Ballmer delves into the 'new normal'

Microsoft CEO Steve Ballmer sent on Monday one of his periodic public e-mails, outlining the business realities of what he called "the new normal."

His e-mail comes just ahead of an event in San Francisco where he will talk about the lineup of products Microsoft is launching, namely Windows 7, Windows Server 2008 R2, and Exchange Server 2010. I'll be covering that event live later Tuesday.

"Today, people borrow less, save more, and spend with much greater caution," Ballmer wrote in the e-mail, which is sent to anyone who subscribes to the notes. "This is the new normal and it will be with us for some time to come. The issue now is how to respond."

Here's the full e-mail:

----- Original Message -----
From: Steve Ballmer
To: Ina Fried
Sent: Tue Sep 29 04:08:15 2009
Subject: The New Efficiency

In all the talk about the economy, one term that comes up more and more frequently is something called "the new normal." I like this phrase because it speaks to the fact that economic reality has undergone a fundamental shift over the course of the past 12 months.

So what is the nature of this shift? After years of economic expansion fueled by unrealistic rates of consumption and unsustainable levels of private debt, the global economy has reset at a lower baseline level of activity. Today, people borrow less, save more, and spend with much greater caution.

This is the new normal and it will be with us for some time to come. The issue now is how to respond.

I believe the new normal requires a new kind of efficiency built on technology innovations that enable businesses and organizations to simultaneously drive cost savings, improve productivity, and speed innovation.

Because you are a subscriber to Executive Emails from Microsoft, I want to share my thoughts with you about how information technology can enable organizations to operate more efficiently, more effectively, and more strategically as they respond to the new normal by moving toward the new efficiency.

THE NEW EFFICIENCY: WITH LESS, DO MORE

In the new normal, one thing is clear: cutting costs is extremely important. But cost cutting by itself is not a long-term winning strategy. To build a sustainable competitive advantage, companies must ultimately do two things-increase productivity and find ways to deliver new value to customers.

The issue, then, is how can organizations take costs out of their operations, increase productivity, and expand their capacity for innovation all at the same time?

For years, we've talked about how information technology enables companies to do more with less. But during this economic reset, IT provides business leaders with the answer to a slightly different question: Can my company with less, do more?

Other trends give this question even greater urgency. Workforces are more distributed and employees are more mobile. Government regulations are increasing and compliance requirements are mounting. Data security is more important to preserve and more difficult to maintain.

At the same time, companies struggle with legacy technology systems built on incompatible and disconnected applications that limit access to information and impede collaboration. The complexity of these systems forces IT departments to focus too much of their time and too many of their resources on providing basic services and protecting security.

Today, a new generation of business solutions is transforming IT into a strategic asset that makes it possible to cut costs without crippling customer service or constraining workforce creativity and effectiveness. A new generation of business solutions is eliminating the barriers between systems and applications, and automating routines tasks so IT professionals can focus on high-value work that is aligned to strategic priorities. These technologies can help organizations reduce risk, improve security, and drive down support costs.

This is IT how achieves the new efficiency with less.

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.

SOFTWARE SOLUTIONS FOR THE NEW EFFICIENCY

This year, Microsoft is introducing a wave of new software created specifically to enable businesses to tackle their most pressing challenges and strengthen their ability to deliver innovation to the marketplace.

It starts with Windows 7, the newest version of our flagship PC operating system. Windows 7 simplifies tasks and lets people get more done in less time with fewer clicks. Ready to deploy now, it enhances corporate data protection and security, and increases control to improve compliance and reduce risk. Part of our Windows Optimized Desktop solution that includes Microsoft Desktop Optimization Pack, Windows 7 streamlines management of PC environments, making it easier to reduce costs, improve performance, and enable end users to work anywhere.

These and other enhancements are the result of close collaboration with millions of customers and thousands of IT professionals who participated in testing programs and provided suggestions about the capabilities and improvements they wanted to see. Thanks in large part to their help, Windows 7 is the best PC operating system we have ever built.

We've also just released a new version of our server operating system. Windows Server 2008 R2 is designed to increase the reliability and flexibility of server infrastructures. It provides a productive server platform that offers cost-effective virtualization and business continuity, great power saving capabilities, and a superior experience for end users.

Later this year, we will also launch Exchange Server 2010. The cornerstone of Microsoft's unified communications technologies, Exchange Server 2010 provides a great email and inbox experience that extends from the PC to the phone to the browser and it helps companies archive and protect information efficiently. It also enables companies to reduce costs by delivering a built-in voice mail solution and providing low-cost storage options.

ACHIEVING THE BENEFITS OF THE NEW EFFICIENCY TODAY

Organizations around the globe are already deploying these solutions and reaping the benefits.

At Intel, for example, Windows 7 is providing improved performance, greater application responsiveness, and a better platform for mobile workers. Ford is taking advantage of Exchange 2010 and Windows 7 to streamline communications, improve decision making, and boost productivity. Continental Airlines expects to save more than $1.5 million annually in hardware, software, and operational costs through the server virtualization capabilities of Windows Server 2008 R2 Hyper-V technology.

At Convergent Computing, an information technology consulting firm based in California, Windows Server 2008 R2 and Windows 7 will eliminate the $40,000 in annual spending that was needed to maintain a virtual private network for the company's 55 employees. In addition, employees can now access the company's corporate network instantly and download files 30 to 40 percent faster than before.

Another example is Baker Tilly, a London financial services firm with more than 2,000 employees and a network of partners in 110 countries. One of the first businesses to deploy Windows 7 on a company-wide basis, Baker Tilly expects to save about $160 per PC by reducing deployment, management, and energy costs. And because Windows 7 improves productivity, it offers the potential to increase billable time for mobile workers at a rate of nearly $600 per PC. This could return the equivalent of one-half of one percent of the company's current gross annual revenue to the bottom line.

Businesses aren't alone in their struggle to respond to the new normal. Governments must figure out how to deliver more services on budgets that are sharply constrained by falling revenue. As part of its response, the city of Miami deployed Windows 7 and expects that it will save nearly $400,000 a year in reduced security, management, and energy costs.

IDEAL CONDITIONS FOR AN ERA OF INNOVATION AND GROWTH

Despite the challenges posed by the global economic reset, I'm optimistic about the long-term opportunities that lie ahead.

I'm optimistic because there are encouraging signs that growth may resume in many parts of the world during the course of the next year.

More than that, I'm optimistic because I believe we are entering a period of technology-driven transformation that will see a surge in productivity and a flowering of innovation.

The new efficiency will not only help companies respond to today's economic reality, it will lay the foundation for systems and solutions that connect people to information, applications, and to other people in new ways. The result will be a wave of innovative products and services that will jumpstart economic growth as companies deliver breakthroughs that solve old problems and serve as the catalyst for new businesses and even new industries.

This too will be the new normal-economic growth driven not by debt and consumption, but by rising productivity and new ideas that provide real value to people throughout their lives. Information technology will play an important role. I look forward to seeing the progress that results.

Steve

[Random_Walk]

Dear Mr. Ballmer.

This does NOT mean breaking up servers into discreet services and practically requiring each service to have its own separate server, just to amplify your licensing income (see also OCS, SharePoint 2007, Exchange 2k7, Forefront, WSUS->SCCM, et al).

It seems that with each new iteration of a back-end product, what could once be packed into a single server now requires two, three, even four or more servers to do the exact same job. Making the Exchange 2k7 mailbox handler into a literal memory hog with no way to throttle it back was an especially dumb move, BTW. To make a comparison? What could once be handled by two Exchange 2k3 servers now requires four (not counting the edge subscription SMTP boxes).

The irony is, I could do the exact same load with one *nix server (and wouldn't require a bunch of semi-dangerous DB-handling tools just to manipulate individual users' emails as needed).

I realize this means more licensing revenue for you, but it's quite frankly turning us off in IT. Even my MSFT friendly boss finally had enough - when he threw out Forefront in sheer disgust (which meant that I didn't have to be cursed with wedging the bloated thing into Exchange and screwing up everyone's email performance, or worse, sending performance down the toilet. spamassassin/ClamAV is loads cheaper and much easier to implement, and I had a working demo going for him in less than three hours).

I am very sure that I'm not alone in this... in fact I am certain. This may explain why your revenues have been falling of late, while RedHat's have been skyrocketing (in spite of their base product - Linux - being basically cost-free). The IT market is yours to lose, and it appears that you may be doing just that.

Signed,
Disgusted in IT.

[Super2online]

It didn't take but one post to start seeing the Linux elitist criticism start flying. Granted some of this is true, and maybe Balmer isn't the person to lead the Microsoft charge on this. But why do you guys always seem to to think that everything in the world is absolute. All Microsoft products are horrid, and all Linux systems are here to save you if you could just get past your stupidity and ignorance. It's that kind of mentality that turns people off and away from solutions that might work better for them.

You would serve your points better by simply stating your case with facts that can be proven and let them stand on their own merit.

[Random_Walk]

HAs nothing to do with elitism - I merely used it as comparison, sticking to known fact and demonstrable/repeatable proofs.

Incidentally, there are no absolutes in there, and I honestly never asserted any, save for the fact that yes, there is (at least in my experience and with local and regional networking) a growing disgust with what's going on - I defy you to find any non-Microsoft employee or vendor that agrees with or enjoys the bloat in licensing and server sprawl.

This is a disturbing trend with Microsoft products that are going to hurt the company sooner rather than later. It's a cash-grab. If there were features that could account for the sprawl, okay - let's see them. As it is, there are few new features of most services coming out that can proportionally justify the expansion that many of Microsoft's services have become.

Let me pick an egregious example: Do we really need an Exchange mailbox store that demands (and gets) 90% of available RAM on a 16GB server, but only (at best) begrudgingly gives it back when some other process needs it (killing both app and I/O performance while the contested RAM pages get written back and forth to disk)? That server's predecessor only needed 4GB of RAM to get the same job done, and have enough left over to let the server perform other tasks as needed. If it were an option, then I'd have nothing to complain about - thing is, it's not optional - you write off the RAM and that's final. Microsoft's argument? They think they're entitled to the RAM, that store.exe's give-back mechanism works as advertised (it doesn't), they claim efficient use of the machine this way (it ain't), etc.

That's just ONE example. I could spend all day listing a small chunk of the rest.

Now how on Earth is the IT director or CIO supposed to justify the frickin' budget bloat required to support all of this - especially in light of the competition.

I used Linux as a comparison because this is what Microsoft is up against in the enterprise space. Sure, there's no perfect analog of Exchange in Linux. However, this doesn't mean that there won't ever be. There are valid and very usable alternatives to Forefront, and they work perfectly with existing architectures of any type. SharePoint, once companies find to their horror how much the real costs are, eventually start looking into a non-Microsoft CMS system to replace it - migration headaches be damned (there's even one method that uses Google API's to do it FFS, and it's looked at as viable - and even crazier - is used).

It's not elitism to lay out the fact that there is competition, nor is it elitism to explain just how much Microsoft is up against. If they (and you) write it off as such, that's your prerogative, but know that ignoring one's competitor is a sure way to be surprised, then conquered by that competitor.

Don't believe me? Just ask Siebel how well it went with ignoring Oracle and that newfangled (relative) ease-of-installation Oracle provided with their products. Ask Word Perfect how well it went with ignoring Microsoft Word and that GUI-thing Word used, and etc.

Ballmer is doing the same thing - doing whatever he wants, self-secure in the assumption that nobody else will ever, ever come up with something better. The problem with leading by fiat is that you lose sight of the landscape, and once you do that, you can no longer see your competition until it's too late to do anything about them.

[Seaspray0]

@Random_Walk. Forefront, WSUS, SCCM... and backup exec, WDS, HTTP services, FTP services, file and print sharing services all running on a single HP proliant DL380 G3. You are exagerating your claims.

[Seaspray0]

@random walk. You are not completely out of line. I do agree that microsoft does have a nasty habit of recommending you put services on individual servers. But that's not to say alot of those services will work well on a single server (as I demonstrated in my last). That's the basis of small business server... running everything on a single server - dhcp, dns, domain controller, exchange, file and print services, database, etc, etc. - and yes it is being done that way (maybe not for your business). Bigger businesses will have a use for more servers but not the extent you claim. I've even seen OCS packed onto a single server. Do you really think everyone uses 6 servers just for forefront (yep, there is a 6 server configuration)? No, of course not. Are some of microsoft's apps hungry? Exchange and SQL are the top 2 on my list. They will soak up as much memory as you want to give them. I can guess that you didn't configure how much you wanted to give them and they wanted it all.

[Random_Walk]

"Forefront, WSUS, SCCM... and backup exec, WDS, HTTP services, FTP services, file and print sharing services all running on a single HP proliant DL380 G3."

I serve nearly 2,000 users locally, 1,000 regionally, with a global org of nearly 10,000 accessing my farms. All of this is in a rather large manufacturing environment. In Exchange, I used to do the whole wad with only two servers (~3,000 users) and a Linux-based relay server and spam filter. Now I need four (two mailboxes, two hub transports) just to keep the performance levels acceptable, plus the two edge subscription servers (one would have done it, but Exchange gets all picky about AD site segregation, and for some reason, cross-site mails outbound tend to get lost in the queue... it's a bug they're working on, but their solution was the 2nd ES server. Go figure).

SQL Server has one feature that Exchange does not - I can throttle the amount of RAM an SQL instance gets. Exchange 2007 does not have that ability - it has at best a few registry hacks that don't really work and induce instability, and Microsoft is adamant about not fixing that particular problem.

Looking at 2010 versions, it seems the sprawl is only getting worse, and affecting more packages. I'm fairly sure they'll still have the SBS editions, but I'm equally sure that they won't have the featureset, or the scalability. Once your smallish rig grows, you're going to be in for a rude shock of sorts...

By the by - "HTTP services" and "FTP services" come with IIS, which is in turn a required package for half of those bits in your SBS. Forefront is also multi-faced - you can use some of it and not the rest.

(and when are they going to fix $#@! MMC 3.0!?)

[Mark_Anderson]

@Random

No-one cares.

[shellcodes_coder]

I don't like Ballmer, Gates was much better than him. He doesn't bark like Ballmer does. Nonetheless, great years ahead--Windows 7, VS 2010, office 2010, project natal, courier :)

[Random_Walk]

For once, you said something that made sense - Gates was leagues above Ballmer.

You either respected or feared Gates' ability to run a company (his coding skills OTOH? *pffft*).

Ballmer just gets laughed at, and Microsoft's loss of marketshare shows that.

[honeyboner]

I actually think he's got to be a much bigger hysterical prick to compete with the other hysterical prick at Apple.

[shellcodes_coder]

@Random_Walk: For once, you said something that made sense and as usual I hope you were not paid by crapple for that post. I respect Gates, and am sure am a better coder than him :)

[dhavleak]

@ Random Walk

You said "You either respected or feared Gates' ability to run a company (his coding skills OTOH? *pffft*)"

What do you know about Gates' coding skills?

[Random_Walk]

"What do you know about Gates' coding skills?"

As evidence, I point to the very earliest versions of Windows. If ever there was a penultimate example of lousy design skills...

[Seaspray0]

@random walk. Plug and play alone made windows 95 the best operating system of all operating systems at the time it was released. It enabled the average joe the ability to easily add hardware with a very simple to use tool. It took years for anyone else to come close to duplicating that. Please give credit where credit is due.

[Random_Walk]

@Seaspray:

I'm referring to Windows 3.0 and earlier, where Gates had a hand in the coding, design, etc.

Also, plug-n-pray wasn't exactly a smashing success at first (nor was it a Microsoft invention - it actually occurs at the hardware level ;) ). Ref: http://en.wikipedia.org/wiki/Plug_and_play

[dhavleak]

@ Random_Walk

I expected as much, that your answer would be based on that.

For the record, the last product that Bill Gates actually coded was the very first Basic compiler for DOS. Now whatever your opinion might be of Basic as a programming language -- well -- Gates didn't create/design Basic -- he merely implemented a compiler for it on the platform in question (and it achieved it's goal well -- it made hobbyist programming accessible to the masses). And again -- whatever your opinion of Basic as a language, I can tell you this -- compilers are probably the single hardest thing to code. I absolutely tip my hat off to anyone who can write compiler code (the stuff that ends up in a real product -- not the compiler projects you do in school). You'll do well to remember that back when Gates was writing this code, he had to do it in *assembly* -- no less. That's about as hardcore as it gets my friend. He was managing a company at the same time -- keep that in mind as well.

People who have learned programming in the last 15 years (or less) are used to a world in which IntelliSense (powered by Reflection APIs) can auto-complete code for you. Wizards can write a good chunk of your project. Managed runtimes abstract out direct memory references so you can't shoot yourself in the foot. Libraries are available that do all the heavy lifting -- the only code you need to write pertains to the task at hand and nothing else. You can actually trust your OS to manage memory for you (in Gate's time, you had to implement your own memory manager / heap -- you couldn't even purchase a library that did it for you back then).

Just a few things to keep in mind before making such a snarky remark about somebody's coding skills. Especially considering you've never seen a single line of the code he wrote.

[ppgreat]

I always find these emails interesting. They're safe, very general in nature, and overflowing with buzzwords. No passion. No real info.

It really speaks volumes of the Microsoft culture and how they approach their solutions.

[rapier1]

This is because this is a marketing tool and that's about it.

[GatesOfHell]

Do more with less. Wow. How much newer could he get?

[Seaspray0]

It does sound like something you'd hear in a walmart commercial.

[Netcentral]

Microsoft just does not get it. Another long rant from the chairman who has presided on the longest decline in Microsoft shareholder value. Yes I am a MSFT shareholder and VAR that has been reselling MSFT products for 6 years. But I can see the writing on the wall. For small businesses, unless they have legacy windows only applications, it is time to look for other solutions. One way to cut costs is to eliminate servers not add more of them. For SMB it is stupid to host your own Email server unless you have to do so because of government regulation. If you really want to get rid of VPN and costly hardware to connect to other satellite offices use hosted applications from good vendors.

The way to cut real costs and improve productivity is start using Cloud based solutions. At first I was real skpetical of Google Apps. I have grown up on Outlook and Exchange. Then one day m, sick of maintaining the Exchange 2007 Servers, I switched to Google Apps. I have never looked back. Google Apps has been reliable, and has excellent mobile phone support. Calendar, Mail and Spreadsheet are great collaboration tools. However the word processing and presentation need a lot of help. I bet HTML5 will fix a lot of those issues. How I got productive was being able to securely access information from anywhere without investing in or maintaining hardware.

Microsoft should focus on listening to customers and try to feel their pain points. Ballmer is simply offering incremental point solutions that maximize licensing revenue for MSFT. The world has changed. MSFT has not.

Gates please come back and rescue my MSFT share.

[Goodbye Helicopter]

He's a moron

[hereismytwocents]

The "new normal" for software companies is that they will be expected to deliver "real" value to the business consumer. No longer can companies continue to add technology without phasing out other technology. Fast deployment, adoption, migration and decommissioning is required. Understanding and addressing this is critical for anyone that expects to flourish in is this environment. Business consumers are wise to the "latest and greatest" pitch. They know that a net-add without a (or multiple) corresponding deduction(s) doesn't address the technological vapor-lock, exorbitant adoption time and costs that companies are expected to go through.
Or to put it another way, NPV > bells and wistles.