Ballmer Envisions A New Course For Microsoft

Changes in the Internet, cloud computing, and open source are all having impacts on the way Microsoft does business, but not in the way many expect.

That's the message from Steve Ballmer, Microsoft's CEO, to a packed crowd of IT users at the Gartner Symposium/ITxpo 2007 conference, held this week in Orlando, Fla.

Ballmer, who shared the stage with two Gartner analysts, said in response to a question about the impact of cloud computing on Microsoft that there are both short-term and long-term implications.

In the long-term, Ballmer said, there's no doubt the world wants to move in a direction that brings together the best of essentially four different models of computing that exist today: the Web or Internet, the PC, the enterprise, and TV or entertainment.

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"The truth is, nobody wants to give up any one of them," he said. "There are advantages to the Web model in the way it grew up, where you kind of click and run. There's advantages of the PC model in terms of the richness of the experience and the ability to mix and match and control what goes on between applications. Enterprises have to engage in a focus on security and reliability, compliance, management. And TVs and phones have their own messaging. . . . We need to bring those together."

As a result, the cloud will become more important, and more and more computing will be done on users' behalf, under their control, but not in the way they are used to seeing it, Ballmer said.

"We're not going to move, in my opinion, to a world where everything is done on a very thin client," he said. "You're going to have rich clients that are more effectively and seamlessly managed and updated and taken care of from the cloud."

In the near-term, how quickly these are brought together will be different in the consumer world and the business world, and will come in many forms. For instance, he cited Outlook, which lives on mobile devices, on the Web, in a rich client form, and on multiple devices.

"We have to move that direction," he said. "We have a lot of competition that probably shares the same view. I think when it comes down to really building platforms, we have a lot of experience. It's taken us 17 years, but I think people think we finally get it in the enterprise. Some of the pretenders have no enterprise expertise. That's important. At the end of the day, people don't want to go backwards when it comes to presentation or word processing capabilities."

Ballmer also disputed the Gartner analysts' assertion that Microsoft and arch-rival Google are looking more and more like each.

The don't look like each other at all, Ballmer said. "In the world of search, Google is the leader, and Microsoft is the aspirant," he said. "We're number three, working at number two, and then working at number one. That is an aspect of the competition."

Microsoft is doing three things to enhance competition with Google, Ballmer said. First, it is doing the R&D and capital investment needed to build a search capability. Second, it is starting to differentiate itself in terms of user interface. "And number three, we are going to try to rewrite the rules on how that game works, and when we have something to say there, you'll see it," he said.

Another differentiator is in productivity and business computing. So far, Microsoft has yet to see much from Google in that area, Ballmer said. "What we've seen out of the other guy is maybe not even as good as 'me-too' with things that we have to offer," he said. "So I feel very well differentiated vs. Google."

Next: Ballmer on Vista, Mac and Linux

Ballmer conceded that Microsoft's release of Windows Vista had issues with having enough device driver ready when the operating system shipped, a problem he attributed to the long development cycle. He also said that a lot of application changes fell behind because of security. SP1 is available, and addresses most of those issues, he said.

However, Ballmer said those issues were not significant, especially from end users looking for the value of Vista in areas such as getting the most secure operating environment possible. "And actually, we have better security and fewer vulnerabilities and fewer issues with Windows Vista in its first six months than any OS that preceded it," he said. "I think there is a lot of value in Vista. The real issue is, we have some things that we wanted to see in shape before we made the transition."

The move to browser-enable more and more applications in no way means the end of the operating system as we know it, Ballmer said. This is because the things users are embracing are not grounded on operating systems, but on the notion of simple install and easy management.

"The truth of the matter is, you will never be able to do as good a job on Microsoft Office if it's browser-based as you can if you're rich client-based," he said. "World of Warcraft, for those who use it, could never be entirely browser-based."

Even so, customers do not want to worry about what is on their desktop, but they do want to access their applications from anyplace, which is why Microsoft just introduced SilverLight, which is browser-independent and operating system-agnostic, Ballmer said.

Next year, version 1.1 SilverLight will include a subset of the .Net programming environment. "It will enable people to do rich and reach applications with the same set of .Net skills," he said.

Ballmer said it is easy to think that, as the Web model gets richer, users may think they are downloading the entire operating system.

"But you shouldn't be confused," he said. "If you want the full capabilities that Windows and the Mac have, you need what Windows and the Mac has. You're going to want something that people think of a lot like an operating system that runs locally on the machine. There'll be applications that use it fully, and there'll be applications to use a subset through the browser, or through SilverLight or Adobe or whatever."

When asked whether Microsoft is sharing less information about its product roadmaps than in the past, Ballmer answered no and yes.

"There's no intent to share less roadmap," he said. "The only thing I would say is, you'll see us a little bit more cautious about promising dates and schedules. I think that got us in a little bit of trouble. The other thing you have to assume is, the things that are really consumer-targeted, we probably won't talk about the roadmap. It's not that important to the enterprise customer. And the way the consumer market works, the element of surprise is actually of some value."

In response to a question about how Microsoft will change its employee recruitment in the face of a new generation of workers entering the workforce with a solid foundation in open source, Ballmer said it does not present any challenge to Microsoft because the issue is not one of Microsoft vs. open source.

"The issue is, our stuff vs. Linux, or our Windows vs. Linux, Office vs. Open Office," he said. "The truth of the matter is, we're certainly going to see community innovation in the software world. We certainly encourage anyone who wants to do open source, to do it on top of Windows instead of Linux. All of the best stuff we want on Windows, whether it comes from open source or from commercial entities. And yes, at the same time, Windows is competing with Linux, and Office with Open Office, and we have to provide better capabilities and lower total cost of ownership, etc."

The challenge of recruiting has not changed during his time at Microsoft. "If you asked me 27 years ago at Microsoft, are people coming out of college with skills in microcomputers and our stuff, the answer was no. They came out of college with Unix skills. Here we sit, 27 years later. We're in better shape than we were then. But there's still a lot of people who come out of college with Unix skills, now in the form of Linux skills. . . . There's still the religious folks that care about the business model. But that's a very tiny percentage of the total people in technology."

When asked what Microsoft's next billion-dollar business will be, Ballmer said a couple of businesses, such as SharePoint, Office Communication Server, and System Center Management products can reach that milestone fairly quickly.

"We have a number of these things that are actually growing very rapidly, and will be billion-dollar businesses for us," he said. "Now, everybody likes to highlight that, when you're a $50 billion company, what's a billion? It's only 2 percent. I highlight, you better get a whole bunch of those, which is kind of part of the strategy of feeding a few things that can grow to many billions, like advertising, or things to do with mobility, which literally could explode. At the same time, we've got some great enterprise businesses that are just starting to scratch the surface."

Ballmer and the analysts also touched on how Microsoft might change as its Chairman and Chief Software Architect Bill Gates continues his transition out of everyday operations.

Regardless of how the transition happens, Microsoft's strategy is evolving from its origin as a builder of software for microprocessors to a company today building software for Zune, mobile PCs, televisions, and so on.

"Ten years ago. . . . if someone asked me what's your strategy, I'd go Windows, Windows, Windows, Windows, and that was it," he said. "Windows is still our central product, make no mistake about it. Yet we need strategies in all these areas. But there's the question about what happens in the center. Where will we invest?"

Each different area in Microsoft has its own visionary. "And so in a sense you can say it's more distributed. Yet there still are synergistic things at the center that will be guided in a technology sense if anything by (those visionaries) under my auspices."