Q&A: Steve Ballmer On Windows 7 Enterprise Deployment

Microsoft CEO Steve Ballmer, in a Sept. 29 e-mail to customers, promotes a triad of Microsoft products -- the newly unveiled Windows 7 and Windows Server 2008 R2 and the upcoming Exchange 2010 -- as enablers for "new efficiency" in business.

[Find out when Windows 7 will be right for your enterprise. If you're weighing whether or not to migrate to Microsoft's new operating system, then be sure to check out InformationWeek's Business Case For Windows 7.]

It's partly marketing, but Ballmer is tapping into an issue that many business and technology executives are grappling with as they continue to scrutinize every dollar that goes into IT operations. Amid tight IT budgets, which Ballmer calls "the new normal," CIOs are hard pressed to fund the kind of companywide software and computer upgrades that Ballmer says can lower costs, increase productivity, and lead to new products and services.

InformationWeek sat down with Ballmer in San Francisco to discuss how IT departments can accomplish both -- manage IT resources with a close eye on costs, while also investing in new systems and software to support business growth.

InformationWeek: Let's start with the e-mail that you sent to customers today about finding 'new efficiency' in IT. You say 'do more with less,' but with a slightly different spin on it.

Ballmer: With less, do more.

InformationWeek: IT and business folks have been doing more with less for years. What's the nuance?

Ballmer: During boom times, doing more is the number one agenda being batted around in most companies at the CXO level. In these times, the lead thought is how do we conserve, how do we economize. But don't think for a second that there's still not a certain set of pressures: we've got an application backlog, we have a new product we want to put in market, we want to innovate.

People are talking about the new normal. The new normal implies a new efficiency. That efficiency is a balance between productivity and innovation, it's a balance between doing more with less. But I think the lead dog right now, if you will, is 'with less, do more.'

Four or five years ago, maybe a Windows Server launch, we did an ad campaign. The theme was 'do more with less.' We kind of flipped it around, because I think it represents where our IT customers are right now.

InformationWeek: We surveyed more than 1,400 IT pros and asked about barriers to Windows 7 adoption. Number one was budget limitations. How do they get over that hurdle?

Ballmer: I don't think we can expect a lot of ad hoc discretionary investment money. That's not going to happen. The case you have to make for anything with IT right now is, how do you take some of the money that's in your budget and carve it out, because this is important enough for future cost savings that it brings, important enough for innovation benefits that it may bring. You're not going to get a lot of discretionary investments being allocated in this economic climate; yet I think we have some of our best cases with the new products that we have coming out.

There's one other thing, which has got to be put in context, particularly as it relates to Windows 7. Most Windows will actually come with new computers. That's a statistical truth. We may sell a lot of upgrades, but by the time all is said and done, most people will get Windows 7 with a new computer. There's not some huge budget that I expect to be allocated for new computers. The average company, even with the economic issues, is still going to refresh computers every three to four years. We're going to be rolling in Windows 7 computers with a lot of our customers--or they're going to have to sit there and say, we want Vista or XP deployed in the year 2010, and I don't think we're going to see a lot of that. I think fairly quickly we'll at least see new machines coming in with Windows 7, which means it sort of has a place in the budget, if you will, already. InformationWeek: Another hurdle to Windows 7 deployment is lack of a business driver. How do you answer IT pros who are looking to find a business driver to move forward?

Ballmer: We also have Windows Server 2008 R2 and Exchange Server 2010, and in a sense they are driven together and in a sense they have their own drivers. Voicemail is a powerful driver; you can justify the Exchange 2010 implementation just on voicemail system takeout. It's a huge amount of money people spend on voicemail systems. Boom, pull them out. I'm not saying that will be every case. The way in which we utilize storage is a lot more efficient with Exchange Server 2010. You can justify an upgrade in the sense that it saves a lot in storage costs. So, there's a lot; each one of these has its own set of dynamics. There's still a whole set of issues that are causing people to spend a lot of money on security. Windows Server 2008 R2--there's a set of advances; application development, there's a set of advances.

But let me stay on Windows 7. We've done some analysis, based on Gartner research, with a few customers. It's our estimate -- I'll say that -- but based upon working with a few customers, it's our view that people will be able to save between $90 and $160 per year [per PC] in direct labor with Windows 7 versus having XP or Vista deployed. Now, people are going to have to vet that, look at that, but that's a pretty powerful driver. Independent of any innovation and productivity advances for the end user, that's a pretty powerful driver on the IT side.

At the same time, to some degree I think you're going to find a slew of people buying Windows 7 on computers at home, and they're going to come in and say, hey, I need this for my productivity. Now, that won't carry the day in this climate, but it sure will on the refresh cycle. Jeez, they'll say, you're going to buy me a new PC in 2010, and you're not going to put Windows 7 on it? That's nuts.

So, I think we've got some pretty powerful, quote, business drivers. They're not the classic business drivers, you know, here's the ROI, the return; they all will have to be morphed and mapped a little bit. I mean, why does somebody get a Smart Phone at work? Where's the business driver? Well, the user wanted one is really the business driver. And I think we'll see that also with Windows 7.

InformationWeek: One of your customers, Baker Tilly, actually tied revenue growth to Windows 7 adoption. How many companies can expect to see that?

Ballmer: I think that's more the exception than the rule. The reason most companies embrace these end user oriented technologies has to do with enabling productivity, collaboration, output from the workforce. Now, whether people can directly tie that to revenue is always a good question, but indirectly people kind of viscerally understand, if I make my people better able to analyze things, to create and to collaborate amongst themselves and with their customers, that's good. The Baker Tilly case of being able to directly tie it to revenue numbers, that's going to be much more the exception.

InformationWeek: Let's talk about new capabilities. What would be Steve Ballmer's top things driving users to Windows 7?

Ballmer: I think the number one thing the end user will seize on is the clean, new look -- a simple and clean UI. At the end of the day, everybody is going to find their own features to fall in love with. But everybody is going to say, wow, we're not in Kansas anymore. The color, the simplicity, just the way the user interface works people will see as a jump-up. Some people will like touch.

When somebody asks, what's your personal favorite feature, I'm almost embarrassed but it really has changed my life, is wireless networking is simple, really simple. It turns out I spend a lot of my time connecting and disconnecting to various wireless networks, whether 3G or Wi-Fi or whatever. At our house, at home, it's Home Group for my kids so they can get the music and the pictures well organized, and that happens to be the thing that my oldest son has fallen in love with. It will depend on the user scenario.

So, from an end user perspective, overall user interface and let me say not only the way it looks but the pop, snappy, the feel of the system, the way it looks and the way it feels, that will affect absolutely everybody. Beyond that, people will find their own features that I think they'll fall in love with.

On the IT side, these things always come back to three things. It comes back to manageability, security, cost. That's where the IT manager lives. If you take a look at the numbers, the numbers kind of make the point on manageability. If you take a look at the security stuff, whether it's DirectConnect or some of the other things that we've done from a security perspective, it's a real step forward. At the end of the day, it's mostly translated into cost; you're supposed to be able to do better with the same amount of money, and hopefully you can do better with less money, and I think that's really the story of this business value. InformationWeek: For years when we would talk to you, security was the number one talking point. Do you feel that you've kind of won that battle?

Ballmer: No, I don't think we've won the battle. I think that's a battle you're on top of for your whole life or you're going to lose. I do think that in the broad mindset, security has less prominence today than it would have four or five years ago. If you look at in our engineering teams and our approaches and what we're doing, security remains very high up on the list. In popular culture, out of sight is out of mind. Today it's identity theft, which is another security problem very much at the top of people's minds. But these kind of raging virus problems of a few years back, while they're not gone and they could certainly reemerge, they're just less in the popular mindset.

InformationWeek: There has been a lot of talk that cloud computing is the new model for IT efficiency. Where does that fit into your new way of looking at IT investment?

Ballmer: I think the reason people will embrace cloud computing is for the new efficiency--productivity and innovation, cost and agility. It's not all about cost, it's about the combination of those things. That said, there will be a pace of adoption, and we've got to stay ahead of the pace of adoption, but no matter what we do, the pace of adoption isn't going to be instantaneous. People have to get comfortable; IT people have to get comfortable with the model, with their data, their programs living outside their companies. We all have to make what I would call the incremental improvements, because some of these application workloads you're going to want to split between on-premise and in the cloud.

So, there's a set of factors that I think will gate adoption. Certainly we're seeing much more rapid adoption even for our Exchange and SharePoint Online offerings. Those things are going really quite quickly. The Azure product line, which is more at the line-of-business platform level -- Windows Azure, SQL Azure -- that stuff will go just a little more slowly because there's a little bit more education and comfort level that has to be built with IT managers, but no doubt cloud computing is also part of the new efficiency.

InformationWeek: Our research shows that only 16% of IT pros have plans to deploy Windows 7 in the first 12 months, and about 50% had no plans or don't know of their companies' plans. That seems to suggest that you have your work cut out.

Ballmer: You always do. I happen to believe there's not much education to do. It's not like people don't understand that there is a Windows 7. It's not like most of the customers haven't tried the Windows 7.

I think there is a set of issues that says, hey, can I deploy this independently, should I deploy this independently of a hardware refresh cycle? And will my hardware refresh cycle continue to look like it has looked, will it be a little slower because of budgets? So, the numbers you cite, they don't scare me. It's software business as usual. IT is going to be thoughtful and kind of careful in its embrace of anything new. I don't think this will be a question in the case of Windows 7 of, should we? It will be when should we, which is a very different question. There will be a strong view very quickly that says we should; yet I'm not sure that that will ring an alarm bell that says we must do it immediately.

InformationWeek: As you talk to CIOs, what's your sense of their readiness to move in this direction?

Ballmer: I think the real question is, are CIOs ready to refresh machines with Windows 7, and when? Are they willing to live with a mixture of Windows 7 machines and Vista and XP machines in the installed base? And selling that transition and supporting customers through that transition is important. Frankly, if you ask me, anybody who's thinking that they're ready for Vista should just deploy Windows 7, tomorrow morning. Now, that may not be where the customers are and we have some work to do to really invest with the customers in getting them confident about that.

So, we're not going to come in there and say, hey, there's a huge big new investment for you. What we're really trying to say is, let's leverage the investment you're already making and help you be more productive with it. Let's help you save that 100, 150 bucks a PC; let's help you get the users the thing they really want. And let's not even spend another dime. Let's try to do that just with what you already have budgeted. And then if you really spend a couple more dimes, we can help you make it all happen a little bit faster. That will be a bigger challenge for our guys, and that's something we'll get after. InformationWeek: Some companies unloaded Vista from new PCs and replaced it with XP. You have a customer base that's grown to respect XP, but is XP kind of coming to end of life?

Ballmer: I think IT people will be able to get comfortable with Windows 7 with its user interface characteristics, security, management, costs perspective pretty quickly, and end users are going to say, we want it. We didn't have as much of the end users demanding Vista that I expect we will have with [Windows 7], but let's see.

There's going to be some phenomenal new PCs running Windows. You'll see some of these ultra thins running Windows 7, and you'll go, woo. You'll see a netbook or two running Windows 7 and you'll go, whoosh, let alone the things you're going to see that go next to TVs, at home, and all-in-one form factors and a variety of other things. You'll see those things and say, that's the machine I need to get my job done.

Again, assume flat budgets. I assume we're not going to get some big increase in IT budgets. That's when people say to me, are we going to get a big corporate refresh cycle? If we do, it's going to be because we're eating away at the budget that would have been allocated to something else. So, I don't count on that, but I do count on our ability to convince people that the best thing to do with that money that they got allocated for new PCs is to put it into these beautiful new Windows PCs at very economic cost.

InformationWeek: One of the things your 'new efficiency' message implies is that businesses can drive through this economy by investing in IT, which is kind of a bold statement.

Ballmer: I do believe that very strongly. It may not be the only answer, but at the end of the day the only way for the economy to grow isn't going to be from debt, it's going to be from productivity and innovation. If you look at the source is of innovation in many industries, IT is fundamental. It's fundamental to new exploration, new invention, new science. IT is a fundamental part of the innovation process, so I think it part of the new efficiency in that sense. And certainly from a productivity perspective, the only provable source of systemic productivity gains in the world economy over the last 30 years has come from IT.

Yeah, I'm sure I'm a booster for our industry, but I don't feel over the top in making the assertion that when it comes to innovation or even take your industry [media], the key innovation in your industry is all information technology. That's where we get the Internet, the blogosphere. It's what we're seeing in the entertainment business, it's what we're seeing in the telecom business, it's what we're seeing in financial services, in shopping, in science-based businesses. We're part of the innovation and productivity that's driving the world economy. We're one of the bedrocks of productivity and economic growth.

InformationWeek: Three years ago, you were optimistic that companies would adopt Vista and drive innovation. As it turns out, there was less of that than expected. Why is your optimism this time is more warranted?

Ballmer: It's one of these things where my optimism about our industry is independent of the products I'm talking about. My optimism about our products is always about what I know about what we've built, coupled with an understanding of what the user reaction has been leading up to the announcement. That was compressed in the Vista timeframe; it was not compressed in the Windows 7 timeframe.

I'm optimistic by nature, but at the end of the day it doesn't matter whether I'm optimistic or I'm pessimistic or I'm FU or I'm BAR; it only matters what the customers say today, three months from now, six months from now, a year from now. So far, the early "tryers", if you will, have been optimistic and positive. So, let's just wait and see what the customers say.

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