Microsoft’s Software Without Service, The end of SBSC and Why you should never partner with Microsoft if you wish to run a profitable business.

IT Business
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The title in itself is my thesis. It is something that has been on my mind for years, but was prompted by this post by David Overton. I am of course not giving away all the details and secrets, as thats what you go to WWPC for and what defines our business value, but you can get the general idea of how we have been running and intend to continue growing our business in the future.

Last month Microsoft’s chief Kevin Turner introduced the Software + Service initiative. Allow me to sum up the strategy for you: “We hope to be where Google is today, in about two years”. Thats all there is to it folks.

The inherent evil in this strategy comes from Microsoft’s almost decade-bred megalomanic plan first coined Hailstorm that has over the years advanced through MSN, Live.com, Windows Presentation Foundation, Silverlight and now S+S. Again, for the sense of simplicity, Microsoft wants licensing (read: control) over every technology implementation used by computers and humans. They not only want the royalties but also control and direction management. They just need some stupid enough to sell it, it is the only missing piece.

Understanding Microsoft PM’s

Microsoft Product Managers are the folks that “own” the code and “own” the direction the product takes. These are usually quite brilliant people, with lots of dreams and ideas, like almost all other developers and strategists. When you have a dream, it is hard to let go of it. It is hard to go a day without thinking about it. So you try – and you fail. And you try again, and you try again, and you try again. You keep on trying until someone up high recognizes the potential, throws money at it and decides you’re going to be the next star.

Take a look at this blog post that sums up how software goes from concept to delivery and how many obstacles Microsoft PMs face.

Understanding how Microsoft is not Evil

Many (Linux / Apple / Mozilla) zealots hate Microsoft and often assign unfair criticisms to it. One of the local Linux guys is often saying, incorrectly, that Microsft is a “felon” that has been “convicted” many times, all of which is false, but in the same breath talks about how much he loves Google and Gmail and company that claims it is up to no Evil.

In my career, I’ve met Microsoft employees of all levels, from CEO on down to the guy that packaged the software on the Windows 1.0 assembly line, and I have yet to meet an “evil” person. However, Microsoft is not a company of employees, it is a publicly traded corporation with shareholders, stakeholders and greedy investors demanding more. Microsoft is also a corporation that has had more fines assessed against it for patent violations that nobody seems to mention in their articles where they try to guess how Microsoft will try to exert control over the entire world with their new “bs” patent.

So Microsoft, in its nature, is not any more or less evil than Google, they are after the same goal. They want the entire world to use their platform, their software, their solutions. They want to be the defacto . . . something. 

Understanding how Microsoft is Evil

Microsoft is evil in its business practices. There are tons and tons of articles you can read in which you see Microsoft destroying entire business verticals through poor software, key acquisitions, dumping the product for free to kill off competition and then either letting it die or making it very commercial.

Microsoft is evil in seeding developers on their platform. If you start a software company, Microsoft wants to be your best friend. They will send you tshirts, free software, free phones, free development tools, free training, free anything. Just for the love of god don’t look at the other, open, solutions because Microsoft’s closed ones are more reliable and secure. Besides, they own 90% of the market, how can you go wrong selling to that large of a crowd?

You go wrong by spending a year or two bringing your product to the market, just to see Microsoft cherry pick the solution and make it the part of the next release. Or they buy a competitor of yours, bring in the feature in-house and then by marking it a part of the product try to reach out to all of your customers and tell them to do it. They also have the balls to come to you, tell you to stop your development, and instead try to make a business out of implementing your former competitors solution and be an “integrator solution shop” – I am not joking.

Understanding how Microsoft and Google will kill the Small Business Specialist

SPFs/OMBs/Generalists are going to die.

Quickly.

I have said this in public forums before and have gotten attacked from every angle for sharing my knowledge and experience with folks. But allow me to explain what I know – as a mere CEO of a company with the largest cloud deployment of SBS and all its friends (Exchange, SharePoint, etc)

Cloud is sweet. It absolutely is. There is no way to fight with the cloud and win. Why? The cloud is cheap, its a low monthly fee that is predictable. The cloud is scalable, as a simple variable increase in the cost of the monthly fee you pay (Exchange Standard hosting = $10, Exchange Enterprise hosting = $15; Try doing that with a standalone on-premise server and it will cost you thousands and thousands of dollars in reprovisioning and infrastructure upgrades). Cloud, for the most part is more reliable than the onsite deployment, I also base that on our internal knowledge of the sites we manage in our data centers and our customers networks. Cloud is always evolving, always migrating – there is no defered upgrade, there is no migration strategy, there is no competitive exploration, there is no security software option – its just a monthly fee and one day you’ll wake up and the new software with new features will be staring back at you.

If you are an SBSC, your chances of pulling a customer from a cloud based monthly fee to a local, single point of failure, prohibitively unjustifiable infrastructure investment with hard limits for a company that may have a growth or consolidation plan are slim to none. Basically, forget about being a small business specialist in the cloud based environment.

No really, they are going to kill us.

Microsoft (and Google) spend a fair amount of time trying to assure us that there will be opportunities, that we can keep on consulting, that we can make money…

Truth is, they are after a referal at which point they can take over or reassign it to the lowest paid employee in the company. Take a look at Windows Office Live Basic hosting which is free. If you are a web hoster, developer, web designer, etc, etc – you are soon to be out of a job. Unless you are stupid enough to think that a small business will pay you $100 or more an hour to sit there and fill out web forms, be prepared to just advise the client where to go for their web site and enjoy your walk back to your car while you can still afford it.

That is very cruel but I did it for a reason, I wanted you to feel the contrast between the worst case scenario and best case scenario Microsoft and Google are pitching.

They aren’t liars (any more so than the average marketing folks) but they are there to kill us. Microsoft’s longest running line when talking to partners has been:

We have a solution you need to be excited about and sell to your clients.

Sell, sell, sell, sell.

Microsoft doesn’t sell software, our partners do!

My expense reports tend to differ with that, but I digress. S+S means Microsoft will be selling to the customer. Directly. As in completely bypassing you. You will be sold on the opportunity of developing some really high end stuff that most small business shops will never afford, but Microsoft will try to hit up the customer directly and hook their SBS box into their solution. Look at Exchange, you’d almost think its impossible to have an Exchange deployment without the Exchange Hosted Services, which are really neither but again, I digress.

Microsoft is actively looking for direct contact and only looks at you as the sales person. I hope you get comfortable with that, because Google, which is working on the same strategy, has no place for you at all.

Where they will fail…

Microsoft can’t sell to the consumer.

Microsoft sells to techies. Over 30 years of selling software to technology people, enticing technology people to talk to the business people and consumers and try to sell them on the latest Microsoft innovation. But when you look really, really hard, you find a sea of Microsoft failures at best (Zune), and open cash hemmorages at worst (Xbox) with pretty much a graveyard of flashy marketing in the middle.

But Microsoft will fail.

What Microsoft, it’s sales people, its developers, its PMs and others do not understand is that it should NEVER be called SaaS. Pointy haired bosses seem to say its all about the name. And they are right.

It’s saaS, bitches. Service is king.

If you want to see the SaaS failures, take a look at this post written by my dear friend in her time of panic. There is no service in the cloud. There isn’t even a phone number. Your intelligence, your data, your business.. can be wiped out as effortlessly as it was setup and you are just expected to live with it.

Until Microsoft, and Google, realize that it is all about SERVICE, they will continue to pile up large losses, customer disinterest, consumer freeloading and marginal success at best. Why? Because although customers buy the software, they buy it for a benefit. They buy the service. In Microsoft terms, they buy the Assurance in Software Assurance, assurance that the next release will be free. And when that doesn’t live up to its promise, customers end up pissed off.

So Mr. Gates… Steve… Personally I like you, professionally I wish you the worst of luck and an assured failure because you simply do not get it. Service is a personal connection, it is not just service because we say it is because we crossed off a bullet point on the requirements checklist and hired an indianinabucket.com to support it.

Service is care. And you are setting out to destroy, financially, the very partners that could help you with it.

Written by a CEO of a profitable saaS company. And thats about all the advice you get for free.

Now, if you aren’t pissed off at this (be it Microsoft, Google, SBSC or Steve Ballmer… you haven’t learned a damn thing. Read it again).

15 Responses to Microsoft’s Software Without Service, The end of SBSC and Why you should never partner with Microsoft if you wish to run a profitable business.

  1. vlad says:

    By the way, I am aware that I didn’t say why you should never partner with Microsoft if you wish to run a profitable business but about 3/4 of the way through it I figured that perhaps that gem of information and reasoning may not be something I’m willing to share with the global audience for free.

    -Vlad

  2. Susan says:

    Well it looks like it’s an R2 Friday without being due to R2.

    Here’s the thing Vlad. There’s a fundamental thing that you and Microsoft are forgetting.

    I have to trust the cloud. Even my customers don’t trust the cloud.

    I have one customer on Quickbooks online. One. Now maybe this is due to being in the backwoods of technology, while people don’t mind some things in the cloud (hosted email and what not) the idea that I will choose everything hosted is absurd. There are certain things that it will be a long time before the comfort of hosted “fill in the blank” will be there.

    My favorite “give me a break” moment was the guy who suggested that they outsource their entire company address book to Facebook. Yeah.. right.

    I look at the fact that even in the USA there’s not ubiquitous high speed access.

    The sky isn’t falling. It’s just changing is all.

    We went from a service bureau keeping our tax returns hostage one year and we’re not giving that control back.

    And where exactly is google? It has a search engine and stores emails. We tried the google spreadsheet as a lark and then web back to Excel 2000 and Lotus 123.

    But put everything in the cloud? Sorry. Don’t trust it. And I’m not alone.

    Some apps will, and quite frankly should. But there are some things that won’t.

  3. vlad says:

    Assume you didn’t know any better, like pretty much every new business, not to mention that the new companies will be started by the kids like me that grew up on the cloud-based and p2p services, not old bitter geezers walking around trying to print out and hold on to a hardcopy of everything.

    The sky isn’t falling, but there are inherent dangers with partnering with Microsoft on a solution that is designed to eliminate what SBSC’s build their business on – infrastructure deployment and maintenance.

    -Vlad

  4. vlad says:

    Lot’s of email generated on this one. Listen, there are a lot of great Microsoft people out there and we use the products because they are the best…. but if the overall corporate direction (not to mention past) is to kill off every bit of competition that isn’t in a direct sales channel of Microsoft Marketing… well, do you folks really think we’re that stupid? Here is a response to one Microsoft staffers email:

    — Anonymous Blue Badge: —
    Do you really think that while working with Microsoft everything we do will destroy everyone else? I think this is just a progression of options, not the death of the SBSC.

    — Vlad: —

    How exactly is this a surprise XXX? Your employer has a long standing tradition of not standing one bit of competition and whenever even the smallest bit of market dominance is established by another company you guys come out with something to destroy it – almost always in a dirty way.

    But look at my business of web hosting, email security, hosted applications, scalable infrastructure design.

    You’ve effectively killed an entire product line by offering both the hosting and the domain for free.
    You’ve bought my direct competitor and integrated them into the Exchange 2007 setup.
    You’ve for years made it difficult for me to integrate hosted CRM in a cost effective environment, now you offer it at almost below cost ($44 from Microsoft, $25 CRM CAL, $3.16 Windows CAL, $8 SQL CAL) hosted from your data centers.

    Now you’re trying to tell SBSCs that there is a profitable business to be built by selling Office Live, the reincarnation of bCentral which if I recall correctly had the pilot offering of small business support packages for a low monthly fee, in fact a direct competition to the core SBSC offering.

    And that is just what targets me, the smallest fish in the sea. Not to mention the “competitive” offerings and behavior against larger players in Netscape, Linux, Apple, etc.

    Again, how is this a surprise? I am not arguing that Microsoft has the best software out there which is why we push it, but business practices are a whole different thing.

    -Vlad

  5. Pingback: SBSC is dead... long live SBSC... at BMS Blog: SBS Consulting in the UK

  6. RandyS says:

    I think that Susan’s comments reflect widespread conventional wisdom. And this ‘attitude’ from the business community will continue virtually unabated until the business owners sell out or die off.

    I am a 50-something myself but I realize that the next 10 years are going to increasingly belong to the generation that isn’t afraid of the cloud… in fact, they will be surprised at those that don’t use the cloud. We (the old farts) trust the telephone cloud, we trust the fax cloud, we trust the cellular cloud, we trust the FedEx cloud, we trust the cable TV and satellite cloud, we trust the health care cloud (should I go on?). Like global warming, these clouds did not exist a mere 20-40 years ago. Look how business has changed in that time. Can you imagine ANY current business that doesn’t embrace all of the stated clouds to get through a typical day?

    Looking at VoIP and other technologies that rely on a functioning Internet, I ask myself, “Will my SMB clients allow me to replace traditional POTS phones with VoIP, will they allow me to chuck their server in favor of a SaaS solution in the cloud?” Right now, I think that the answer is NO, but look who my client is… PEOPLE LIKE ME. We have not yet begun to see the 20-somethings start business that need our support. Hmmmm. Maybe the 20-somethings have the businesses (Vlad) but they don’t actually NEED our support! Maybe they are getting enough support from the cloud and their simple hookups to the Internet.

    How many young entrepreneurs are starting ‘infrastructure’ businesses? Businesses like machine shops, law firms, medical offices, trucking businesses, etc.? My guess is, not many. These are typically the businesses that need our SBSC help. At some point, these ‘youngsters’ are going to take over or start some of these businesses and I believe that they will demand that the business practices for the companies that they are now running will need to match their way of life, not their grandfather’s.

    Sure, the cloud can fail (like 365 Main’s recent meltdown), but they get them back up in a hurry. Your ISP can take a hit (like ours did last weekend in a fierce thunderstorm), but it was back up in a day. Everything breaks.

    For those of us who don’t want to become ASPs and enjoy working in the trenches, I think the future is for us to remain good at implementation and support, but we have to also be a trusted guide, knowing what is going on, what is coming and how it can best be put to use by forward looking clients.

    –Randy

  7. wmiwmi says:

    I agree that Google and Microsoft are going to try to eat our lunch. I just don’t think it makes sense for them from a margin standpoint, unless they can completely eliminate the need to provide service. Because service – as a business – kinda sucks.

    Hiring people to do stuff that your cloud doesn’t do, is just too labor intensive, and low margin to be interesting for software or search company with such ridiculous margins. How many business owners… how many of us… want to call Microsoft PSS when you need help doing “X”?

    I’m not saying that Microsoft or Google aren’t going to try and eat our lunch, I’m just saying that I think it will be mess, that it will disrupt our businesses, and ultimately be a failure… unless they find a way to eliminate service and support as a need completely.

    Check out my post touching on this in a bit more depth…

    http://addicted-to-it.blogspot.com/2007/08/software-without-service-indeed.html

  8. Susan says:

    Should SBSC’s get out of the infrastructure maintenance business?

    Right now? No. Long term? I’d say bring it on. I recently was building a beta and it kept falling over and I wanted so badly to just get the dang box built so I could get on with the evaluation. Installing cds isn’t a job, it’s a chore.

    I have seen the marketplace move from sneakernet to now. Things change.

    But there will still be a need for offline, off the cloud.

    Regulations and industries will keep things off the cloud as well.

    And last but not least… one has to setup the connectivity to the cloud and then enhance the apps up there. Office live is not for the faint at heart.

    As was said earlier… it will need a generational change in management before you’ll see enough folks trusting the cloud.

    SBSC isn’t dead, just changing. And that’s a good thing.

  9. Pingback: Paulie’s Technical Memoirs » Blog Archive » Is this the end of SBSC?

  10. RandyS says:

    I agree with Susan, it isn’t here yet, but it is coming fast. And change can be quite a barrier to entry into our market for some and an impetus for others.

    One thing that impresses me about the cloud is the ‘time to market’ fuse is so short. Look how quickly Vlad put a hook to Fonality/Asterisk into SM. And this is integration from the cloud into disparate hardware/software on-site. He did it in a day or two and immediately rolled it out. Nothing broke, it didn’t fail because I might have been using Trend AV, etc. That is responsiveness.

    I have been dying to get the next generation of SBS or Centro. I have several clients that have exceeded the 75 user limit, but like the features of SBS. Exchange 2007 has been out for close to a year and we are going to have to wait at least another year for SBS 2008. What about all of the opportunities for convergence with voice, etc. in that time frame? Lost business? Work-arounds?

    I see the ‘network plumber’ skills becoming less and less important (and paying less as well) and the skills needed to do mashups and integration as well as to manage the converging space becoming the new high-value ticket. But where does one go to get these skills? Right now it seems like the people doing these things have a natural affinity to it and the developer training that they have synergizes with their innate abilities.

    Where do the rest of go to pick up these skills to allow us to be on the leading edge of they hype cycle?

  11. ababinchak says:

    I agree with everything that you’re saying, Vlad. I think that the future does look bleak for SBSC. We’re not specialists in a particular application or LOB app. We’re not developers. We’re not even project oriented. That’s not how we make our money. For us its all about Service. SAAS will be the death of the IT generalist. It remains to be seen if a company like Microsoft can do without its base. Without the little guy I really thing that MS will loose the enterprise business it so covets.

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