Microsoft is Hibernating Its SMB Efforts Because of COVID-19

Posted on April 14, 2020 by Paul Thurrott in Microsoft, Microsoft 365 with 8 Comments

With millions of small businesses not expected to survive COVID-19, Microsoft is pivoting the Microsoft 365 resources it normally devotes to small businesses to more crucial concerns.

This change may seem somewhat ruthless at first blush. Microsoft, after all, has cultivated a positive and responsible image during the crisis. But it’s important to put this in perspective, understand that the change is temporary, and that it will allow Microsoft to better use its resources where they are most sorely needed.

“Our SMB-specific efforts need to be hibernated due to market dynamics,” an internal Microsoft memo viewed by Thurrott.com reads. “We will pivot our SMB engineering resources to address time-critical COVID-19 challenges for both SMB and verticals, while hibernating projects focused on new SMB customer value. This will also free the team up to focus on growth opportunities for the broader Microsoft 365 business, with enterprises that will not be as negatively impacted by the anticipated downturn in the economy.”

According to the data provided by the memo, Microsoft expects up to 25 percent of its SMB customers to not survive the pandemic, while those that will survive will experience negative year-over-year growth. This outlook is corroborated by a new survey that claims that 26 percent of small businesses in the United States will close within 1-2 months. In total, over 7.5 million small businesses could shut down permanently because of COVID-19 if the pandemic continues. And over 90 percent of the businesses surveyed are typical small businesses, with fewer than 20 employees.

To date, Microsoft has marketed Microsoft 365 to SMBs largely by creating new value, that is, by adding new features like Microsoft Teams that make its existing offers even more enticing. That strategy has seen some success in the past few years. But with COVID-19 ravaging this part of the market, Microsoft is understandably shifting its resources to address the changes by targeting industry verticals during the crisis.

What this means is that work has halted on new SMB-focused Microsoft 365 features and functionality. This was apparently quite disappointing to some in the organization, especially those who were working on solutions that were nearing completion. But the hope is that this work can pick up again once the crisis passes; that explains Microsoft’s use of the term “hibernate.”

And at least one pending improvement—a simplified setup and onboarding experience for SMBs—will still come to market soon, because it was very recently completed and provides improved remote work capabilities. It also includes an improved initial set up wizard, updated first-run experiences, and in-product nudges promoting new help content, the memo explains. Beyond that, however, Microsoft will focus on new offers for SMBs that lower the cost of adopting Microsoft 365 and enable remote work, plus “relief” for existing customers to decrease churn.

Also, there is a job security element to this shift as well, since those who were working on SMB solutions no longer need to devote their time and effort on a market that is suffering major losses and isn’t particularly interested in new Microsoft features at this time. Clearly, there are other sectors, especially healthcare, that require as much attention as possible in the short-term. So from an internal perspective, there is still more work to be done than there are resources to do it.

According to the memo, Microsoft will take the next month to “complete the critical COVID-19 response work, dedicate some resources to help on time-critical efforts for telehealth, wrap up projects to ensure they are put into either a healthy sustain or hibernate mode, and go through rigorous planning to identify the highest impact work that aligns to a newly defined charter,” a charter that will take everything that the organization learned about SMBs and apply it to industry verticals.

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