NEW YORK--While tech spending has not evaporated, Microsoft CEO Steve Ballmer said on Tuesday that most companies have mandated that their IT departments cut a significant percentage from their budgets.
"To save 5 (percent) to 10 percent, you have to save a little bit on a lot of things," Ballmer told CNET News on Tuesday, in a joint interview with EMC CEO Joe Tucci, "It's not like there's nothing new getting done. Some new projects are getting killed. There's pressure on vendors to reduce prices."
Tucci said he is seeing similar pressures due to the weakening economy. "Most of our customers are dealing with some element of their own restructuring," he said. "They are trying to cut costs. They want quicker (return on investment)."
Tucci and Ballmer sat down with CNET News at the Plaza Hotel in New York, where the two executives were meeting with several dozen CIOs and announcing a three-year extension of the companies' joint sales and engineering partnership. The two companies have been partners in some areas since 2003, although the efforts have expanded significantly in recent years.
The companies are working together in a number of areas, including security, virtualization, and document management as part of the extended deal, which will now run through 2011.
Ballmer, noted that partnerships often either break down or prove to be irrelevant. That, he said, hasn't been the case with EMC. Ballmer said that he was initially somewhat skeptical as to the amount of overlap the two companies would have, but said he was happy that Tucci's optimism proved right.
Still, the partnership makes for strange bedfellows in a couple of areas, particularly virtualization. EMC, after all, bought virtualization leader VMware in 2004. Although EMC has spun VMware out as a separate public company, it still owns the bulk of the shares of VMware, Microsoft's biggest competitor in the virtualization market.
"We're not sitting here pretending we are partnering with VMware," Ballmer said. "There are things we try to cook up with those guys, but let's put that aside. That's more competition that needs to take into consideration what customers want."
But there is more to EMC and virtualization than its stake in VMware, Ballmer said.
The storage business is being transformed also by virtualization. "While Joe may own 80 percent of VMware, he still thinks it is a good idea to sell jointly in areas where perhaps, we'll win as opposed to VMware."
Tucci said that although it's a win-win when customers buy both EMC and VMware, he's also happy to sell storage gear that runs in conjunction with Microsoft's Hyper-V virtualization product.
"If you look for that alliance or partnership to be perfect where there's like zero areas of overlap," Tucci said. "I'm not sure that's physically possible with two powerful companies."
This is the first of several postings coming from CNET's interview with Tucci and Ballmer, which was conducted by Margurite Reardon, reporting from New York, and Ina Fried, reporting from San Francisco. Click here for the full interview.