Microsoft is set to launch on November 8 its small-business solutions strategy, one element of which will be a new version of Microsoft Office designed expressly for the small-business manager/owner.

The new Office release is expected to include new payroll functionality, an updated version of Microsoft's business-contact-manager technology, and new Web services, according to sources close to the company.

Microsoft already sells a small-business version of Office, Office Small Business Edition 2003. That product bundles together Word, Excel, Outlook, PowerPoint, Publisher and the current release of business-contact manager.

According to some sources, this new version of Office is code-named "Magellan." According to other sources, "Magellan" is the name of the team inside Microsoft that is devising the new version of Office, as well as other small-business-specific solutions.

Microsoft did not respond to a request for comment before this story was published.

The Magellan Office release will be a further refinement of the existing Office SKU, according to sources. And it is key to Microsoft's strategy of growing its Office business by creating new Office releases tailored for specific audiences.

The Magellan release, unlike the current Office Small Business Edition product, will bundle in a small-business payroll product and/or payroll-processing service, sources said.

Microsoft rival Intuit launched in late October its 2005 version of its QuickBooks small-business line. As part of its QuickBooks 2005 rollout, Intuit launched a new, in-house payroll-processing service for accountants and small businesses called QuickBooks Enhanced Payroll Plus.

According to sources who asked not to be named, the Magellan effort evolved from the Microsoft Business Solutions small-business team, rather than the Microsoft Office team.

But it will be Microsoft's Small and Midmarket Solutions and Partners (SMS&P) unit, which is increasing its focus on small businesses, that will be the key driver behind Magellan, sources said.

In 2003, about 20 percent of Microsoft's 2003 revenues company-wide were attributable to sales to small-business customers, according to Steve Guggenheimer, Microsoft's vice president for worldwide small business strategy.
The company has a team of about 250 individuals worldwide who are exclusively focused on developing, marketing and selling small-business-specific solutions.

Guggenheimer told Microsoft Watch this summer that his team is spending a lot of time "focusing on understanding small businesses."

"The (small-business) owner/manager is different. It's a new category for us. These are the folks who are very focused on how to do more with less," Guggenheimer said.

Guggenheimer's team completed earlier this summer a survey of 2,500 small-business users. They gathered data on what technologies small businesses are using today, how they view their business, and their attitude towards technology in general. Microsoft's now taking these findings and applying them across product groups, especially the Windows (particularly the Small Business Server unit), Office and MSN teams.

These three teams, not so coincidentally, are working together on new hosted IT services for small businesses. Among the services Microsoft is expected to launch in this space are blogging, desktop-mangaement and security services.

One of the biggest take-aways from all this research: Small businesses want fewer solutions that work well together, rather than a bunch of brand-new products, according to Guggeneheimer.

Guggenheimer said Microsoft is thinking about ways to target these kinds of users, almost entirely via its reseller and integrator partner channel.

(This article includes content which first appeared in the July 22, 2004, issue of the Microsoft Watch newsletter. Want to see what other Microsoft news nuggets you might have missed? Sign up today for a free two-week trial subscription to Microsoft Watch.)