Ballmer: Microsoft, Partners Ready To Leave Tough Year Behind Them

Microsoft

Summing up the economic slowdown, looming antitrust penalties, emergence of low-cost competitors like Linux and skirmishes with its partner base as the key pains in a "tough year" for Microsoft, a trim, energetic Microsoft CEO Steve Ballmer in his finale keynote at Fusion 2002 nevertheless urged partners to seize big .Net opportunities.

The high-tech sector--as well as Microsoft and its partners--are on the cusp of an explosion of opportunities because of the emergence of open standards such as XML, not a dead end as pundits predict, Ballmer said.

"This has been a tough year in a variety of ways; the economic climate is truly unique, almost unexplainable," said Ballmer. "I have a fundamental faith that the technology industry--our company--still has more opportunity to have more impact on the world than ever before. It's been a tough year ... not the start of a cold winter, one in which we can add less value .. it's just part of a bad year."

Up front, Ballmer acknowledged that many of the company's fumbles and decisions over the past year have angered partners and customers and he is hard at work on solving some of them. He pointed to Microsoft's new partner- and customer-centric focus and hinted about the possibility of making changes to Licensing 6.0, which he acknowledged angered both constituents.

Calling the 800,00 batch of partners the "finest group of allies" Microsoft has ever had, Ballmer said he is not only listening but also making the necessary decisions to evolve Microsoft into an enterprise company.

"It's been a tough year in other ways, [such as the level of change we have experienced as a company. Some of the change will be net positive in the long run, and some has been troublesome over the last 12 months," said Ballmer, acknowledging that the misalignment of sales and consulting groups with channel partners led many to wonder if Microsoft was more "foe" than "friend. "It didn't look that way .. but our strategy never changed."

Microsoft will invest heavily to make that point this year--with 400 more people, $26 million in partner training, $182 million in marketing and a $100 million increase in support services for partners, Ballmer said, alluding to major changes and redefinition of the channel infrastructure in the Web era. "This is an area where we have under-invested despite our best intentions," Ballmer said. "We're dialed into improving our ability to go to market with you. We need an expanding group of partners, and you will be as diverse as possible.

"The number of new things we're going to try to do will increase, not decrease, especially in an environment with the antitrust litigation," Ballmer said, noting that partners have asked him if the antitrust case will make the company stop integrating products and retrench. "We're not," he said. We're pushing forward."

While Microsoft intends to move its Windows customers to .NET, much the way it moved its DOS customers to Windows, Microsoft has lost control of the platform to open standards in the Internet era, Ballmer conceded.

"The entire IT industry made a decision in the last several years around the replatforming around XML," the CEO said. 'When we look back six or seven years from now, things will look very different."

Ballmer told partners that Microsoft will remain undeterred in its mission to make .Net the next major platform for the Internet services era and neither the competition nor the government will stop the software giant.

XML, he said, is the "core plumbing" that will connect different applications, business servers and systems. "There has to be a standards-based architecture," said Ballmer, noting XML will enable any accounting system to talk to Office in the future. "One of the biggest issues in the enterprise is how to get Microsoft [server to interoperate [with other systems. XML is like a lightning bolt from above on this.

"I don't care if you are a small, medium or large company, XML will change the way your IT infrastructure works," Ballmer said before about 2,000 partners who attended Fusion this year. "It's OK [for partners to wait ... but everything Microsoft does will be XML-based."

The unifying capabilities of XML will revolutionize computer use, Ballmer said, joking that the WorldCom-like fiasco won't likely happen in a world in which the Securities and Exchange Commission had access to the telecommunication giant's financial data in XML format, in which it could download the data into an XML version of Office and quickly analyze it.

He noted the company has a new charter to be more accountable for its actions and "has a new set of obligations" as part of its proposed consent decree with the government. However, Microsoft will continue integrating new features in Windows and integrating its products tightly together in the future--and those are key considerations for the company's partners, he noted. "We'll try to put more things in our products and push the frontiers where you can all add value,' he said.

To that end, Ballmer and company demonstrated at the show Monday tight integration between the forthcoming Office 11 application suite and the Titanium version of Exchange server, which are both due to ship in mid-2003.

Ballmer cited Web services, storage, security and management as key opportunities for partners going forward--as well as new products for both enterprise-class and SMB partners, including Office 11 and Titanium. "The SMB is still not served well by IT," Ballmer said, noting that solution providers are Microsoft's sales force to this sector of customers.

Further out, he point to a Yukon wave of products in late 2003 and a Longhorn wave of a fully native XML line of client, server, database, tools and Office products in 2004. The XML store of Yukon, for example, will serve both database and Windows file management capabilities in the future.

Ballmer listed the current roster of competitors as Sun Microsystems, Oracle and IBM but singled out Linux as a big problem--and urged partners to help Microsoft with it.

The CEO noted that he is "riveted" by the low-cost proposition of Linux and is urging his employees and partners to focus on product value to redefine Microsoft's identity as the low-cost leader. "This is a new world in which we don't always have the lowest priced product," said the CEO. "We have to push ourselves to be better. We want to win business vs. these guys and we need your help upselling against these guys," Ballmer said. "We're competing with free software. ... This capitalist thing is working very well at making us responsive."