Microsoft Unleashed

As legal woes fade, the software giant seeks to fix relations with its customers.

Put yourself in Steve Ballmers shoes. With antitrust suits looming, youve been forced to ask yourself what a variety of judges and prosecutors would think about every major move you might make. But, following a settlement with the Department of Justice, the legal clouds have begun to lift, and youre freer now to act than any time in the last four years. So what do you do?

Youd probably start looking around for new markets to conquer and, with $40 billion or so in the bank, maybe a few acquisitions. And thats exactly what Microsofts CEO is doing.

"I put out a memo where we talked about our mission, where we talked about the fact that were going to do new things," said Ballmer in an interview with eWeek editors and reporters at Microsoft headquarters here this month. "We were quite explicit that we need to enable new scenarios for our customers, which take us into new areas which could be [through] acquisition, could be [through] incubation," Ballmer said. Microsoft is looking at possible acquisitions in the areas of storage, security, and management and developer tools.

Not to say that Microsoft, even before last months ruling effectively settling the DOJ antitrust action, wasnt already entering new markets. This year, the software company has launched the Tablet PC, embedded Windows, enterprise applications and content management. Not to mention Microsofts full-court press to explain and sell its .Net initiative.

But, before taking off the gloves and expanding even more aggressively, Ballmer and Microsoft have some work to do shoring up strained relationships with enterprise customers. Still stinging over Microsofts controversial Software Assurance volume software licensing terms, as well as ongoing security, reliability and complexity problems with Microsoft products, many enterprise customers say the company must improve its fundamental business practices. If that doesnt happen, some vow, theyll continue to put the brakes on upgrades and even consider alternatives such as Linux.

"We wish theyd concentrate on better security and fewer bugs rather than continuously focusing on new features," said Kevin Baradet, network systems director at the S.C. Johnson Graduate School of Management at Cornell University, in Ithaca, N.Y., and an eWeek Corporate Partner. "Look at Office. Ninety percent of our people use 10 percent of the features. If we could get something less feature-rich and more secure, we wouldnt have to spend as much time writing around and patching problems."

Although Microsofts new Software Assurance program succeeded in getting up to three-quarters of enterprise customers to switch to long-term maintenance agreements, according to analysts, many IT managers are still steaming over what they see as a heavy-handed Microsoft tactic, which many say costs them money.

"They alienated most of their enterprise customers with the insistence on the new licensing model. Companies that might never have considered looking elsewhere have begun piloting Linux and [Sun Microsystems Inc.s] StarOffice," said Michael Skaff, manager of IT and the network operations center at AdSpace Networks Inc., in Burlingame, Calif., and an eWeek Corporate Partner.

Meanwhile, customers such as Skaff are unhappy that, rather than buckling down to fix such problems, Microsoft is looking beyond its core product space for growth. "I think [Microsoft] is being greedy," said Skaff. "Instead of improving and revising within their current area of strength, they are looking to expand into new areas of opportunity," said Skaff. "Those are ... resources that will now be directed away from delivering better value to the enterprise."

Somewhat uncharacteristically, top Microsoft officials have begun to publicly own up to mistakes that have soured relations with some enterprise customers and to promise fixes. On software licensing, security and initial attempts to define its .Net strategy, company officials now admit some serious miscues were made. Perhaps most harmful to its relationship with some enterprise customers, said officials, was Software Assurance. Not just the terms of the new plan but also Microsofts attempts to roll it out quickly, before many companies could gracefully factor it into their asset management processes. While Microsoft isnt going to roll back Software Assurance, the company is attempting to make it more palatable to customers.

Microsoft officials even acknowledge that enterprise displeasure with Software Assurance may slow adoption of key new products such as the upcoming Windows .Net Server 2003. "It could have," said Paul Flessner, vice president of the .Net Enterprise Server Group. "There were plenty of customers that were unhappy. Honestly, there were plenty that were happy. But there was a fairly vocal minority—maybe 20 or 30 percent—that did see an increase."

But Microsoft has plans to appease what Flessner calls the vocal minority by adding to Software Assurance limited training and support, at no additional charge, according to Mike Sinneck, corporate vice president for worldwide services.