Cisco vs. Microsoft: Small Business Showdown

During Cisco's (CSCO) annual partner summit in Las Vegas this week, Cisco is announcing an aggressive push into small and midsize businesses. The initiative sets the stage for Cisco to both compete -- and collaborate -- more closely with Microsoft (MSFT).

Picture the following scenario: Microsoft's small business customers trying to upgrade their PCs and networks to use voice-over-IP applications. Now, flip the scenario: Cisco small business customers trying to make their PCs work with voice-over-IP software. Who will small businesses call for help: Cisco or Microsoft consultants? The answer could decide the balance of power in the small business market for the next decade.

The Cisco Smart Business Communications System [SBCS], set to ship in June, will include a range of small business products, including IP phone management technology, network switches, WiFi solutions and software that allows IT consultants to monitor and manage small business networks.

Meanwhile, Microsoft has announced its own small business IP telephony solutions, in partnership with several networking companies. Microsoft also works with Nortel to compete against Cisco in for large enterprise business.

Looking ahead, it's a safe bet that Cisco will partner with other software companies to surround and conquer -- or at least limit -- Microsoft's power in the small business sector.

Cisco insiders say the SBCS system will integrate with popular third-party applications, including customer relationship management (CRM) software from Salesforce.com. Next up, in my opinion, Cisco needs to work more closely with open source application developers like Sugar CRM, JasperSoft and Centric CRM.

If Cisco brings the open source crowd to the small business party, Microsoft could have a real headache on its hands.