Q&A: Ballmer on Surface, Apple, partners

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Q&A: Ballmer on Surface, Apple, partners
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Microsoft CEO Steve Ballmer has worked at Microsoft for 32 years since he was hired as the company’s 30th employee by Microsoft co-founder and Chairman Bill Gates.

Since taking the helm of Microsoft 12 years ago, Ballmer has been forced to navigate seismic shifts from the dotcom bust to the worldwide economic meltdown.

After addressing some 16,000 partners at the company’s Worldwide Partners Conference, Ballmer spoke with CRN about Microsoft’s Surface tablet, Apple and the future ahead for Microsoft and its partners. Here are some excerpts from the interview.

CRN: The number of solution providers rating Windows 8 tablet as an outstanding or good sales opportunity nearly doubled from 34 to 64 percent in our polling after the Surface launch. What is your response to those partners? They are excited, and they want to know if they are going to have the opportunity to sell it.

SB: Look, let’s just say this is new for us. We have announced that initial distribution would be off Microsoft.com as well as through Microsoft physical stores. So is there an opportunity? Is there some big distribution? Not initially. We just got to get [it] out the door.

But, if a partner says, "Hey look, I want to sell some of these things. I want to put them in a solution" they can order some off Microsoft.com and sell them. There is nothing that gets in the way of that. But, we have not set up what I would call industrial distribution as sort of a first element. We may get there. 

CRNWhy didn’t you give these guys a chance to sell it out of the gate? Apple is out there in the channel now. They are recruiting a lot of guys to sell the Apple tablet, granted low margin. 

SB: We made a decision to get into the market in a way where we know we’ll have a perfect experience to get started, and then we can always do more -- go broader.

We had no idea what kind of a reaction we were going to get to the product, to the concept of us doing Surface. None of that. So we took our first step. It doesn’t mean we can’t take other steps.

We get to decide. Right now we are focused on executing well this first phase, which is to ship the Surface RT along with Windows 8 in October. We said it would be about 90 days later before we would have the Surface [for Windows] 8 [Pro], and those will just be in limited distribution to start.

CRN: It sounds like there is going to be only very limited product availability between now and the end of the year.

SB: Limited availability is all a question of supply versus demand. So we have got to see what kind of demand we have. We’ll make what we can.

CRN: Who is building the Chinese production factory?

SB: I think the speculation is that Pegatron is -- I wouldn’t say building it -- is doing the transformation is the word they like to use; that is the final sort of integration.

CRN: I've watched Microsoft for 30 years and with Surface, it really feels different. It feels like you guys have taken off the gloves and are going on offensive rather than defense. It is more in the Ballmer style. Talk about how Surface has changed the character of the company.

SB: I think it is Windows 8 that really is the catalyst for sort of stepping out.

Look, we needed to reimagine Windows. We really did need to reimagine Windows in order to take the next steps with our customers and take the next steps in competition. Whether it is new silicon support, new form factor, new UI, embracive touch and stylus, all of that stuff had to come with the new version of the operating system.

So, of course you see stepped up competitive energy and vigor and the like. Surface is a part of that because we wanted to have the device that was designed for Windows 8 and only Windows 8, and a design that really would make it absolutely clear that you could have a device without compromise that was both a tablet and a PC. And, we think we have done that.

But, we also think there will be a number of OEMs who have great devices along that road. So with Windows 8, yeah, I think you could say it is a new era. Gloves are off. Let’s go Baby! Bring it!

But, there is not only going to be Surface tablets, which I am very excited about. We have partners who are doing tablet designs, x86 tablet designs, Intel SOC tablet designs, Nvidia, Qualcomm.

I mean you are going to see an explosion of a number of Windows tablets. I happen to have a personal fondness for the work we are doing with Surface. But you are going to see a range. 

CRN: With Surface this ability for you guys to act as a vertically integrated hardware software supplier really changes the game. Can any of these OEMs really match what you guys are going to bring to the table when you guys have the secret software sauce?

SB: Look we have been very good about supporting our OEMs. There is nothing that we can build that our OEMs can’t build. There will be 375 million PCs sold (this year). I think it is probably fair to say that we are not going to sell a super high percentage of the 375 (million).

So it is not us alone. It is us and our partners.

Surface will be a very important thing. And I am really excited about it. But we are also going to see great work from HP and Dell and Samsung and a bunch of other guys.

CRN: Don’t you think this will push the OEMs to do more innovative products?

SB: I don’t think it is going to hurt in terms of stretching innovation. It is the time. Windows 8 is a unique opportunity not just for us, but for everybody who builds applications, for everybody who builds computers. Windows 8 is a unique opportunity. And if Surface galvanises people around the opportunity to do hardware innovation so be it.

CRN: What are you going to do to assure that hardware OEMs have a level playing field?

SB: Number one do we license them everything (in Windows) that we use in our own Surface? And the answer to that question is: yes. Number 2: they will say hey look ‘essentially do you charge yourself some kind of a royalty so that we’re on equal footing from a price perspective? ‘ The answer is: we handle things so that things are appropriate in that dimension.

And then the third question they ask is when they give us their confidential information do we protect that from our Surface team. And the answer is of course we’ll do that.

CRN: So there will be confidentiality and a level playing field in terms of royalties

SB: I didn’t say it quite that way. We are trying to be very precise so that our OEMs know absolutely that there is opportunity here despite Surface.

CRN: The number one thing guys want to know is this Surface thing. Your message to those guys is they can’t sell it out of the gate.

SB: I didn’t say that. They can order it from us and they can’t order from their normal distribution. They can order it off Microsoft.com. And they can do what they want off Microsoft.com.

But we are not setting up what I would call a typical distribution chain. What our partners choose to do is up to our partners. In terms of all of the classic machinery not out of the gate. We are not doing that.

CRN: A lot of these guys are going to be working deals. They are excited. What do you tell them?

SB: Great! Go for it! Go for it! Great! Love ya. If Surface makes sense to your customers, yo go for it! 

CRN: Was it simply a margin issue in terms of not letting the channel sell it?

SB: One step in front of the other. One foot in front of the other.

Read on for how Microsoft is planning to take on Apple

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