If Steve Ballmer really believes his comments that IBM has short-changed its shareholders by selling off low-margin hardware businesses, and that IBM's product line is more "narrow" now than ever before, then Ballmer's strategy as laid out in his "New Efficiency" letter this morning makes absolutely no sense.
Now, I certainly understand that competitors compete, so I'm not shocked that Ballmer's clearly trying to try to cast IBM as an old fuddy-duddy that keeps its cash stuffed under its mattress and its punchcards in its shirt-pocket. But at some point, doesn't the approach of "my competitor's a bozo" routine get more than a little tired? Does Steve Ballmer really have such a short list of great things to say about Microsoft that IBM-bashing becomes a strategic talking-point?
Such an approach is dubious at any time, but for Ballmer and Microsoft it is particularly bad policy right here right now as only a few hours ago Ballmer sent out a letter to customers and developers called "The New Efficiency" that describes how "a new generation" of IT products and services and capabilities can help companies "do more with less."
It's a spirited message of IT's potential to move out of the back office and help companies move faster, make better decisions, and focus on higher-value work, all with less cost and complexity. And Ballmer's message was intended to provide the strategiec context around the launch of Windows 7 plus other key Microsoft products that my colleague Paul McDougall covers nicely in the news article that's linked above.
But how does Ballmer reconcile the strategy that he carefully lays out in his "New Efficiency" piece with his broadside at IBM, which itself has been going down that same strategic path for the past several years? Ballmer can't possibly have missed IBM's carefully plotted move out of several hardware categories—low-margin for IBM and low-value for its customers—and its intensified focus on software, services, and financing. So why, then, did he say these seemingly silly things about IBM as reported yesterday in a New York Times blog post? Take a look:
During an interview last week, Mr. Ballmer, Microsoft's chief executive, was critical of I.B.M.'s decisions over the last decade to dispose of its networking equipment, hard disk and PC businesses. Technology companies must pursue constant market expansion and diversity to stay alive and relevant, according to Mr. Ballmer.
"I.B.M. is the company that is notable for going the other direction," he said. "I.B.M.'s footprint is more narrow today than it was when I started. I am not sure that has been to the long-term benefit of their shareholders."
Is this just about the head-to-head competition for database sales Microsoft SQL Server and IBM DB2? I don't think so.
Or, does Ballmer really think shareholders are eager to have their companies stay locked into low-margin businesses like commodity PCs and commodity servers, particularly as the already-challenged PC is getting squeezed brutally by smartphones and netbooks? No, I don't think so—no one has a better view into the dynamics of the PC market than Steve Ballmer.
Maybe Ballmer is prepping Microsoft for a huge move into business analytics, which is arguably the centerpiece of IBM's growth strategy for the next decade? That's possible, but the cupboard of powerful BI companies available for purchase is pretty bare right now, particularly since IBM has acquired about two dozen such companies in the past several years. That's not exactly the sign of a narrow footprint for IBM, and it's not exactly a tantalizing prospect for Microsoft—so no, that's not it, either.
An acquisition, maybe? Here's one possibility:
Maybe Microsoft's going to acquire long-time partner Accenture and become a high-end services player? Well, that could be interesting, but it would also give credence to the very IBM strategy that Ballmer is attempting to belittle: moving into higher-value, higher-margin businesses. Plus, Microsoft's vast network of highly influential channel partners would screech like roasting cats if Microsoft were to make such a move. So no, I don't think that's it, either.
Could it be cloud computing that's the source of Ballmer's bilious Big Blue broadside? I think that's it: the cloud is the one area where Microsoft and IBM could very well be on a collision course, and Ballmer wants to spread the word in these early days that IBM's become too narrow, too confined, too unimaginative, and too risk-averse to offer any meaningful innovation and value. And the Times blog seems to inkle in that direction as well:
Mr. Ballmer's comments were blunt enough. And then there's Bob Muglia, the president of Microsoft's server and tools businesses, commenting on I.B.M.’s cloud strategy. "I don't think I.B.M. is keeping up," Mr. Muglia said. That comment came during part of an interview last week about the cloudy companies that keep Microsoft up at night. As you can tell, I.B.M. failed to make the nightmare list.
So if we follow that thread, it looks like Ballmer and Muglia are reaching back into a (very) old IBM playbook by trying to spread a little cloud FUD (fear, uncertainty, and doubt) about IBM's ability to be a player in that rapidly emerging and deeply strategic market.
The problem with that approach is that CIOs and other customers are sick and tired of hearing vendors berate each other and belittle competing approaches when the real issue for those CIOs is what can YOU do for me NOW, other than tell me in the vaguest possible terms how crappy my other choices are. And that's where Ballmer's comments in the Times blog crash head-on into the ideas he lays out in "New Efficiency," including this key passage:
At the same time, these technologies streamline access to information no matter where it is stored and enable people to work together securely no matter where they are located. This new generation of business solutions also provides improved mobile computing capabilities so people who work in a branch office, at home, or on the road can be as productive as employees who work at corporate headquarters.
Most important, a new wave of IT technologies offers advanced tools that enable employees to transform insights into innovations that address unmet market opportunities and meet unfulfilled customer needs.
This powerful combination of greater productivity and improved capacity for innovation is how IT enables businesses to do more.
IBM's been doing this for several years. Steve Ballmer might not like that, but that doesn't make it any less so. Through Global Services, through its intense move into business analytics, through its work on business-process optimization, through its middleware and entire integrated software stack, and through its aggressive move into financing, IBM is doing all the things Ballmer says Microsoft is about to do to meet the new realities of our times.
I have no doubt that Microsoft and Steve Ballmer, fully and unambiguously at the helm of what used to be Bill Gates's company, can do great things for CIOs with these new products and new focus and vision. But they do themselves no good, and their customers no good, by making shallow and ultimately silly claims about how IBM's a moron and it's feet are too skinny and it's become so risk-averse that you can watch it shriveling up into irrelevance.
Steve Ballmer can't seriously believe those things about IBM. So he should stop insulting the intelligence of his customers by saying them publicly, and he should instead pound relentlessly on the theme of all the great things that Microsoft can do and is doing for its customers.
Because that would be a new efficiency in strategic communication that customers are likely to reward.
Bob Evans is senior VP and director of
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