The glue holding the pieces together is XML. "Everything we do shares in the fact that we will try to help people exploit the new lingua franca of the Internet," Ballmer says. (For the full Ballmer interview, go to informationweek.com/910/ballmer.htm.)

With PC sales forecast to grow just 1% this year, Microsoft needs new ways to get customers to upgrade. "Desktop application features don't drive upgrades," says Therese Fontaine, principal architect at Honeywell International Inc.'s $7.2 billion-a-year Automation & Control Solutions unit.

Group VP Jeff Raikes, who's in charge of Office, says today's software is "underserving the opportunity" to help companies make faster, more-informed group decisions. Microsoft's proposal: Deliver "business intelligence for the masses" through a new data-analysis client called Data Analyzer, replace paper documents with products such as XDocs, fuse Office and instant messaging with the planned Greenwich real-time collaboration server, and get workers using Tablet PCs.

JetBlue Airways Inc. plans to incorporate Office 11 into a project that would let pilots update flight manuals on their laptops from a company intranet and deliver specs on airplanes to independent contractors via an extranet. Also in the works: .Net applications that could deliver reports about demand for fuel and parts to JetBlue's suppliers. Chief developer Adam Cohen says coding these apps with Web services could free development staff from generating reports, which take half their time. But JetBlue's partners will need to run Office 11 to take advantage of the apps, he says.

There's a dollars-and-cents side to Microsoft's pitch. Customers can save $190 per PC by replacing Windows 95 or 98 with Windows XP, it says, and Microsoft has allotted $1 million to perform cost-of-ownership studies for companies with more than 5,000 PCs running old versions of Windows. But there's a flip side to the cost-saving argument: Some customers say the vendor's new Software Assurance licensing policy actually costs them more than before. Two months ago, Microsoft abolished discounted upgrade versions of Office and Windows and required large customers to pay for all upgrades released during a contract's life--or forgo any upgrade. "They held us up," says John Thomas, CIO of engineering and construction company Parsons Corp., which signed a license agreement this summer. Ballmer insists most big accounts see their costs drop.

Then there's the perception issue. Microsoft doesn't spring to mind as a primary source for business-process help. German technology company Siemens AG has upgraded half of its 350,000 PCs to Windows XP, and other Microsoft products--Office XP, Exchange, Windows 2000's Active Directory--are deeply rooted in its IT infrastructure. But technology development manager John Minnick says Siemens' main business processes, such as manufacturing and human resources, run on other platforms, and he sees no short-term need for help from Microsoft. Still, he says, "We're going to be open about it."--with John Foley, Tony Kontzer, and Paul McDougall