Microsoft’s Small Business Server (SBS) has a new little brother. It’s called Windows Server Foundation, and it targets small businesses with up to 15 users. Dell, Hewlett-Packard and IBM have already vowed to support the operating system. Here’s why Microsoft launched Windows Server Foundation, and here’s where it may fit into a VAR’s business strategy.

Simply put, Windows Server Foundation is a smart, pro-active move by Microsoft to mitigate potential competitive threats from open source and Linux small business servers.

Does the product actually work? The VAR Guy will leave that to channel partners to decide. But Microsoft does have a good history with small business products.

SBS remains the dominant server brand and application platform in the small business IT channel. But over time, low-cost Linux server appliances — coupled with falling hardware prices — could undercut SBS in some markets.

As one Microsoft employee told blogger Mary Jo Foley: “If you have a $700 server, you can’t have the OS be $300 worth of that.” Well said.

New Product, Old Market

Enter Windows Server Foundation. It is:

Sounds interesting. And Windows Server 2008 Foundation will be sold preinstalled on servers from such companies as Dell Inc., Hewlett-Packard Co. and IBM Corp.

The VAR Guy is hardly surprised. Say what you want about the growing open source movement. But in small business, Microsoft remains a safe bet for the IT channel and server makers alike.

Still, the biggest threat to Windows Server Foundation may not be Linux. Instead, it’s likely SaaS (software as a service) options for email, database, CRM and other applications.

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