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Ballmer Defends Microsoft Pricing and Practices

ORLANDO, Fla. -- Steve Ballmer, president and CEO of Microsoft, defended Microsoft product pricing trends, .NET strategy, and industry practices Wednesday at GartnerGroup’s Symposium/ITxpo.

Ballmer emphatically denied a contention put forth by Gartner analysts that per-user costs for Microsoft server products have risen by 300% to 500% in recent years. “The value we deliver in our software over the past five years has increased. But our pricing hasn’t,” he said. He also noted that software prices have risen across the industry.

In many cases, additional functionality in server products has required price increases, “reflecting additional skin in the game that we require, and our enterprise customers expect of us. We’re trying to stop leakage in our software,” he said. “We have balanced and changed around our licensing terms, but the average cost has not increased by 300 to 500%.”

Ballmer also noted that a highly competitive software market keeps prices at bay. “We face competition from StarOffice for Office, as well as from our own installed base,” he added. “We don’t take products with an existing definition and keep raising prices year to year. We’re in a competitive market. We have to deliver value and earn customers’ business every day.”

Ballmer defended the software giant’s inclusion of its .NET strategy in most recent product announcements over the past few months. “We’d rather err on the side of being over-liberal with our announcements,” he said, adding, “It will take a few years before we have all of .NET rolled out.” The next version of Windows – code-named “Whistler” – will leverage .NET to a greater degree, he added. “All our products are headed toward this model of new programming models, new user interface, and new applications.”

While saying that Microsoft supports open standards and protocols – such as XML and SOAP – Ballmer defended some of Microsoft’s closely guarded industry practices. “We need proprietary formats in our applications that protect our intellectual property,” he said.

He also defended Microsoft’s policy of restricting customers’ discussion of server performance. “We have good reasons for this policy,” he said. “At OracleWorld for example, Larry Ellison tried to publish performance data that was incorrect.” But Ballmer added that Microsoft “has never denied any legitimate customer permission to discuss these results.” He urged any customer wishing to share performance data to first clear it with their account representative.

Ballmer acknowledged that Linux looms as one of the company’s greatest competitors in the near term. He said that Microsoft has no plans to work with Linux solutions at this time, even though it has taken an equity stake in Corel, which has rewritten its solutions for Linux. “The Microsoft environment and Linux is messy enough. It’s a confused environment,” he said. Ballmer cited copyright and licensing issues as a major obstacle. However, he noted, “We’ve expressed a willingness to be open to Linux.”

Ballmer also said he is unfazed by the software giant’s current antitrust troubles. “Certainly, on some days, it’s no fun to read the newspapers,” he acknowledged. It’s like watching a ball game, and somebody scores a touchdown against your team.” However, he said morale remains high on the Microsoft campus, and there has been no significant change in corporate culture. “Our people come to work everyday to do great software,” he said. The only difference, he added, was in e-mails – not in content but in tone. “Our top people have developed an awareness in watching the tone of their e-mails. And softening the tone in e-mail is not a bad thing for anyone.” -- Joseph McKendrick

About the Author

Scott Bekker is editor in chief of Redmond Channel Partner magazine.

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