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Cyberpeace--of sorts--in our time

newsmaker Steve Ballmer and Ron Hovsepian make an unlikely pair, and their pact has caught the tech industry by surprise.

At first blush, they make a most unlikely pair: Novell's unassuming Ron Hovsepian and his opposite number at Microsoft, Steve Ballmer, who is Mr. Bluster personified.

But for now--and for the foreseeable future--these two chief executives are joined at the hip. Last week, Microsoft and Novell announced a broad marketing and patent pact that they said would smooth interoperability between the heretofore warring worlds of Windows and Linux.

When the two companies, which began their negotiations in April, sprang the surprise announcement, the industry reacted with a collective double take. Microsoft and Linux? But the agreement does not signal an end to the competition between Microsoft and Novell. Rather, the two companies say they negotiated the arrangement in response to pleas from software customers to make their lives easier. Increasingly, customers were telling both companies they wanted to run both Windows and Linux-based systems without technical hassles or the threat of being vulnerable to legal liability from intellectual property infringement claims.

Shortly after the two men appeared together to announce the deal at a San Francisco hotel, CNET sat down with Ballmer and Hovsepian for an extended joint conversation.

What's the extent of the kumbaya that we saw on stage between the two of you?
Ballmer: Let me give you a way of thinking about it. Whatever you think the relationship has been between us and Unix, essentially we're able now to embrace a framework that is much more similar...It's a framework of competition: Windows competes with Unix, Windows competes with Linux. Linux is the popular form of Unix on Intel machines. We compete. And in a sense, that's the dominant theme for both of us.

In order to get a framework for interoperability, you need an intellectual property framework. An intellectual property framework with anything licensed under the GPL (General Public License), particularly, and anything that is not owned by anybody--there's nobody to "negotiate with" as the owner of the intellectual property. That presents new set of complexities. So in order to do interoperability, we needed some kind of IP framework.

The dream is that with interoperability, it's going to be easy for me to get his customers--and he's thinking the same thing.
--Steve Ballmer

What pushed you to find a way for Windows and Linux to interoperate?
Ballmer: Customers want (us) to. The dream is that with interoperability, it's going to be easy for me to get his customers--and he's thinking the same thing. Interoperability is both about the customer and it's also about a dream of increased market share on both sides.

The GPL is particularly unique, and the fact that nobody can negotiate on behalf of the creators of the intellectual property. As we've been soliciting customers' feedback and talking about our intellectual property concerns, they have steered us consistently to try to get this worked through with the distributor (of Linux).

Customers wanted somebody to speak on their behalf to bridge proprietary and open-source creation. We had thought a lot about the issue, but didn't know quite how to get there. When Ron came into his position, this was a great opportunity. Now we get intellectual property, which lets us get interoperability. It's like the next phase in the competitive landscape. It doesn't end the competitive landscape, but it does put it on what I call a less emotional, more traditional basis of who's got the better offering.

So does this mean you're really accepting open source?
Ballmer: What I am going say is that we're going to compete with a number of products, some of which come from commercial competitors and some of which come from the open-source community. The open-source community is also doing great innovations on top of Windows, which I'm very excited to see in a variety of different ways. But we compete with Linux. That doesn't change as a result.

I know our customers have Linux. It's not my job to accept or not accept. I'm going to try to tell them every day why Windows is a better choice, but when they make the choice to have Linux, I want it to interoperate with Windows. I want to provide that value, I want to use that interoperability as a source over time of other opportunities. But I need to do that in the framework in which the incredible investment we're making in patented intellectual property is protected.

You could have done this deal a year ago. Does this say anything about the depth of customer frustration?
Ballmer: This is a world in which you'd better be IT-compliant. Sarbanes-Oxley says, "You'd better be intellectual property-compliant, or you'll have an undisclosed liability." Nobody wants to have an undisclosed liability. Everybody wants to have peace of mind that they have proper rights to whatever it is they own. That's very important. This is a world in which compliance in all forms, not just in this form, is of greater importance.

One of the Linux community organizations has talked about the potential patent issues. And it's not like it's not out there. Customers are asking, "What am I doing about it? Microsoft, I consider this is as much your problem as it is Linux's problem. Fix it." That's the environment in which we live. Now, the fact that more and more people are moving off Linux onto Intel architecture, yeah, we are winning our fair share. But a lot of those customers are moving onto Linux on Intel architecture.

Hovsepian: We've seen that trend. I presented this scenario to our board more than a full year ago, as to this is where we see the market going. My elevation to this new role afforded me to have this conversation, and accelerate from where we started. If you just listen to the customers, they'll guide you. We've put a mechanism in place to bridge that. That's all that we're doing.

Do you think this agreement would have been possible under the previous Novell leadership, when Ray Noorda was running the company? Hovsepian: I didn't know Ray, but I've heard wonderful things about the man and some of his innovations. I think the Novell team has a very long heritage and heterogeneous environment. We have our proprietary business, and we have our Linux business. Now, we love to compete with this guy (pointing to Ballmer). We hope to beat him up on a regular basis. But the reality is that he is in that marketplace. And we're in it. And we're trying to bridge that for the customer.

Ballmer: When we lose, we want to make sure we're losing to someone that respects our intellectual property. We hope through this agreement that Suse Linux--let's call it a version of Linux that respects our intellectual property and respects the GPL--grows its share of the total Linux platform. And since it's a nonexclusive deal, it could happen with other people. But Ron had the foresight to move. We move quickly...there are first-mover advantages that come along with that.

Do you see this as the "first of many" kind of deal?
Ballmer: I see this is a deal we could get done, and we got it done--and I'm excited to get it done and to go to market hard with it. We're quite clear about the fact, though, that there's nothing in this covenant not to sue that is exclusively offered to Novell.

We hope to beat (Ballmer) up on a regular basis. But the reality is that he is in that marketplace. And we're in it. And we're trying to bridge that for the customer.
--Ron Hovsepian

It also puts a final coda on a decade of disputes between the companies. Does it say anything about your maturation as a businessman? I don't know if it's right to say you're a kinder, gentler Steve Ballmer than you were 10 or 15 years ago...
Ballmer: There is a difference between high rhetoric and high competition. In a sense, most industries have high competition, most industries do not have high rhetoric. Our industry has been marked by high rhetoric and high competition. At this stage, at least on the commercial side, our customers aren't all that interested in that rhetoric. They love the competition, actually, because it brings better value, better technology and everything else.

Take what we did with (Sun Microsystems and its former CEO, Scott McNealy). People didn't want the rhetoric anymore. They wanted the competition, but they wanted something else. They say, "Look, we're going to use both Windows and Linux, so get rid of the rhetoric. Compete hard, and as you compete hard, solve the issues that we face in terms of our ownership of both."

I think if you look at us over the last five, six or seven years, you would say that by and large we've been lowering the rhetoric. I don't think we've been lowering the competition. We continue to do very well, and we're selling our stuff hard. But while the level of competitiveness hasn't gone down, the level of rhetoric has dropped.

We've all grown up in this industry as a bunch of young folks in a young industry. Maybe it's sort of a higher-rhetoric part of life.

Then there was a kind of an almost a religious fervor around the open-source stuff. But you don't see that kind of rhetoric from Bank of America or JP Morgan or Citibank. They go after each other pretty hard, but you just don't get the same thing when it comes to the rhetoric.

What's your timetable on when customers can expect to see something in the field, in terms of real product? Hovsepian: On the technical side, we want that as fast as possible. I'm going with my kickoff meetings this week with my field team, so I'm going to explain to them what we just talked about.

I think what's exciting right now for the customers is the covenant not to sue. That's immediate and part of our agreement with Microsoft that takes care of all Suse customers.

I was talking with the CTO of the City of Seattle. He said the covenant not to sue is great, because it makes Suse Linux more attractive to him, and maybe he'd even swap out some Windows boxes to install Suse. That's probably not that you want to hear, Steve, but...
Ballmer: He speaks for himself. I get to vote for his boss. That's all I'm saying (laughing).

Hovsepian: Yeah, I don't see the City of Seattle pulling out Windows servers, to be blunt. On the flip side, I think what it does is open up the competition that Steve highlighted. The competition is very real, so I do anticipate those conversations.

Most people have an app up and running, they're not going to rip it out or replace with another OS. Those are pretty weighted in there. What we're fighting over is the new applications in general. That's where you're trying to get people over to your environment. Would I love to get his development environments onto my platform? Yeah, but I don't think he's going to give that to me any time soon. Those are the kind of the things--it's really getting those developers. That's where the game begins and ends.