Study: Small businesses wary of Microsoft

Many small and midsize companies harbor some level of "concern" about becoming "overly reliant" on software made by the Redmond, Wash., giant, a survey shows.
Written by Matt Hines, Contributor
Many small and midsize companies harbor some level of trepidation regarding how dependent they have become on Microsoft software, according to a survey.

A report Boston-based The Yankee Group released Wednesday shows that some 43 percent of small and midsize businesses are "concerned" about becoming "overly reliant" on Microsoft's products and services. The study focused on information technology needs at 600 companies with fewer than 500 employees.

In a statement e-mailed to CNET News.com late Wednesday, a Microsoft representative said that while company was not part of the study and didn't have access to Yankee's criteria and methodology, it found the reported results "surprising." The representative said Microsoft is committed to meeting the needs of small and midsize business customers, and that it would look to its partners to continue serving companies in the space.

Seventy-two percent of the surveyed companies said it is actively seeking to lessen the dominance of Microsoft's products in its operations by exploring alternative vendors.

"The reality is that (Microsoft) can only hit these...companies so many times with what are seen as exorbitant licensing fees before they start to look elsewhere," said Michael Lauricella, an analyst at Yankee Group. Small and midsize "companies are somewhat more willing to gamble than their larger counterparts, and (businesses) very well could head in a different direction, if they see a possibility to do so."

That news could be troubling for Microsoft, which has been beefing up its efforts in that business segment. Its customer relationship management (CRM) software, in particular, is aimed almost exclusively at the low-end sector. However, Lauricella believes that the software giant can improve its prospects for CRM and other products by increasing its dependence on partners.

"It will be very important for Microsoft to be smart about how it uses partners and channel companies, and in some ways, it may be better for them to be more of a behind-the-scenes player, to reduce this perception of dominance," he said. "This situation isn't something insurmountable for (Microsoft), but it will take some effort to calm these concerns."

Lauricella said some companies are wary of Microsoft because of the company's high-profile litigation with state and federal governments, the rise of the open-source movement and the software maker's own licensing policies. He said Microsoft could improve its prospects with small and midsize businesses by shifting its licensing strategy to offer serious discounts to smaller players--as it has done previously in the education space.

Overall, Yankee Group said, the IT spending outlook is improving in the small to midsize business market, with companies particularly expressing a serious interest in making investments in wireless networking products. But the research firm said other software makers will benefit the most from the fears currently associated with Microsoft.

"I think there are a number of companies that could use this as an opportunity to increase their own market share" in the industry, Lauricella said. "Among the most likely to do so could be software makers, including Corel, Intuit, NetSuite and Peachtree (Software)."

Other companies that are expected to compete increasingly with Microsoft in the small and midsize business space are SAP, Oracle, Siebel Systems and IBM, which also have voiced plans to move aggressively into the market.

In a separate study to be released sometime in February, Yankee Group found that small and midsize companies view hardware maker Dell as the IT vendor that provides the greatest value per dollar. Dell outpaced all other vendors by more than 20 percent in that study, according to Lauricella.

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