Replacing Your Windows 2003 Small Business Server


Replacing Your Windows 2003 Small Business Server

February 1, 2013
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Replacing Your Windows 2003 Small Business Server

This Year or Never

By Chris Filippi, February 2013

At the heart of your network lies your trusty Windows 2003 SBS (Small Business Server) box. For the last 5 to 8 years, it has received and stored your email, shared your documents, and made your information accessible remotely from the web, an iPad, or a smart phone. Like any other computer, it’s nearing the end of its service life – so you’re probably planning on getting a brand new server in a year or two that’ll be basically the same with some key modernizations and you’re set server-wise for another 7 years or so, right?

Unfortunately, this is no longer the case: After 15 years of a successful one-stop, all-inclusive server product, Microsoft will be discontinuing the retail sale of Windows Small Business Server on June 30th, 2013.   It will still be available preinstalled through OEMs (such as Dell) through December 31st, 2013.

The current (and final) release of Windows Small Business Server is version 2011, which includes Windows Server 2008 R2, Exchange Server 2010, and optionally SQL Server 2010. In its wake, Microsoft will be selling Windows Server 2012 Essentials (essentially a limited version of Windows Server 2012 Standard optimized for small business) and Office 365 (a subscription-based, hosted email solution).

Why? Cloud-based subscription services are really hot right now, and Microsoft has jumped in with both feet. Google’s rampant success with Google Docs has prompted Microsoft to go full-bore with Office 365 – an online monthly service that, at various price points, offers cloud-based email, calendaring, file sharing, and more. In essence, Microsoft wants charge monthly to do what Small Business Server does.

So what? What makes Small Business Server (SBS) so special? Simple: features, usability, and cost. In an effort to attract small business (i.e. less than 25 users) to use Microsoft software on their servers (in place of Novell, IBM, or Lotus), Microsoft released BackOffice Small Business Server 4.0 in October of 1997. It combined limited versions of enterprise-level software products previously priced far out of reach for small organizations. At its core were three key components: Windows Server for sharing files and printers, Microsoft Exchange for collaboration, hosting email, and storing personal information (e.g. calendar, tasks, etc.), and Microsoft SQL Server for hosting databases. Designed to run on modest hardware and be managed by non-IT personnel, it combined a highly affordable and flexible collection of software with simple installation and maintenance. Over the years and several iterations, Microsoft continued to provide slightly handicapped versions of its current enterprise products into SBS and effectively took over the small business server market. The product also continued to expand, ultimately allowing up to 75 users and even a second server with their Premium Editions of SBS. As a result, countless small companies now rely on SBS for hosting and sharing their Outlook data, storing and backing up their data, and running their line-of-business applications.

The value of an in-house Microsoft Exchange Server cannot be understated – it has been labeled THE killer application for most professional organizations. Aside from simply receiving and sending e-mail, Microsoft Exchange stores everything your users access in Microsoft Outlook and their mobile devices. Thus, when a user sends an email from his iPad, that email shows up in Sent Items in Outlook. When a user updates the phone number for a contact on their laptop, that contact is immediately updated on their smartphone. Furthermore, by centrally storing all that data, when a user gets a new computer everything they had in Outlook on their previous workstation is accessible without any import/export migration required. Switching from your BlackBerry to an iPhone? No problem – just punch in your user name and password on your new phone and your email, contacts, and calendar magically appear in a matter of minutes. Stolen laptop or workstation hard drive crash? All the email for the past umpteen years remains safely intact on the server. Accidental deletion? Compliance? Disaster recovery? Central storage also allows for central backup, so everyone’s mailbox can be safely stored to tape, external hard drive, or cloud storage.

SBS’s isn’t just a great deal for the end-user; it’s proved highly successful for small business focused IT firms. With the rampant growth of the small business server market, computer consulting companies now had a product that was easy to sell, install, and maintain. Technicians no longer needed extensive expertise in Microsoft Server products because Small Business Server effectively automated common tasks such as creating users, adding mailboxes, and performing backups. Additionally, small companies could enjoy enterprise-level features such as web access to their email, secure remote access to their network, and comprehensive document and data storage without weeks of training.

But those days will soon be over. Microsoft wants you to put everything you do in Outlook on their servers, not yours. By removing Microsoft Exchange and SQL Server from Small Business Server (in what is now called Windows Server 2012 Essentials), they have effectively eliminated the primary attraction of the product. And while customers still have the option of buying the full-fledged versions of Windows Server, Exchange, and SQL Server originally included with Small Business Server, they will face 2 to 3 times the costs in software licensing and need IT support that knows how to manually do all the things Small Business Server did automatically. Ultimately, succumbing to Microsoft’ new will and direction may seem like the path of least resistance, but per-user monthly costs can quickly add up and you may still need a SQL Server solution.

So, let’s take a hard look at your options:

  • Replace your server before the end of the year with the current (and final) version of Small Business Server (SBS 2011) preinstalled on a new machine.
  • Purchase Windows Small Business Server 2011 software and licenses before June 30th, 2013 and hold onto it until you’re ready for a new server.
  • Abandon Windows Small Business Server down the road and buy the Microsoft products and licenses you need separately for a new server.
  • Move your email to the cloud and replace your server when it’s time with a new server that just handles file and database sharing.

Option 1: Replace your server this year

Maybe you’re not ready to replace your trusty server just yet, but here are a few reasons why you should seriously consider it:

  • OEMs (such as Dell) provide Small Business Server 2011 preinstalled on new servers, which greatly reduces the labor cost of getting the server ready for deployment.
  • By purchasing the software with the hardware, you get OEM support for both while the server is in warranty.
  • Significant savings compared with the other alternatives, especially over the life of the server.

And here are the downsides:

  • High initial cost for server hardware and licenses.
  • Forfeiting any remaining usable life of your current server.
  • Not getting the latest, greatest version of Windows Server and Exchange.

Option 2: Buy the software to install later

If you’re not ready to purchase and deploy a new server this year, you can always purchase the software and licenses now to install on a future server later. When it’s time, you can buy a new server with no operating system pre-installed. This move has the advantages of:

  • Relatively small initial cost.
  • Maximum the life of your current server.

Unfortunately, there are a few key caveats:

  • Higher deployment cost as server software will need to be installed on a “bare” machine.
  • Potential lack of support from server manufacturer as software was purchased separately.
  • Not getting the latest, greatest version of Windows Server and Exchange.

Option 3: Forget SBS – get the real thing

From its inception, Small Business Server has had some key limitations to prevent large organizations from taking advantage of the small-business-friendly pricing, such as capping the maximum number of users, prohibiting child and trust domains, etc. By purchasing the “full blown” versions of the products included with SBS, many of these limitations disappear. Additionally, you can get the benefits of the latest versions of Microsoft Windows Server Standard (currently version 2012) and Microsoft Exchange Server (currently version 2013). To summarize:

  • Latest versions of Microsoft software.
  • OEM support for pre-installed operating system.
  • Elimination of SBS limitations (e.g. multiple domain controllers, Exchange archiving, etc.).

However, here’s what you’re giving up:

  • Substantially higher licensing costs (2 to 3 times higher).
  • Higher deployment costs, as server software components must be installed “from scratch.”
  • Less user-friendly management means increased maintenance cost.
  • Some SBS features (such as the Remote Web Workplace and POP3 email retrieval) are not included with standard Microsoft server products.

Option 4: Put the e-mail in the cloud

Microsoft Exchange (which receives and sends e-mail, centrally stores users’ Outlook data, provides remote access to Outlook data, and allows synchronization of Outlook data with mobile devices) is perhaps the most desirable component of Windows Small Business Server. Since purchasing it separately, backing it up, and maintaining can be expensive, why not get someone else to host it for you? While you’ll still need an in-house server to store files, run your line-of-business applications, etc., that server will cost a lot less than an SBS box. This may suit your business because:

  • Minimal initial cost in licensing and deployment.
  • No need to buy and maintain software to back up your Exchange data.
  • Improved remote access.
  • Easier management with less server maintenance.
  • Technical support for Exchange is typically included with your subscription.

There are some major hitches though:

  • Higher long-term costs, as you’ll be paying for the service indefinitely.
  • Less flexibility, as you’ll need to abide by your host’s rules (e.g. mailbox size).
  • Higher dependency on your internet connection, requiring more bandwidth and/or a secondary connection.
  • Initial Outlook synchronizations (such as when you get a new desktop) will take substantially longer.


Okay, now down to the real business decider: dollars and cents. Let’s take a small, 10-user SBS 2003 law office as an example and look strictly at software costs (namely operating system, licenses, subscriptions, and backup software):

Options 1 & 2 Option 3 Option 4
Initial Cost $1665 $3915 $896
5-year Cost $1665 $3915 $3296

[This model assumes: No Microsoft SQL Server; Server 2012 Standard for Option 2; Office 365 Hosted E-Mail and Server 2012 Essentials for Option 4]

Two things are clear: 1) While the hosted solution is initially attractive, the savings don’t pay out over the life of the server, and 2) the SBS licensing cost is a steal compared to purchasing the full versions of the latest Microsoft products.

Now, let’s take the above example from 10 users to 25:

Options 1 & 2 Option 3 Option 4
Initial Cost $2,639 $5,690 $896
5-year Cost $2,639 $5,690 $6,896

[This model assumes: No Microsoft SQL Server; Server 2012 Standard for Option 2; Office 365 Hosted E-Mail and Server 2012 Essentials for Option 4]

That’s right: not only does hosted solution get really expensive; the gap between Small Business Server and its full-size counterparts continues to grow, even though the core component and backup software costs remain constant.

Finally, let’s add Microsoft SQL Server to the mix. In the case of Small Business Server, this would require the SBS Premium add-on for options 1 and 2 (and slightly higher per-user licensing costs), while options 3 and 4 require Microsoft SQL Server 2012 purchased and licensed separately:

Options 1 & 2 Option 3 Option 4
Initial Cost $4,211 $12,471 $8,224
5-year Cost $4,211 $12,471 $14,224

[This model assumes: Server 2012 Standard for Option 2; Office 365 Hosted E-Mail and Server 2012 Essentials for Option 4]

So essentially, this firm would blow $8,000 in software licensing costs alone for the luxury of keeping their 8-year-old Windows 2003 Small Business Server for another two years. Furthermore, the lower startup cost for the hosted solution has vanished due to the initial purchase and licensing costs of SQL Server.

Okay, so what about the other factors like IT costs, maintenance, server hardware, etc.? In the case of Option 3, these are higher across the board, so let’s forgo that one. Instead, let’s look at a small 5 workstation, 5-user law firm that’s considering replacing their SBS 2003 server. To keep it really simple, let’s assume they only need Microsoft Exchange functionality, centralized back up, and simple file and printer sharing:

SBS 2011 Replacement 2012 Essentials + Office 365
Initial Server Cost $5,000 $4,000
Server Deployment $1,800 $1,200
Email Migration $0 $500
Total Initial Cost $6,800 $5,700

[This model assumes: Dell PowerEdge T420 with 3x2TB HDs and 16GB RAM vs. PowerEdge T320 with 3x2TB HDs and 8GB RAM, and labor @ $100 / hr]

Now, let’s assume typical server maintenance and services over a 5 year period:

SBS 2011 Replacement 2012 Essentials + Office 365
On Site Maintenance $3,000 $2,000
Remote Administration $3,000 $1,000
Hosting Subscription $0 $1,200
Internet Access $8,100 $12,600
Server SSL Certificates $360 $0
Backup Email $132 $0
Anti-Spam / Email Filtering $562 $0
Total 5-year Cost $15,154 $16,800

[This model assumes: a single cable modem connection for SBS and a cable + DSL connection for Office365]

Because the hosted option requires every interoffice email to be sent to the cloud and then pulled back down (such as scanning a document on your copier and emailing to yourself or forwarding that 50-page PDF to your partner), internet bandwidth becomes a major factor. Thus, this additional bandwidth costs 50% more per month and is the driving element in the above cost analysis, effectively killing the initial savings within 5 years.

SBS 2003 vs. SBS 2011

So other than being newer, what does SBS 2011 have over your existing SBS 2003 server you’ve been happily humming along with? Two big things: support and compatibility. Microsoft doesn’t release security updates and patches for its products indefinitely. In fact, mainstream support (i.e. addition of new features to work with new technologies) ended on July 13, 2010. Extended support (i.e. patches to security flaws) will end in March, 2015. That means that if a security issue is discovered after extended support ends, Microsoft will probably not fix it. Windows Server 2008 R2, upon which SBS 2011 is based, has mainstream support through March, 2015 and extended support through January, 2020.

Being able to connect all your workstations and mobile devices to your SBS 2003 server is likely one of the main reasons you’ve kept it around for so long. However, this connectivity will become more and more limited as your computer environment changes. For example, if buy a brand new Mac with Microsoft Office 2011 Home and Business (which includes Outlook), you will be unable synchronize your contacts and calendar, because Outlook 2011 doesn’t support Exchange Server 2003. These incompatibilities will only multiply as time marches on.

Here’s a quick summary of the key advantages of SBS 2011 over SBS 2003:

  • No 75GB Exchange database limit
  • Compatibility with Macintosh software (e.g. Mail, iCal, Outlook 2011, etc.)
  • Better smartphone support and management, including the ability to remote wipe lost devices
  • Vastly improved Outlook Web Access
  • Improved spam filtration and email transport customization
  • Remote Web Workplace with SharePoint, which lets you create a fully-customized internal intranet site, such as an office calendar, photo album, bulletin board, etc.
  • Faster search from Windows Vista, 7, and 8 computers
  • Stronger security for local and mobile users
  • Improved server management tools, making it easier for non-IT personnel to create new users, reset passwords, etc.
  • Backup to external hard drive now includes full server imaging, allowing restoration of the entire server after a hard drive crash or other catastrophe

Regrettably, there are two capabilities you’ll lose moving from SBS 2003 to 2011, namely:

  • Integrated tape support for backup is no longer included, so if you want to backup to tape you’ll need 3rd party software, such as Symantec’s Backup Exec
  • Fax services are no longer compatible with Windows XP – if you use your SBS 2003 server as a fax machine, computers with Windows XP will be unable to send faxes through the server or view the fax server’s inbox

Compatibility with software and hardware the same era as your SBS 2003 server is also a major downside. Since SBS 2011 is only available in a 64-bit version, older hardware (such as label printers, copiers, etc.) may not have available drivers, prompting additional hardware replacements and/or upgrades. As with any operating system upgrade, older software may no longer be compatible, especially older server applications (such as QuickBooks 2007 Database Server). It goes without saying you should check with your software vendors and IT support to ensure your line of business applications are compatible, and what’s involved with upgrading or replacing them if they’re not.

Other Considerations

SBS is by no means a server panacea: by limiting the installation to a single server (or two in the case of SBS Premium) larger organizations cannot implement Microsoft Exchange clustering to spread the workload over multiple machines. While SBS 2011 no longer has a constraining cap on the amount of data the Exchange Server can hold (SBS 2003 is limited to a maximum of 75GB), a company with 50 workstations can experience significant delays if too many people are hitting the server at once. Also, companies with sizable branch offices cannot implement satellite servers, forcing branch users to authenticate with the main server directly, resulting in performance hits and connectivity issues if their link to the main office breaks down. And a solitary server means a single point of failure – since the SBS server cannot be clustered for fault tolerance, if the server goes down it effectively takes the whole network with it.

However, keep in mind that SBS is intended for what Microsoft considers a Small Business: 25 users or less. Though SBS 2011 can support up to 75 users, the server hardware required to support upwards of 50 users on a single machine can easily prompt IT managers to opt for multiple, less expensive servers to distribute the burden to provide better performance and redundancy. Additionally, with virtualization technologies becoming commonplace, companies with high growth expectations should certainly consider keeping the hardware out of the equation and focus on scalability.

But for most small businesses with an existing SBS 2003 server, the factors above simply do not apply: while the workforce may certainly expand over the next 5 to 7 years, a company with 20 users is unlikely to balloon to 60 overnight. And if it did, the additional infrastructure required would likely quickly overshadow any previous technological investment. Furthermore, any small business with substantial server overhead probably outgrew their SBS 2003 box ages ago. Finally, if the hardware running your SBS 2003 server is as old as the operating system itself and you’re still getting along, it’s safe to assume a new SBS server will easily sustain your server needs for quite a while.


SBS is a licensing bargain. If you have an aging 2003 Small Business Server and are reliant on Microsoft Exchange, replace it this year or at least buy your licenses now so you’re ready when you’re existing server’s time has come. Putting your email in the cloud is very en vogue and for $4 per user, per month it can be very tempting. But even if a new SBS 2011 server lasts 75% as long as you’re existing SBS 2003 box, you’ll still be ahead of the game.

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