Ballmer pushes partners to retrain for the cloud

Microsoft Chief Executive Steve Ballmer encouraged the company's partners today to build software and services for the Web on the software giant's technology.

Speaking at Microsoft's annual Worldwide Partner Conference, Ballmer pressed partners to move with the company to cloud-delivered technology. That's key for the company, whose fortunes have been built by creating a massive partner network, in its effort to combat Web-generation rivals such as Google, VMware, and Salesforce.com.

"The cloud is where things are going and we want you to come with us," Ballmer said to 15,000 conference attendees at the Staples Center in Los Angeles in a speech that was streamed online. "You are going to have to continue to remap and retrain yourselves."

The company's partners--businesses that generate their fortunes on top of the various Microsoft platforms such as Windows and Office--have historically been the bulwark against rivals that's made Microsoft so formidable. On the PC, for example, it's been hard for a competitor to replicate the vast number of Windows applications, which in turn make the platform itself more valuable. That's one reason why Microsoft estimates that its partner ecosystem generated $580 billion last year--somewhere between the gross domestic product of Indonesia and Switzerland.

But as software development continues to move to the Web, the Windows PC platform faces increasing pressure. Microsoft is racing to create a new generation of development tools to address that need. And, with Ballmer's keynote address, it's also pushing partners to create new Web-based services that take advantage of Microsoft's Web-centric platforms.

Ballmer encouraged partners to consider the work Microsoft is doing on its Bing search engine. With Google dominating the search market, Ballmer noted that Bing is probably the company's product that "Microsoft partners spend the least amount of time with."

But Microsoft is creating a platform with Bing that companies are already using to increase business. Stefan Weitz, a director at Bing, demonstrated how Facebook has baked recommendations from friends into the search engine. That way, a Hawaiian hotel that a Facebook friend has chosen to "like" will climb in that person's search results if they are looking for accommodations there for an upcoming trip.

Similarly, OpenTable has worked with Bing, adding the ability to make reservations directly from search results for specific restaurants.

"It's not just index and retrieval anymore," Weitz said. "There are a lot of ways in which we can help you do, and not just search."

To keep partners engaged, Ballmer reminded them about the growth in its core products, Office and Windows. Two weeks ago, Microsoft launched Office 365, technology that brings Web functionality to its desktop and server productivity software. Office remains the dominant offline productivity application.

Online, rival Google Apps has gained momentum. But Ballmer said that most of the customers Google highlights are merely just ones that Microsoft hadn't tried to sell on its product. He exhorted partners to engage those businesses and sell the company's new software.

As for Windows, Ballmer took a bit of a dig at Apple, noting that Windows continues to outsell all rival computer operating systems by a wide margin. Consumers bought 350 million PCs last year running Windows, compared to 20 million computers running rival operating systems, Ballmer said.

"Now, 20 is too much," Ballmer said. "But 350, last time I checked, is still more than 20."

Microsoft, though, offered little insight into the next version of Windows, dubbed Windows 8, which is likely to appear next year. The company plans to offer more details at a conference in Anaheim, Calif., in September.

For now, the company is pushing Windows 7, which debuted in 2009. Microsoft has to walk the fine line of stoking excitement among partners to create software and services that take advantage of the upcoming operating system without dampening any enthusiasm for the current one.

That's why Tami Reller, corporate vice president and chief financial officer in the Windows & Windows Live division, highlighted the financial success of Windows 7. Microsoft has sold 400 million Windows 7 licenses to date, selling the operating system about three times as fast as its maligned predecessor, Vista. What's more, Reller pointed out that 27 percent of all Internet use is now done on Windows 7 PCs.

"The path to Windows 8 starts with Windows 7," Reller told the company's partners. "The time is right now to lay the foundation for the future."

Ballmer spent a bit of time talking up Windows Phone 7, the company's new mobile-phone operating system. It launched in October, and remains far behind Google's Android and Apple's iOS in market share.

"We've gone from very small to very small," Ballmer quipped. "But it's been a heck of a year."

But Ballmer assured partners that the company intends to stick with mobile phones. He pointed to predictions from market research firms that Windows Phone will overtake iOS by 2015.

"We know we've got a lot to do," Ballmer said. "We're all in when it comes to mobile devices."

Correction at 1:33 p.m. PT: This story initially misstated Windows 7's predecessor. It was Vista.