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9/7/2005
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Ballmer: Microsoft Needs To Work Harder To Woo Midsize Businesses

The market of companies with 50 to 1,000 employees is potentially lucrative but difficult to study and forge close business relationships with, Microsoft CEO Steve Ballmer says.

The vast but elusive segment of companies with 50 to 1,000 employees can be a large source of sales growth for Microsoft, but they're difficult to study and forge close business relationships with, Microsoft CEO Steve Ballmer said at a product launch event on the company's Redmond, Wash., campus Wednesday. Ballmer's remarks came on a day when Microsoft executives, including chairman Bill Gates, spoke with more than 500 employees of midsize companies and resellers about Microsoft's plans for their market segment.

"I see great opportunity for revenue growth coming from midmarket customers," Ballmer said during his presentation. He added that he's spent more time during his Microsoft career trying to understand these customers than any other market segment to which the company sells. Small businesses are extremely difficult to research. "You're lucky if you know their name and what they bought," he said. Consumers and Microsoft's largest business customers never miss an opportunity to tell the software company what it needs to improve. Midsize customers have proven harder to pin down. "The midmarket you have to connect to," Ballmer said.

Microsoft took steps to do so Wednesday, as it unveiled plans over the next year to deliver new versions of its enterprise-resource-planning and customer-relationship-management software that include user interfaces tailored to more than 50 job roles at companies. The company also said it plans to release a midmarket version of its Windows server in 2007 or 2008. By exposing to employees from CFOs to sales managers to warehouse workers only the information they need to do their jobs, Microsoft says it can increase sales by making its business apps easier to use and more relevant to customers' daily work. Microsoft's Business Solutions division lost $201 million during the fiscal year ended June 30, on sales of $803 million.

According to Ballmer, midmarket companies have to compete with larger ones but are tight on the resources to do so. They also have the most problems with licensing Microsoft products, compared with other customers, Ballmer said. The company amended its Open Value licensing program for midsize companies to let customers use Microsoft products more "aggressively" at lower cost and simplify managing their contracts, he said. Midsize companies without IT staffs can spend as little as $15,000 annually on IT; companies with tech support can spent $50,000 to $500,000, and in some cases as much as $1 million a year on computing and IT services, Ballmer said.

During his presentation Wednesday morning, Gates said Microsoft has a "unique opportunity" to connect business apps and personal-productivity software in ways that can benefit workers.

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