Ballmer Says Recession WIll Drive Efficiency

Microsoft CEO Steve Ballmer, speaking at a company event in San Francisco on 29 Sept, suggested that IT administrators will need to be more efficient during an “economic reset,” as he called it.

“I think IT is going through a period of new efficiency,” Ballmer said at the event. “What do we mean by that? It relates to this notion that the same pressures that have been on IT for years … [are now] accompanied by the pressure to run a cost-effective IT shop.”

Of course, Ballmer then suggested that the surest route to that extra-efficient, ultracheap IT shop would be the deployment of Windows 7 and other upcoming Microsoft software platforms. The event was aimed squarely at the enterprise, upon which Microsoft and many of its ecosystem partners are depending for a sizable amount of technology sales over the coming quarters.

“In the new economy, it’s, ‘With less, do more,'” Ballmer said. “Yet at the same time, there’s a lot of pressure for new applications, new innovation.”

Ballmer attempted to appeal to IT administrators’ consciousness of their purse-strings, focusing much of his talk on the supposed cost-efficiency of upgrading to the next generation of Windows products.

“Some of our customers will race to embrace Windows 7 and will want to upgrade machines in place,” Ballmer said. “More will probably want them on more PCs as they refresh their PC base. Those with a particularly old install base may do a more massive refresh.” He added, “We do think you’ll see ongoing savings once you have these things deployed and provisioned that should be interesting for you from a cost perspective.”

In a letter titled “The New Efficiency” released to customers and partners on the same day as the San Francisco presentation, Ballmer wrote, “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 … other people in new ways.”

Drawing attention to Windows 7, Windows Server 2008 R2 and Exchange Server 2010, Ballmer made it clear that he wants the enterprise to see Microsoft as a vital part of propagating that new efficiency. In the letter, he cited Ford Motor Company, Continental Airlines and Baker Tilly, a London financial services firm, as all saving money through the deployment of Microsoft systems.

The viciousness of the two-year recession has dampened companies’ IT spending and, by extension, Microsoft’s bottom line. For the fourth quarter, the company reported a 17 percent decline in year-over-year revenue, with earnings of $13.10 billion that were roughly $1 billion below Wall Street estimates.

As a result, Microsoft has cut several underperforming or legacy programs and retrenched around core products such as Windows 7 and Office 2010. In addition, it has launched a campaign of price cuts and associated promotions through retailers, attempting to spark interest in the upcoming operating system among consumers.

That being said, a key part of Microsoft’s strategy focuses on the enterprise. So that its new operating system will be embraced by IT professionals, some of whom may initially choose to stick with their well-worn XP-based systems, Microsoft has taken steps such as offering Windows 7 Enterprise in a free 90-day trial edition.

The question remains, though, whether IT professionals will choose to rapidly upgrade their systems, especially considering the general squeeze on budgets alluded to by Ballmer during the presentation. A July report by Deutsche Bank found that Windows 7 would indeed compel such a widespread tech refresh within the enterprise and small and midsize businesses, even as another survey by ScriptLogic found that many companies plan on adopting the new operating system and other software in the Microsoft ecosystem much more slowly.