A Small Business Battle: IBM vs. Microsoft

Last week IBM launched its System i Express, a low-cost, all-in-one IT hardware package for small businesses with five to 40 employees. It will allow entrepreneurs to purchase servers from IBM and run business applications on a per-user basis starting at $7,995 for the initial five users.

Most small businesses have traditionally opted for the inexpensive Microsoft Windows-based servers. IBM is hoping to change this by reducing their i Express costs. They also claim that their servers are less vulnerable to viruses and more reliable.

According to System i general manager, Mark Shearer: "This is probably the boldest move we've made in the small-business space in a decade."

The key to IBM's success, however, will not be in the hardware but in the software applications that will run on it. Few small business owners will call up asking for a System i server but they will want to run the latest manufacturing, financial, or medical applications and their software vendor will advise them on which server to purchase to run the applications.

Windows has a dominant presence and switching costs are high enough that most SMBs will not move over but IBM does present a compelling enough case to be considered as a serious alternative for new purchasing decisions. To that end IBM is hoping to triple the number of new customers in the first year of the new promotion.

Microsoft Improves Small Business Package

Microsoft is building a presence in the small business market. Windows and Office are, of course, standard tools for most entrepreneurs but with offerings like Office Small Business Accounting, Microsoft is targeted SME's and going after entrenched players like Quicken. Microsoft's new Office Live also helps small business owners establish free company websites and email accounts to help them build an online presence. They have also created a Small Business Specialist partnership program to connect with organizations that fill the needs of small businesses.

Microsoft defines small business as being under 50 employees and up to 25 personal computers and their upcoming release of Vista and Office 2007 will be an interesting one to watch. The consumer market is an obvious market for the products but small businesses could drive the growth of both products and Microsoft's future.

I'll be keeping my eyes on Microsoft to see how they target small business owners and penetrate the market. Vista and Office 2007 are scheduled for release next week.