Microsoft’s AI pitch to SMBs runs through its partners

When she’s not selling small and medium-sized businesses (SMBs) on Microsoft’s AI tools, Allison West Hughes might be testing them out at the construction business she co-owns with her husband.

As Microsoft’s corporate VP of global SMBs, firsthand experience like building work schedules for large projects can help her understand the needs of other customers using Copilot’s SMB tier.

These smaller companies are generally eager to adopt AI tools, and they do so about 10 percentage points faster than enterprises, West Hughes said, but they often lack the IT staff to manage these tools. A big part of Microsoft’s pitch to SMBs is its partner ecosystem, wherein managed service providers and systems integrators help SMBs handle tasks like building agents and securing data.

“Microsoft has a huge network of partners,” West Hughes said. “They specialize in different geographies. They specialize in different verticals. They specialize in different customer sizes. They have different models of operation, whether they’re systems integrators or managed service providers.”

Microsoft is one of several AI vendors vying for the SMB market at the moment, including both tech giants and frontier AI companies. Anthropic and OpenAI have both upped their investments in tools catering to this tier recently, and Meta rolled out its own enterprise platform geared to SMBs last week.

Microsoft offers a more established enterprise software suite than some of its rivals, as well as cloud services and a growing stable of in-house AI models outside of its loosened OpenAI partnership. Its small business-specific offerings include a price tier of Copilot for up to 300 licenses that’s designed specifically with SMBs in mind.

Shadow tools: Regardless of whether you as a small business owner decide to use AI, there’s a good chance that your employees are already using the tools in their work, West Hughes said. But SMBs don’t necessarily have the IT expertise needed to deal with the security issues that can arise from unauthorized use.

“The opportunity for SMB is to…understand why their employees are using those tools, what they’re trying to accomplish, and to make sure they do that with security and data compliance top of mind,” West Hughes said.

The SMB of the future: SMBs currently employ nearly half of private sector workers, but West Hughes said these companies will likely need fewer workers to see the same amount of growth in the future.

“Labor’s like 60% to 70% of costs for SMB, and so if you can think about them being able to grow their business without the labor cost being linear to that growth, that’s the unlock that AI and AI agents allow them to have,” West Hughes said. “That will allow them a lot more flexibility, the ability to transform easily, the ability to hire for different skills really easily, and so we’ve kind of packaged that up as our frontier transformation.”