Microsoft has failed to win the hearts of a significant portion of small and midsize businesses that remain wary of the software maker despite its huge push to sell them run-the-business applications, a market-research firm says.
A Web-based survey late last year of 600 small and midsize businesses in the United States found that 43% of key decision-makers of IT purchases are concerned about becoming overly reliant on Microsoft's products and services, the Yankee Group said Wednesday.
Of that group, 72% said they were actively seeking other vendors to diversify their product portfolios. Yankee Group 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 Group analyst Helen Chan said.
The constant battering that Microsoft's Windows operating system and its other software gets from virus writers has cost small and midsize companies 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 midsize companies.
Small and midsize companies "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."
Small and midsize businesses 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 small and midsize business market, believed to include 45 million businesses worldwide, as a major growth area. The company estimates it can get $10 billion in revenue from this market by 2010.
Last year, high-tech researcher Gartner estimated that small and midsize companies 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 smaller businesses. They were the largest acquisitions in Microsoft history.
However, Microsoft can easily lose sales to competing vendors that have also released products for small and midsize companies, Chan said. On the database side, Oracle and IBM are selling products comparable in price to Microsoft SQL Server. For business software, small and midsize companies can turn to competitors SAP, Intuit, Siebel Systems, Best Software, Salesforce.com, 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.