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2/28/2008
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Microsoft's Ballmer On Windows Server, Yahoo, Linux

How does Microsoft beat Linux? The same way "you beat any other competitor: You offer good value, which in this case means good total cost of ownership," Microsoft CEO Steve Ballmer says.

Microsoft celebrated the launch yesterday of Windows Server 2008, SQL Server 2008, and Visual Studio 2008 at an event in Los Angeles. After his keynote address to the gathered crowd of IT pros, InformationWeek had the chance to sit down with Microsoft CEO Steve Ballmer.

In a 25-minute interview, Ballmer discussed virtualization, Linux, the concerns customers might have about the Windows Server 2008 release, Microsoft's recent "openness" pledge, the forthcoming Yahoo acquisition (including the fate of Flickr), and even mainframes. Here's an edited transcript:

InformationWeek: I think you see VMware aggressively courting virtualization customers. Customers that I've spoken with are saying Microsoft is definitely coming from behind here. You mentioned it on stage here. There's Hyper-V's delay. Does Microsoft's entrance now into the virtualization space put it at a disadvantage in the virtualization world?

Ballmer: The choice is, you know, to be first to have share or not. I guess I prefer to be first to have share. Now, you've got to remember, this market has barely been scratched, less probably in the install base -- less than 5% of all systems run virtually. Virtualization is way too complicated, way too expensive today for people to take advantage of it, and it's way too isolated from the rest of everything that happens in application development to data center deployment and operations. That's not my way of criticizing, it's just if we're going to get -- if the phenomenon is going to fully take effect, then we've got to democratize it. That might be VMware, [but] they haven't shown moves in that direction. Somebody could argue it might be one of the open source alternatives. I like what we've got. I think we pay out on those problems.

That doesn't mean the other guys are going to go away. Obviously we recognize that fact and we provide good interoperability with VMware's virtual machine. But I don't think -- there's a simplicity with performance, with management, integrated management, with everything else, I think we're going to make a real difference. Sure, I wish we had everything we're announcing now and shipping this year a year ago, sure. Two years ago? Sure. But, believe me. We're going to make a big difference.

InformationWeek: One of the concerns I found that people carry over with them from -- certainly the Vista release and their past experiences with those operating systems, is the concern about application compatibility at the beginning. What kind of things is Microsoft doing today that it hasn't done in the past to assure customers that they can start moving fairly soon to Windows Server 2008?

Ballmer: Well, we've done a lot of work, obviously, even in the Vista context. We've done a lot of work on application compatibility. Some of that is work we've done in the code, but most of that is work that we were doing with the ISVs, with the application developers, with tools that help people get there, etcetera. And that doesn't mean that it'll be entirely zero work, but I think it's an area in which we have done a very good job and, in fact, the fact that Windows Server 2008 is a year after Vista actually helps the server release quite a bit.

So I think the thing ought to proceed fairly quickly. You know, if you look at it, only some of what happens in the server is about the sort of bespoke applications or ISV applications. A lot of what happens in the server, frankly, is about very standard applications. Are the databases all there or not? Are all the mail packages there or not? Are all the document management and collaboration tools and SharePoint there or not? You know, so I think a much higher percentage of the machines are accounted for by what we call standard applications as opposed to specialized applications. That doesn't mean specialized applications aren't important.

InformationWeek: So another thing is Linux. You've said you're gaining ground against Linux and some analyst reports have shown that. But still, a quarter of our readers have said they're looking to increase their ratio of Linux servers to Microsoft servers. How does Microsoft stay successful against Linux, and how do you convince that quarter that they're wrong?

Ballmer: Well, I think what we have to do rather than convince people they're wrong is we've got to convince people that the stuff that we do ship, that the partnership on top delivers real value. And that's what we've been doing a very good job of. I mean, the fact of the matter is, how do we beat Linux? The way you beat any other competitors: You offer good value, which in this case means good total cost of ownership, right? Because total cost is really, at the end of the day, the issue. And the fact that, quote, Linux is open source, therefore it appears to have a zero price -- that actually made it easier to shine a spotlight on the thing that always mattered anyway, which is total cost. We have a better proposition today, I would think, for total cost of ownership, and we have to offer better value where better value reflects the applications that are available, the quality of the tools.

Take something like SharePoint alone. It's a big deal. The quality of the databases, that's a big deal. The availability of tools, of Visual Studio and .Net and the ability to build bespoke applications, those are all part of the value and the total cost. And I think we've done a good job. In the areas where we haven't done a good job, we'd have less share. We have a smaller percentage of the market, for example, in high-performance computing. That's about 40% of Linux business. We really didn't enter the market with what I would call an engineered, high innovation, high-value-add offering until last year. Now that we're in the game, we're gaining share in the high-performance computing work load. So in a sense, the old formula: Keep the prices low, keep the innovation high, keep the total cost of ownership low.

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