Q&A Part 2: Ballmer says core IT implementers are key

REDMOND, Wash. -- Microsoft Corp. CEO Steve Ballmer spoke last week with Computerworld about a wide range of topics, including the merger of Hewlett-Packard Co. and Compaq Computer Corp., his company's potential for expansion into new business areas and the importance of senior IT professionals. This the second of a two-part interview; Part 1 appeared Friday (see story).

Q: What's the biggest difference between Microsoft today and Microsoft five years ago?
Externally, which is very important, I'd say the level of customer expectation is much higher in any way you want to say, whether it's reliability and trustworthiness, [or] whether it's on innovation. If you want somebody to upgrade, to do something different, the level of expectation and the amount of innovation it takes to get somebody interested in making a transition, making a move, is higher today than it was five years ago.

Microsoft Corp. CEO Steve Ballmer
Microsoft Corp. CEO Steve Ballmer

If you look at the ways we're different internally, I think we've recognized and we are responding to that level of expectation. I think that our investments across the board -- whether it's in direct-to-customer-facing things or the innovation which feeds the customer -- we've ratcheted those investments up with an eye towards this increased sense of expectation.
Five years ago, if you'd asked me, I would have spent a lot of time talking about ... what businesses aren't you going to be in. That was always a question we'd get. And I was always trying to answer it. I don't try to answer it anymore.

Q: You figure the doors are open to be in any business?
Yeah. We're basically a software company. We help people realize their potential through software. But I don't want to be limiting. I don't want to limit the way our people think about how they can add value. I don't want to create any kind of expectation amongst anybody else that we will limit, if we have good ideas and we think we can make a contribution.
We're still going to have partners. We're going to have to be very frank, very open, very honest with our partners. I think we are more mature as a company in the way we think about those partnerships.
I kind of believe this growth thing: "Only the paranoid survive." But the way in which we have to be paranoid is quite a bit different. I, by and large, think most people we're going to compete with and who don't know it -- we ought to tell 'em. Let's tell 'em in advance. Let's tell 'em what we're going to do. It sort of defies conventional wisdom about how you compete with somebody -- you know, stealth, work in the garage, don't let anybody see what you're going to do and then spring it on them. But for most things we do, we've got too much at stake, in terms of the degree to which we are valued as a partner, to approach things in that way.

Q: What new areas of the enterprise software space might Microsoft enter?
Areas in which we think we have innovative ideas that can make a difference. We will build technology in areas where we think we've got some unique ideas. ... Will security be different tomorrow than it is today? Yes it will, because now we have to secure an XML infrastructure, if you will, as opposed to an HTML infrastructure. Everything about the way security works needs to change. You start passing XML messages around, it's not enough to just put a firewall out there and say, "I'm done." It's a set of work, and we think we have some unique ideas to add value. ... Some of those we may pursue all with our own technology. Some of those we may pursue in partnership.
Take storage. How are we going to support SANs? Where do the interfaces come between the operating system and the storage systems? And what's our relationship to the storage community? And how will it evolve? Well, we're talking to EMC about that, and we're talking to Compaq -- or HP, I guess I should have to say -- about that. And we're trying to find the right place for us to add value in the right ways.

Q: Given the very close relationship you've had with Compaq, what's your perspective on the HP/Compaq merger?
I think we have a great relationship with the merged company. As a matter of fact, Carly [Fiorina] and Michael [Capellas] were here together two days ago, something like that. The two companies talk frequently. ... I think HP will be a very important partner for us. I think those guys have sets of very ambitious goals for themselves. And we want them and need them to succeed. We talked mostly about what we're going to do together.

Q: Did any action items result from the meeting?
Sure. But it's inappropriate to go through them. There's plenty of things that we're working on together that I think are very exciting, as we have plenty of interesting things with any of our big partners, whether it's HP, Dell, Accenture.

Q: Do you think the merger's a positive development for the industry?
I think that as the new HP executes well, it'll be a good thing for the new HP and therefore a good thing for the industry. I think it's a hard execution challenge, and certainly I have a lot of respect for Carly and for Michael to step up to that kind of challenge. I'm not sure I would have had the je ne sais quoi that they've got for that kind of tough challenge. But they're sure fired up by it.

Q: How has your view changed over the last five years of the corporate IT professional? Obviously, CIOs are important. Senior IT, the real implementers, are important as well.
If you actually ask who will make the decision in the average enterprise IT shop about the way to build the next application, the CIO will ultimately give his or her imprimatur to the decision. But there's some implementer, a technical architect, a smart person who's well-regarded in the organization who's really going to study it. They're going to take a look at .Net. They're going to take a look at the alternatives, and they're going to make the real recommendation-cum-decision about what to do. So in a sense, relative to the enterprise, a lot of the key decisions about our servers, tools, management infrastructure -- it's going to be at the level you described as opposed to the CIO level.

Q: Those people felt a lot less important during the dot-com days, because marketing and business people were making a lot of the decisions. Do you see that difference now in your customer base?
I don't think that group was ever less important. It wasn't here. I agree that there was kind of a bravado that ran around that said, "Ah, we business people. We're just driving the business, and we're not going to wait for you technical guys to figure things out, this side of it. You'll either do it my way or I'll go to Sapient."
I never bought into that myself. That doesn't mean we didn't do some selling that way. But in some senses, you could say it shows. We have low market share of what I would call the dot-com funny money. ... It was basically money that went from investors and venture-capital guys into companies and then went back into IT vendors. And part of the reason why IT sales have fallen apart is because the funny money got dried out of the market.
If you look and say, "Who had the highest share of funny money?" it was the four horsemen of the Internet: EMC, Cisco, Oracle and Sun. The four horsemen were the guys who had the high market share of funny money. We did not.

Q: To what do you attribute the fact that you weren't one of those four?
First of all, money wasn't an object. And we've always appealed to the value buyer, shall we say. There was a cult that this was the way to go do the Internet, which I think some of those guys very successfully fostered in their marketing. Some of the initial Web implementations had happened on Unix systems, which gave sort of an extra boost, particularly to Sun and Oracle. And, OK, we didn't have high market share. But it meant we never took our eye off the ball with the core IT people. That's always been kind of our bread-and-butter audience.

Q: Do you need to change your image with those people?
The companies over time that that community can view as providing real trustworthy computing will be companies that have a real leg up. I want to be pre-eminent in terms of that community's view. ... Our heritage is perhaps innovation, new features, etc. We can do better.
But we will be a leader amongst that community, being a trustworthy company and providing a trustworthy computing platform for them. We've set that out as an absolute goal for the company. Bill [Gates] put out his memo four or five months ago about trustworthy computing, and we will work to get there. We must do that. And so we will do that.

Q: What is the payoff going to be on .Net for Microsoft? What value does Microsoft add, with regard to the development of Web services?
It's a rich platform for building the three important styles of applications that I think people are going to want to build over the next five or 10 years. And Windows the client and Office the client will both be programmable through a .Net programmability infrastructure. So if you want to program or customize or tailor products like Windows and Office, this is a skill set that you will want to build inside your organization, and we have the best tool set for building those kinds of applications also up on the server.
So, what's the big win for us? The big win for us is with our customers doing new things, which means they're more inclined to upgrade, and I think because we've got the best programmability infrastructure on the server, we'll get a chance to build some market share up on the server. I mean, it's pretty good, but there's still plenty of opportunity for market share increases for us in the enterprise server software business.

Q: What do you have going on in research that has you excited?
The stuff I'm actually most excited about is the stuff we're doing to enhance programmer and tester productivity. In the day and age I live in, and particularly with the class of audience that tends to be Computerworld readers, it's a big issue. How do you help programmers be more productive? How do you give them tools to write more secure code? How do you make testing more effective and more efficient?
I mean, if you take a look at it, probably 50% to 60% of all the resources we put into things around here go into test and verification, as opposed to real development, so to speak. And so I think it is time for a quantum leap forward in terms of everything that goes into software development efficacy, whether that's the design cycle, the development cycle, the assurance cycle, the verification cycle, the security verification cycle. ... I think that perhaps the biggest contribution we'll have a chance to make to the world will be in the area of developer productivity.

Copyright © 2002 IDG Communications, Inc.

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