No-Holds-Barred Ballmer

CRN: There's been a long, industrywide discussion about managed services. You have the OneCare security service you've announced, which is supposed to be at the consumer level. But small businesses really seem to be served by the offering, too. What's the strategy long term? Will Microsoft be in managed services?

BALLMER: I'll tell you what I do know. Let me draw a picture: The new view of the marketplace. Forget small, medium, large. Too confusing. Let me make it even simpler. You have four kinds of businesses: very large businesses, and--I will define these in a different kind of way--midsize businesses, small and tiny. These aren't official Microsoft words, just a concept. Let's say tiny is a company that has no servers. It has a different IT environment. And think of a small business, just for kicks, as one with just one server. And a midsize company has a few servers and a few IT guys--maybe up to 10, and it could be 11. They might have someone who thinks of himself as IT. And large is everything else.

What you might ask is what each of these constituencies might want. The tiny business is a lot like a consumer. A family has four or five members. Maybe they all want one [Web] domain, and they need a common security contact. A family is a lot like a tiny business. Whatever we say is good for consumers is probably just as good for a tiny business. That's just my opinion. Now people might decide to morph from tiny to small or small to tiny. You might have people who don't have servers [decide to] put in servers for a variety of reasons. It doesn't mean the business size has changed, but they have gone from one IT characteristic to another. And you might find people who have a server today decide they don't want to have a server.

A midsize company clearly can take a bit more complexity, but not a lot of complexity. Say they have five, six, eight IT guys. You can't afford to have material experts and 28 different technical topics. You need something that's relatively simple. And a large business has its own set of characteristics. It may have a lot of capabilities, but whatever it does for itself or has done for it, it has to fit in its own concept of security and management and directory policies.

Why do I say this? I think that the strategy for us and our partners together should be to think through how to take costs out of some kind of designed offering at each level. Some strategies may work at some levels and won't work at other levels. Certainly, with the strategy you use for someone who's tiny, it's easy to see that it probably won't work for someone who's not tiny. Someone who has a single server has an interesting point; you have a little different strategy. Whatever you do is a lot more complicated for a midsize customer, but that midsize customer is not large enough in the number of PCs to get a lot of customized attention for whatever should exist for services. And a large business will have its own set of complexity. So we are sitting here saying, across the landscape, what do you want to do? In a tiny business case, [would they use the] OneCare? Sure, we will sell OneCare to a tiny business. There should be no confusion about that.

Whether there's a heavy channel play in a service perspective, I don't know. Probably not. There probably is a resell play because our channel partners do a lot of different things. Sometimes resell is the play, sometimes service and sometimes both. In small businesses, so far we haven't come up with any better strategy than to design serviceability into our Small Business Server to make it easy for our partners to participate. Now over time, maybe there are some services that today people have to run themselves that you could run for them someplace else. There are third parties that do this very well. There are people who say, 'Send me your IP traffic. And I'll filter it for viruses, I'll filter it for spam.' You could call that a managed service. It's not managing everything. But it still comes out of the data center, and there are still partners involved in the account.

That's quite different from OneCare. OneCare assumes you have no personality of your own except what you get out of our data center. [My broader philosophy] says you do have a personality of your own but that maybe there are some services you can farm out. For midsize companies, I don't know, exactly. We are trying to think through what we need to do with our whole product line to have them be better optimized. ...