Microsoft Retools Strategy

Microsoft CEO Steve Ballmer spoke with eWEEK Senior Editor Darryl K. Taft last week right after his keynote speech, where Microsoft officially launched Visual Studio 2005, SQL Server 2005 and BizTalk 2006.

Microsoft Corp. CEO Steve Ballmer spoke with eWEEK Senior Editor Darryl K. Taft last week right after his keynote speech, where Microsoft officially launched Visual Studio 2005, SQL Server 2005 and BizTalk 2006. The interview was two days before Microsoft, of Redmond, Wash., released internal memos about the sea change the company was going through in its effort to attack the world of services. Ballmer, however, discussed that issue and a lot more.

When you guys began your enterprise play, a lot of your competitors said you werent an enterprise company and you couldnt compete. You have proved that you could. But now youre entering the tools space with an enterprise tool set, which is not your heritage. How do you think youll be able to bring that famed Microsoft high-volume, low-cost, mass-market story to this arena?

Ill be shocked if we dont have super-high market share within a year. Ill just be shocked. If you take a look at the total number of customers that these high-end development suites have, its tiny.

We looked at Rational [Software Corp.] before IBM bought it. The number of actual seats and users they have is tiny. And, so, if you can take some of the good concepts and put them in an ease-of-use package and at a price point that you can get out, I think developers want this stuff; you just have to make it easy enough to use and at the right price. And I think with Visual Studio Team System, we have that. And I would expect to see our share of high-end software life-cycle seats to really climb quite dramatically for the next year.

So youll eclipse—and pardon the pun—Rational?

Id be very surprised if we dont. Who knows? But I think weve got great products, and I think those things are so low- volume that, in a sense, it should be easy to bring those kinds of capabilities, I wont say to the masses, but to a much larger mass of people than those guys have reached.

Well, its always been an area sort of focused on heavyweight stuff for heavyweights.

Yeah, if you go back to the old [Charles W.] Bachman and all the guys whove ever competed in this category, none of them has ever gotten to critical mass. But I think by the way weve done the integration with Visual Studio, I think we should get there.

You started out with sort of a joke about timing and product cycles. What do you think you have to do to get more agile in terms of delivering products?

Well, I think we have had an interesting Visual Studio release. So I wanted to take the issue head-on, but I think I maybe even overaccentuated in the remarks I made to the customers.

I think we have to decide that we want to turn the releases faster, and we can. What we did here is we said were not going to do our next release until we have a whole big bunch of stuff done, including the integration of the .Net run-time into SQL Server, which was a huge piece of work for both of those two teams, frankly.

So you tie them both up. And what we have decided is that were going to keep releases coming on a much more regular schedule.

In some sense I think we need three cycle times. With Community Technology Previews were going to have some stuff that people see in the six- and nine-month cycle. We need our regular two-year cycle. And well probably always be doing some big, thorny stuff that is two releases out. And thats a change in mentality, but I think we can get there fast.

/zimages/5/28571.gifMicrosoft taps former Rational heavyweight to lend credence to enterprise tools play. Click here to read more.

Do you think the industry is moving away from an economic model based on selling software licenses to alternatives such as software as a service—such as your Office Live, and subscription-based services such as Red Hat?

Well, I think youre going to have all three models. Youre going to have what we call the transaction model, where you sell something. Therell be a subscription model, where you pay for something as you use it. And therell be some things that will be funded via advertising or essentially as part of a bigger idea. I mean, what are we doing with our Express editions? The fact that theyre available for free download doesnt mean that weve given up being a profit-making company. But we do recognize that theres just a budget limitation students have, and yet we want to create a funnel so that, over time, some percentage of those people, themselves or the companies they work for, wind up buying a full Visual Studio, a full SQL Server.

But how much weight do you see yourself placing on each, and how much can you get out of them?

Well, we already sell almost $2 billion a year in advertising, so I cant tell you its small. And depending on how you look at some of our enterprise agreements, a number of those are kind of subscription-based, so its hard for me to tell you thats small. I think theres a lot of economic promise in all three for different scenarios. Each has its own place.

Do I actually think ad funding is going to be the primary source of revenue for mission-critical applications?

No, I dont think so. I think thats still going to be either transaction-[oriented] or, perhaps sometime in the future, more

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