Ballmer to partners: Bet on us

Steve Ballmer is looking to make new friends.

At a three-day conference, which kicks off Friday in Minneapolis, Microsoft's CEO will try to summon his best sales pitch to more than 6,000 application providers, hardware resellers, distributors, systems integrators and software developers of all types.

His message? Those so-called partners should bet on his company's software in order to generate new business and profits.

Partners are a critical component in Ballmer's strategy to expand the company's reach into new areas. Microsoft competitors, such as IBM and Sun Microsystems, are also investing heavily in partner relationships. Ballmer will also need to convince partners that Microsoft is a safer bet than a growing list of open-source software options.

The CEO discussed Microsoft's strategy in an e-mail interview with CNET News.com on the eve of the conference.

Q: At the partner conference this weekend, Microsoft is demonstrating some new forms abilities that will come in Office 12 and is discussing Longhorn. How important are those two releases for Microsoft, and can you give an update on where things stand with development of those two products?
Ballmer: Office 12 and Longhorn form the foundation for what is potentially the biggest wave of innovation for us since the Windows 95 time frame. We are on track to deliver both in the second half of next year. There will be tremendous new opportunities for partners from the innovations we're working on in Office 12, like the new file formats, new forms capabilities and other new technologies still under wraps. We estimate there will be a $140 billion annual partner services opportunity on the Office 12 platform. When you couple that with the additional capabilities and opportunities for partners with Longhorn, you can see why we're excited.

At various times you and other Microsoft executives have talked about the possibility that in the future more software might be sold as a service. Additionally, there is the possibility for more software to be offered in a hosted manner as opposed to on-premise. Will that change the traditional role for partners as a channel for Microsoft?
Ballmer: Customers want flexibility in the way their software is delivered, especially due to the differences in priorities for IT by industry. Some customers care most about high uptime; some care more about easy manageability. Companies want to focus on their core competencies, and they want to reduce the complexity of running IT. The role for partners will certainly change over time as different technologies come and go and customers request new options--that's always been the case. One thing that won't change, however, is our dedication to working with partners to deliver value to customers.

At the show, Microsoft is announcing a promotion in which midsize businesses can buy a collection of Microsoft server products at a discount. Is this a prelude to a midmarket server product along the lines of what Microsoft did with Small Business Server?
Ballmer: That is an interesting idea that we are exploring. With this immediate offering, however, we're providing a solution that will serve as a first step for midsize businesses, and the partners that serve them, to address their IT needs with attractive pricing and essential guidance. Our current product offerings--Windows Server, Exchange Server, MOM (Microsoft Operations Manager) Workgroup Edition--provide a solid, integrated solution set that they can use immediately. Many midsize businesses are seeing great value with these products now, but we wanted to provide even greater value, less complex licensing, more tools and resources, and simplified deployment guidance.

One of the things that Microsoft is showing at its partner conference is a set of tools to add presence (a knowledge of how someone can be reached) into a wide range of programs. In what ways do you think we will see such capabilities used in products two to three years from now?
Ballmer: Presence relates to one of the big things that both (Microsoft Chairman) Bill (Gates) and I have been talking about this year, which is how the world of work is evolving. Presence is part of this trend. It empowers people. It's already being integrated into business applications, along with instant messaging and call control, by partners like Siebel, OSISoft and BrightWork.

Our goal is making it easier for developers to embed various modes of communications into their applications. We'll continue to create additional toolkits to help them. For example, the right-click options we make available for developers can be expanded and enriched with

voice and video, with data and with other integrated technologies. We've really only scratched the surface of integrated communications. We'll continue answering customer demand for deeper integration across the whole productivity platform--Microsoft Office System applications, including Outlook 2003, SharePoint, Live Meeting and Groove, as well as Exchange and some of the other infrastructure pieces.

In recent months, Microsoft has beefed up its own sales force and has begun adding vertical specialists in a variety of industries. Does this mark a change in the way Microsoft sells things?
Ballmer: The steps we're taking with our sales force represent an evolution of solution selling, rather than a marked change to how we sell. If you look at how our platform is evolving to support integrated solutions that align with business process, it makes sense that our sales force and partner investments will be optimized for customized solutions that work how our customers work. We started solution selling five years ago, and everything we're doing today in the field--adding more specialized resources by technology and by industry, aligning our account teams by industry where possible, integrating partner solutions more effectively into the sales process--represents the next era of solution selling.

A year ago at the partner conference, Microsoft was pushing a similar specialization plan for its partners. Have you seen a significant shift in your resellers in that direction?
Ballmer: Partner by partner, we're making an impact by creating business opportunity for our partners and, in turn, partners are betting their business with us. It's really encouraging to see partners betting big and succeeding. One example there is Interlink, which has more than doubled its revenue since they focused on partnering with us a few years ago.

Partners around the world are recognizing the benefit of aligning by competency, and they're starting to see the competency-targeted readiness, sales and marketing tools work. Enrollment in the competencies is strong. Customers are finding the help they need by using the competencies in the Microsoft Partner Program to differentiate partners' areas of expertise. This differentiation also helps ensure that solutions partners receive the benefits, information, and business opportunities from Microsoft that are most valuable to them.

Microsoft has been dabbling in some new ventures that arguably have made the company somewhat less predictable for partners. For example, the company said in March that it was going to take over management of Energizer's internal IT functions, a job that Microsoft has not traditionally performed and its partners have. Why is Microsoft doing some of these things?
Ballmer: Let's be very clear here: Our core business is developing and delivering software. That said, our incubation project with Energizer should not surprise anyone. We have a responsibility to help drive cost and complexity out of our customers' environments and help them maximize the value of their IT investment. Energizer will not be the only one here in this pilot; there will be a few others, where we will mirror our own internal IT environment running the technology hand in hand as opposed to being a step removed. We're going to test this out and see where it takes us.

With the Internet serving increasingly as a means for businesses to learn about and purchase software, what is the long-term future for software resellers? How do you see their role evolving in the coming years?
Ballmer: Software resellers continue to provide value to customers across a broad range--some bring specific implementation or customization skills; others bring a unique understanding of particular verticals or geographies, etc. The one commonality, though--and this is the crux of the matter--is that the partners who specialize are the ones who will thrive. I talked a lot about this at last year's partner conference, and I'll talk about it this year. As we go to market with our partners, we want to provide customers with the broadest ecosystem of products and services, and to do that, everyone involved needs to make choices about where to focus and add value.