Microsoft Launches 'Dream Server'

[Editor's note: This is a live blogged document, starting around 11:00 a.m. EST until noon.]

The venue was surprising. Microsoft launched its new server products virtually, via Webcast, which is unusual for the company. Typically, Microsoft launches products of this caliber during a live in-person event. The launch was live, but via Webcast.

GOT A TIP OR RUMOR?

During the launch event, Steven VanRoekel, senior director of Windows Server Solutions, said that customers and partners asked to "attend in a way that is cost effective." I spoke to Steven last week about today's launch. This is clearly an experiment for Microsoft and one deliberately timed because of ailing world economies.

If successful, I expect Microsoft to do more events like this. From a marketing perspective, the Webcast puts Microsoft in nearly total control of the messaging. The company presents executives, partners and customers in a venue free from pesky questions from bloggers or journalists. I don't like it, but from a messaging perspective, it's a sensible approach.

Something else: The virtual launch—designed to save customers and partners travel and related costs—helps put emphasis on cost savings, which is one of the messages Microsoft wants to communicate about the new server products. But cost savings is relative to the comparison. Compared to its predecessor, SBS 2008 costs more (Jump to the last subhead for fuller explanation).

Financing Is Available
Consistent with Microsoft's value messaging, the company also revealed financing options, which I expect will appeal to both customers and channel partners during these tough economic times—particularly with credit otherwise difficult to obtain.

Michael Risse, vice president of the Worldwide Small and Midmarket Business group, said that "It's total solution financing." That means hardware, software and even services. There is "no money required up front." The fees are paid over time, offering SMBs a "predictive cost structure" (e.g., monthly payments). Microsoft is initially making financing available in 15 countries.

In Europe, particularly, Microsoft also will make available software rentals. Subscription software may be available in other geographies, but only Michael identified Europe. He didn't say: Because of taxes and other financial differences from the U.S. market, subscription licensing is more popular on the Continent.

I haven't reviewed all the terms, and Microsoft probably won't make many available. Already Microsoft has indicated there would be a 24-to-60 month licensing commitment. I expect that financing would also require Software Assurance. Microsoft could argue that SA better protects its financing commitment to the customer by providing upgrades and support services. Maybe, but for some customers they would take on additional costs. For businesses that don't plan on upgrading within three-and-half years, Software Assurance is a wasted expense for upgrade protection.

Partners Are Critical to Success
During a brief taped introduction, Microsoft CEO Steve Ballmer said that "this year," Microsoft will spend "$6.5 billion on solutions, services and support for small and medium business." He referred to Microsoft's fiscal year, which ends on June 30.

Microsoft has about 20,000 small business specialists and puts the worldwide number of small-and-medium businesses at 100 million. Based on U.S. Census data, more than one-quarter of those business are located in the United States.

Steve "Gug" Guggenheimer, corporate vice president for the Original Equipment Manufacturer division, described partners as a "critical part" of the Essential Server Solutions launch. Many customers need "local partners" he said. "It's really the partners that bring these technologies to life." What Microsoft SMB partners look for, Gug said:

• Easy configuration
• Customization
• Value-added services

Steven VanRoekel identified some of the benefits Microsoft believes Essential Business Server 2008 will deliver customers, such as "preconfigured to best practices." He also touted easier management and server consolidation. The typical midsize business has seven to nine servers, which EBS consolidates to three or four.

Customers Will Pay More
SBS 2008 is an upgrade to a previous product, while EBS 2008 is a new product line for midsize businesses. Both product lines are generally available worldwide, starting today. Microsoft uses "Dream Server" as reference to Essential Server Solutions, of which both products are part.

Microsoft announced pricing for both products in May. I wasn't told of any changes. For Small Business Server, Microsoft increased pricing, which bucks against the company's cost-savings messaging.

Microsoft raised SBS 2008 "Standard" edition pricing to $1,089 from its v2003 $599 list price; both versions come with five CALs. That's an official base price increase of $490. However, Microsoft lowered the CAL (client-access license) price from $90 to $77. But since Microsoft raised the CAL price from $60 to $90 between v2003 and its predecessor, customers would still pay $17 more per CAL in 2008 than SBS 2000. For a business with 10 employees, SBS 2003 Standard would cost about $40 less than SBS 2008 Standard. Additionally, Microsoft upped SBS 2008 "Premium" base price from $1,499 to $1,899 and price-per-CAL from $90 to $189, Yes, that's right! Premium CALs cost $99 each more than the previous version.

The launch may have been virtual to save money, but there's no real savings I see in pricing, particularly for smaller businesses, compared to SBS 2000 or SBS 2003.

Pricing for Standard and Premium editions of Windows Essential Business Server 2008: respectively, $5,472 plus $81 per CAL and $7,163 plus $175 per CAL. Since the product is new, there is no price comparison other than Mcrosoft ala carte server software. Simply said: Operations with fewer than 300 seats can count on savings.

On Monday, IBM unexpectedly preempted Microsoft with the launch of its Foundations appliance, which is Linux based. I predict that the real cost savings to SMBs will come from increased competition rather than either company's server software bundles.

[Please send your tips or rumors to watchtips at live.com].