Ballmer: Linux Changed Our Game

Ballmer, speaking Monday at Microsoft's Fusion 2002 partner conference in Los Angeles, saidin this new competitive landscape, the software giant relies even more heavily on the expertise, contacts and value-added-services of its business partners to compete effectively against the Linux threat.

"We have prided ourselves on always being the cheapest guy on the block--we were going to be higher volume and lower priced than anybody else out there, whether it was Novell, Lotus or anybody else," said Ballmer, during a keynote that closed the event. "One issue we have now, a unique competitor, is Linux. We haven't figured out how to be lower priced than Linux. For us as a company, we're going through a whole new world of thinking."

Instead of leading with price, the company has changed its go-to-market strategy to present a value proposition to customers and partners to explain why a solution from Microsoft delivers more capability at an appropriate price.

"We are actually having to learn how to say, 'We may have a high price on this one, but look at the additional value and how that value actually leads to a lower cost of ownership despite the fact that our price may be higher,'" he said.

Ballmer also spoke about the technology sector as a whole, noting that the past year has been one of the toughest in recent history. Still, he says he's optimistic.

"I do have a fundamental faith that the technology industry, our company, our partners, the people in our business, still have more of an opportunity to have a positive impact on the world than anybody else around," said Ballmer. "So despite the fact that it's been a tough year, I think about it exactly as that--a tough year, not the start of a cold winter. My optimism and enthusiasm about where we are going has been unabated."

Addressing his audience directly, Ballmer spoke about the challenges Microsoft has faced in the last year, both internally as well as in its partner relationships.

"Some of that change I argue will be net positive over the long run, and some of that change has certainly been troublesome over the course of the last 12 months," he said.

He mentioned the controversy over perceived competition from Microsoft Consulting Services, noting that it was more a result of poor communication than a direct effort to change strategy.

"Our strategy has never changed with what we are trying to do with consulting, but it sure looked that way in the early part of the year because we managed to get a disalignment between our incentives and our resources and our strategy in the marketplace," Ballmer said. "That caused our consultants to look sometimes less like your friend and more like your foe than we ever have intended it to."

He also addressed the licensing changes that the company put in place over the last year, calling them an important part of a long-term simplification strategy.

"I personally reviewed most of the key decisions that went into that, and I personally will take most of the blame, credit and responsibility that goes along with it," he said.

As a result of the issues, Ballmer said the company learned a few lessons about the best ways to introduce change to its partners, noting that in the past it may have been done that too quickly and without enough foresight.

Ballmer then spoke about efforts in the last year to redefine the company's overall mission statement, moving away from the notion of putting a PC on every desk and in every home to one of enabling people and businesses worldwide to realize their full potential. That comes in the way of new tools and technologies that allow people to extend productivity, capability, communication and creativity.

He said that despite concerns he has heard from many partners over the ongoing Department of Justice antitrust case, Microsoft has no plans to slow down efforts to innovate and expand into new areas where it believes it can create value for customers. Some of those areas include storage, management and security. he also outlined the next three technology waves for Microsoft technology: the current wave, driven by XML, Windows and .Net server solutions; the "Yukon" wave, which will be at least a year out and be driven by the next-generation database product; and the "Longhorn" wave, which will include integrated experience.

During his keynote, Ballmer also announced the availability by the middle of 2003 of Exchange Server "Titanium," which will include integrated wireless access, greater scalability and availability and contextual collaboration. Simultaneous to that release will be the arrival of Outlook 11, which will include XML and new features like meetings innovation, note-taking tools, personal information management and expanded e-mail.