Ballmer: We are so much smarter now

Microsoft's CEO describes the last five years as a period of learning, and says the firm has woken up to its corporate social responsibilities.

MINNEAPOLIS--If someone said Microsoft only became a large corporation five years ago, odds are that person would be labeled a lunatic, especially when you consider the US$36 billion it raked in for fiscal 2004.

But if that someone is Microsoft CEO Steve Ballmer, you might want to hold your tongue because, as the burly man says, no one else has the authority to say otherwise.

During an intimate roundtable with four journalists including ZDNet Asia, Ballmer was candid in discussing how Microsoft has evolved over the last five years.

Microsoft, he said, is "so much smarter today than we were five years ago". Senior management today understands the importance of good corporate citizenship and no longer runs it like it is still a small company.

During the discussion, Ballmer also responded to a question on Longhorn's multiple delays and drastic redesigns. He acknowledged the company had gone "a little ahead of ourselves".

"Fact of the matter is technologies like Avalon and WinFS do need lots of lead time," he said. "(But) that wasn't the mistake. The mistake was, in planning some schedule around something, we should have been a little more open-ended because I do think (the delays and redesigns) had created some issues."

ZDNet Asia also asked Ballmer for his views on a several key issues, including the open-source community's LAMP. Here are excerpts from the discussion:

Q: Microsoft's argument against open source has been about the real total cost of ownership and about how open-source products aren't engineered to work well together. Do you see efforts like LAMP as the first sign of a more organized effort by the open-source community to better compete with Microsoft?
A: At the end of the day, we just compete. We compete as products. We don't compete with open source. We compete with Linux, BSD, Open Office. In any competition between any two competitors, some days, one guy is ahead and another guy is behind and maybe another day, that guy is ahead and the other behind.

The only analysis that's interesting with respect to open source is about the things that we cannot do because we are a commercial company, and that they do. And there is one--we can't publish our source codes.

There are other things they don't do as well because of their organizational form, and they don't integrate as well. They may do other things just fine--I'm not trying to take anything away from (them)--but LAMP is just a set of letters put together. The development of Linux is independent of the development of Apache, and independent of MySQL. And for better or worse, that is the way it works.

I'm not going to get into the religious debate of which way gives a better outcome. I'll just tell you that I think today, we've got a better outcome and we will continue to have a better outcome. And when we don't have better outcomes, I (can) at least tell you what we're doing to engineer a better outcome. There's nobody to talk to, for better or worse, on the other side. You don't like something in the Linux stack, who do you talk to?

I'm pleased with where we are, technically. We've got more to do, but right now, I would say we're well ahead.

The focus at the conference here this year has very much been about getting your partners to build products for vertical markets. Can we see this as a sign that software is perhaps moving towards becoming more of a commodity? And that the only way then for channel partners to survive in the business is to provide value-add services and build domain expertise?
Saying that software is a commodity, I can't disagree with more. Saying that at the end of the day, we all get paid when customers are excited about the value that something brings to what they're doing, that is certainly true.

And yet, the world at this point is moving to where all software should have started from scratch--(to be) vertically focused. Building on a platform like (Microsoft's) Office or Axapta, or SAP, if I take the competitor's side, and building out vertical capabilities that help people, you've got to start with these horizontal platforms. If everybody in the industry was basically writing their own Excel spreadsheets as part of the way they did business intelligence, that would be bad. So you've got to combine the best of the horizontals with the best of the verticals.

It's been more than five years since you took over as CEO from Bill Gates. No disrespect to Bill, but how would you define the Ballmer era for Microsoft?
We have learned and we've gone through the process of really understanding what it means to run, in an agile way, a large company. I would say these are the first five years that we've been a large company. People would say no, no, but only I can speak, nobody else can speak on this topic and nobody else can have a point of view, because it's the way we think about how we run the place and that marks the transition. The last five years have seen us make the transition to trying to run a great large company, as opposed to continuing to run the company like it's a small company.

But why did this happen in the last five years? (Microsoft) had outrun the capacity to run like a small company. And we were trying to run it like…just a couple of guys all over everything, we had to (hire) more managers and give them the ability to control areas of the company. We tried to learn how to do that with a certain nimbleness and innovation and agility…and how to get all that out of a bigger company.

You know, we are so much smarter today than we were five years ago. We tried a different path, starting five years ago. That's why Bill wanted to become full-time chief software architect; that's why he wanted me to become CEO. We lived in a world in which it had been more clear to us what the corporate social responsibility was of a large company. Small companies don't talk about their corporate social responsibility much. Large companies recognize that and confront that. And we certainly have recognized and confronted that.

You might say that (it's because) we got hit over the head with a stick--that was part of the whole (process) of how we got through the DOJ trial, what that meant to us, and how we focused on what our responsibility to citizenship is. So that's part of going from being a small company to running a large company.

Another area is innovation, and innovating as a large company. I am proud of our record of innovation over the last five years. We've brought out more new things in the last five years than any other time in our history. I'm proud of that. Some of them, we're doing really well; some of them, we're not doing so well yet. But we're dedicated to really doing (all of them) well.

So I would characterize the first five years as learning to perform, learning to execute, learning to innovate, learning about our responsibilities as a large company. That was the transition over the last five years.

And that's not about Bill, and it's not about Steve, but about what was the state of (the company)…that's why I'm saying it's almost got to be in our minds, (experiencing) the transition that we went through, as opposed to what everybody else was saying that we were a big company for 10 or 15 years. You don't think about yourself that way, you don't make the change you need to innovate in a new world.

ZDNet Asia's Eileen Yu reported from Minneapolis, USA.