incredibly important," Josh Waldo, director of Microsoft's U.S. SMB marketing, told BusinessNewsDaily. "We've got capabilities now that we've never had to serve small business, and that's the cloud."

The heart of Microsoft's SMB offering is Office 365 , a service that wraps familiar Microsoft tools such as the Office productivity applications in a cloud service package that includes SharePoint’s document management functions, Exchange Online’s email, calendar and contact features, and Lync Online, a communications service that integrates enterprise voice, instant messaging and web-, audio- and videoconferencing.

Critical approval

Miscrosoft's cloud offering has received critical approval while winning the hearts, minds and desktops of the SMB world. When introduced as a private beta last year, it was tested by more than 100,000 organizations, including independent professionals and large corporations, but more than 70 percent of the early adopters were small businesses.

Microsoft has a track record of being something of a late bloomer when it comes to adopting transformative technologies. When the giant wakes up, though, it quickly makes up for lost time. Witness the company's rise to the top in the browser wars in the late '90s, when Microsoft went mano a mano in a last-man-standing tussle with Netscape, then the market leader.

The cloud gains traction

The same pattern seemed to be playing out in the early 21st century when cloud computing began achieving traction in the marketplace with corporations and consumers. (The cloud is the metaphor that information technology professionals use to describe an environment where software, data and computing power reside in distant data centers and not on individual computers.)

Cloud-based productivity packages such as Google's Apps for Business and Zoho seized the first-mover ground as an alternative approach to productivity software and began chipping away at Microsoft's hegemony in the marketplace. They didn't draw much blood, but it was enough to wake up the folks in Redmond, Wash.

With Office 365, Microsoft has Google's Apps for Business' 3 million users in its sights as well as the entire cloud-based office productivity ecosystem.

This is not to say that Microsoft has abandoned the world of shrink-wrapped software packages for SMB users. Far from it. Microsoft products that reside on your computer or server, such as Office 2010, Office Web apps, Windows 7 and Windows Phone 7, will be an integral component of Redmond's offering for the foreseeable future.

But they're no longer the only game in town.  The cloud is clearly here in Redmond to stay.

The linchpin

Although Office 365 is the linchpin of Microsoft's cloud offering, the company  also offers cloud-based services like Azure, which provides a platform for developers to build, host and store applications in the cloud, and Intune, a cloud-based PC management and security platform.

Why the cloud? Ease of use, ease of maintenance, ease of upgrade and cost. Everyone is always on the same page and the latest platform.

"We provide a very extensible, powerful platform, both on premises and through the cloud," said Waldo.  "We're extending enterprise-grade functionality to the SMB market."

"On premises" is IT-speak for software that lives locally.

As full-featured as Microsoft's products can be, frequently dazzling users with a bewildering array of capabilities, they also profit from familiarity. They're what most people have been using throughout their careers or since their school days. That's a powerful pull and selling point, both for individuals and businesses.

The lure of the familiar

"A lot of times people expect to use at work what they use at home," Waldo said. "People aren't always making IT decisions. They're making tech decisions based on what they're familiar with."

Under the hood, there additional reasons why the totality of Microsoft's cloud offerings for IT-challenged SMBs make sense.

"With Office 365, Microsoft takes over the burden of IT overhead and security," Waldo said.

Though it once had a reputation for being aloof with customers (with a hint of "What's good for Microsoft must be good for its customers"), the company has learned to reach out to all its constituencies, even the smaller ones, to find out what they need to make their lives easier and better.  They've even gotten down into the weeds on Twitter and Facebook.

"People want a complete set of tools to get the job done," Betsy Frost Webb, general manager of Microsoft Online Services, told BusinessNewsDaily. "They want it to be familiar, easy to use and accessible."

• Microsoft Has Its Head in the Cloud
• Google Adapts Apps for Small Business Use
• There's Light at the End of the SMB IT Tunnel

Reach BusinessNewsDaily senior writer Ned Smith at nsmith@techmedianetwork.com. Follow him on Twitter @nedbsmith.