Microsoft Is a Sleeping Giant in Local — But Its Window May Be Closing

Share this:


What’s the most important dataset for a small business? More often than not, it’s a customer list. A batch of new relationship management systems have popped to make sense of customer data for small merchants in recent years, but the technology with the biggest market share has been around for decades.

A new study from Alignable, a social network for small businesses, suggests that these new CRM systems remain a small, but growing, part of the equation. But, the majority of small businesses continue manage their customer lists through spreadsheets, leading us to wonder whether Microsoft may have an opportunity to turn Excel’s dominance into a cloud-software powerhouse for small businesses.

The survey, which polled over 600 business owners, found that 34% of business owners kept their customer lists in a spreadsheet or document on their computer compared to 30% that said they used a CRM. The email marketing industry also has a stake here, with 17% of merchants saying they used an email application such as Constant Contact or MailChimp to manage their customer lists.

Screen Shot 2015-04-14 at 4.06.06 PM

From a device perspective, Microsoft has held onto a dominant position among small businesses for nearly two decades. In addition to widespread back-office use, the overwhelming amount of point-of-sale terminals traditionally run on Windows machines. Even after the company cut off support for Windows XP, the version remained used by a sizable minority of business owners.

However, Microsoft may not enjoy that immovable position in the market for much longer. The growth of cloud business applications, particularly in front office point-of-sale systems, has opened the door new devices — namely, the iPad – to enter the market. And Apple, in partnership with IBM, is doubling down on enterprise software as a way to stimulate slowing iPad sales.

As a data management tool, spreadsheets have survived in large part because the applications for the dataset remained relatively static. Merchants used spreadsheets to manage fairly straight forward customer contact information — name, address, email — and so the database did not need to be hooked in directly to the merchants other systems.

However, that’s changing. The ability for cloud software companies to more easily network products has led to a deep convergence within the small business technology industry as vendors look to bring point-of-sale, email marketing and back-office management into a single suite built off of a single database. That means that the small business data management category, long-dominated by Microsoft, is now facing external changes — the convergence with other products — that could change the customer calculous if Microsoft is too slow to adapt

The cloud also introduces a degree of mobility that was never before possible — and that’s bad news for the spreadsheet. The spreadsheet was built for desktop computing, and increased usage of mobile devices among small business owners will likely accelerate the shift to new forms of software. That means Microsoft’s foothold in the small business market could continue to shrink.

What should Microsoft do? I see two options. The first is to create its own application ecosystem through a string of acquisitions. The company launched its own mobile point-of-sale product earlier this year, but the company faces a hugely competitive market and shrinking market share. I also believe that as the top new point of sale systems scale their businesses, a middle tier of venture-funded small business software startups will be in need of an exit.

Second, it could build an integrated data management system for small businesses that operated across the application stack (point-of-sale, back-office and marketing.) Excel always thrived because of its interoperability, and the company has the clout to cost-effectively integrate with thousands of application providers. But it needs that foundational product — right now, Excel — to position itself at the center at an extremely competitive ecosystem of software companies going after small businesses.

Steven Jacobs is Street Fight’s deputy editor.