Interview: Ballmer Speaks Out

Favorable court ruling allows CEO Ballmer to lead the company toward a new future, move into new areas.

U.S. District Court Judge Colleen Kollar-Kotellys recent endorsement of much of the agreement reached between the U.S. Department of Justice and Microsoft Corp. lifts many clouds from the companys future. Now Microsoft, under the leadership of CEO Steve Ballmer, is free to turn its attention to such initiatives as acquisitions, .Net, shared source code and a more componentized Windows.

Ballmer addressed these issues and others, including why Office 11 requires Windows XP, in an interview at Microsoft headquarters, in Redmond, Wash., with eWeeks Executive Managing Editor/Features Jeff Moad, Technology Editor Peter Coffee and Senior Editor Peter Galli.

eWeek: How will the favorable ruling change Microsofts strategy? Will it allow you to be more aggressive in acquisitions, for example?

Ballmer: We have essentially been working on compliance for over a year—given that the resolution from the judge largely looks like the consent decree. We have been very serious about compliance, and you should expect us to continue to be. However, we are going to do new things to enable new scenarios for our customers, and that will take us into new areas—that could be acquisition or could be incubation.

Also, we understand we have new responsibilities of leadership not only because of the case but because of the way the whole industry looks at us. That doesnt mean well stop innovating in our core platform. The responsibility of leadership isnt to shut down; the responsibility of leadership is to drive forward—to understand, to anticipate and to work with the industry.

The new things in the judges ruling will, of course, affect us. But in large measure, the rulings are more similar to than different from the consent decree we signed a year ago. You should expect to see us continue down the path that we have been on the last year.

eWeek: What new things are you looking at?

Ballmer: You have seen our movements in new areas. We acquired Great Plains [Software Inc.]—that clearly points us in new directions. A little over 12 months ago we bought Encompass [LLC], a content management product. We launched our SharePoint portal server. ... Weve made it clear weve got people looking to add value in storage. Ive made it clear were looking to add value to security, management and developer tools. There will be more.

eWeek: Moving into new areas raises the question: Who is your core customer?

Ballmer: We dont have a core customer; we have lots of customers. We have a technology platform. Our job is to expand the capabilities of that core platform and to bring that platform alive to many core customers.

Let me take, for example, Windows. Who is the user of Windows? Its not the enterprise customer, its not the consumer, its both. Its anybody who wants to use the PC. Its a very horizontal thing.

Think real-time communications and what weve done with Net Meeting and instant messaging. Are they corporate capabilities? Are they enterprise capabilities, small-to-medium-business capabilities or consumer capabilities? The answer is all of the above.

eWeek: We are hearing from your enterprise customers a lingering unhappiness with some of the meat-and-potatoes things they think Microsoft should be doing for them—things like reducing bugs, providing patches and offering more flexible licenses. Why is it taking a long time for Microsoft to remedy this dissatisfaction among enterprise customers?

Ballmer: I think perception has changed dramatically over the last five years. In 1997, where were we? The fact is, we are so much more reliable, and our enterprise customers would say, "Boy, are they more reliable." They say, "I put them in my data center. Those products are pretty solid. Theyre solid as anything else in my data center."

However, our customers have all raised the bar on the importance of security. Theyre saying we tend to be targets because our stuff is popular. Theyre saying they expect more out of us, and they have higher standards now.

Or take manageability and patch management. Were in so much better shape than five years ago. People want to push a button and have everything automatically get distributed easily and conveniently. Weve made some progress, and customers like it, but that doesnt mean were fulfilling their expectations. Were trying to make everything go as fast as we can, but the customer will always want more. Hopefully, theyll always want more.

With the licensing, we learned a lesson about the amount of time it takes for people to react to change. We learned the consequences of our actions. We have learned some important lessons, which were part of our growth experiences as a company.

eWeek: Legacy customers using Windows 9x were told they wouldnt be able to upgrade to Office 11 without also upgrading to Windows XP. Some of them feel they are being forced into upgrading. Can you explain that decision?

Ballmer: System services. In the new [operating system], there are services we take advantage of that are not in 9x. Either you build an upgrade of XP into Office 11, or you tell customers that we need these system services and recommend that they get the OS upgrade and upgrade to Office 11.

Thats not to say we dont like the 9x customers. We like them just fine. But this is an evolution. This is an innovation that requires a change to the OS. There will be times when to do application innovation you need platform innovation. We see that as a feature, as opposed to a problem. And I dont know if were very effective at communicating that.

The other option is to build OS capability into Office and all other applications. I appreciate there are customers who feel disenchanted at the decisions we make. Im not sure they would prefer the alternative.

eWeek: Is the Microsoft approach of a unified operating system vision going to be able to effectively compete against Linux, which is gaining enterprise mind share because people feel they can make it do what they want it to do?

Ballmer: You can make Windows do anything you want it to. You can write your own anything that manages memory, manages disk and runs the file system for you. In Windows, we package those together in one comprehensible manner. You like someone elses Web server? Do what eBay [Inc.] did: Put [IBMs] WebSphere on top of Windows. It doesnt devalue Windows. Im willing to concede there are some things we can improve on. But I like our value proposition a lot on the notion of having a fixed-form, well-defined operating system, as opposed to something that doesnt do much and gets added on 180,000 different ways. Still, we can do better.

eWeek: Could you give an example?

Ballmer: We can make Windows much more easily componentized. For in-stance, we could set Windows to do only [Domain Name System]. How many other Windows components get installed in that configuration when you do it? We certainly can make it so these things are in smaller chunks and theres a smaller dependency chain to set Windows up in a special-purpose configuration.

eWeek: Are you saying the focus on access to source code is fundamentally misplaced?

Ballmer: Nobody wants to modify the operating system. However, some customers want to be able to support themselves. So providing tools for self-support is important. We have the biggest community in the world—its bigger than the Linux community. But we havent nurtured it as much as the Linux world has nurtured its community. If you look at posts for Windows—Windows sites versus Linux sites—its dramatically different. We need to do better to support our community.

However, we wont publish our source code. Its inconsistent with our business model. On the other hand, our shared-source-code program is all about making our source code more available so that you can get support. eWeek: Turning to the vision of .Net and pervasive Web services, two years ago, Microsoft came out with a strategy that many people looked at as rather consumer-driven. Do you think your strategy was too optimistic at that time, and how have you repositioned it?

Ballmer: I believe conceptually in everything we said back then. I think we got a little ahead of ourselves and drank a little of the Internet Kool-Aid ourselves in terms of how quickly the world would move to an [application service provider]-oriented world. Do I still believe in everything about Microsoft [.Net My Services]? Yes. Will we see that idea come again? Will end users be involved with XML Web services? That idea is not dead. On the other hand, we got ahead of ourselves, timewise. Looking ahead, youll see a lot of XML support in Office 11. There is a lot coming in the next version of Windows.

eWeek: People talk about software as a service being the future. Do you agree?

Ballmer: Itll happen first in the consumer market. It is sort of what [America Online Inc.] is at the end of the day. It is offered as a service, and I still think that is the future of software.

Additional reporting by Stan Gibson and Anne Chen