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Microsoft shift in the works


Steve Ballmer, 50, chief executive of software colossus Microsoft Corp. since 2000, faces his toughest challenge yet as chairman and co-founder Bill Gates phases out of day-to-day management over the next two years. The change is coming as Microsoft struggles to beat back competition from free, advertising-supported software delivered over the Internet by rivals such as Google Inc. A graduate of Harvard University, where he lived down the hall from fellow sophomore (and later dropout) Gates, Ballmer joined Microsoft in 1980. He spoke to Globe reporter Robert Weisman last week after giving a keynote speech to Microsoft's Worldwide Partner Conference in Boston.

What will be the biggest change for you when Bill steps away from daily operations at Microsoft?

Well, in a sense, for me this is starting now, not even two years from now. It's almost like getting a new job. Now that might sound interesting to people in the sense that 'you've been CEO, why is this a new job?'

Because I've been able to effectively delegate aspects of our product strategy to Bill. And I'm going to have to delegate to people who aren't peers in quite the same way.

And that's already begun?

A two-year transition doesn't mean you start the transition in two years. You start now so that you can really be ready in two years. And I'm sort of excited and a little awestruck by the whole thing, but definitely excited.

Will you still be consulting with Bill regularly once he shifts his priorities to running the Bill & Melinda Gates Foundation?

Well, for the next two years he'll be available full time, absolutely. Two years from now, we've talked about him being part time. What I actually assume is I can't count on him for any one thing, but I can count on him for general advice and counsel and involvement in specific projects.

So, in a sense, he's there for spiritual support and we can pick his brain on any topic and he's always available.

Can Ray Ozzie, the executive you hired from Groove Networks, fill Bill's shoes as Microsoft's chief software architect?

I don't think anyone's going to pretend Ray will be Bill. They're different human beings, and Bill grew up with the company and Ray didn't. But Ray's brilliant, and Ray's already made clear he's got a different way he wants to focus. He'll probably pick a narrower set of topics to focus in on and go deeper on those topics than Bill has.

Microsoft has delayed the release of Vista, the new version of your Windows operating system, as well as the next version of Office. Why are these products taking so long?

First, I don't think it's fair to say that Office is taking so long. I mean, yes, we delayed it a month or two. In the grand scheme of things, Office will still have a fairly tight release cycle. It's really Vista that people point to.

And the story of Vista - we did something we wouldn't do again, and I think that's what causes this whole time gap. We started with a spec, a concept for the product, that was beyond the state of the art in complexity. That cost us some time.

We worked against a spec that was too ambitious for really a couple of years. We then said, "Look, we have a problem here," and we decided to do two things. Number one, we did a major re-engineering of Windows in one year; the end user features didn't change, but the security improved dramatically. And then we'll have a little over a two-year cycle from then to deliver Vista into the market.

How important are your "live services" - Windows Live and Office Live - to the future of Microsoft? And do you foresee software residing on the Internet and supported by advertising ever becoming your dominant model?

There are two questions, and nobody should get the two of them confused. One is "Will Internet hosting and Internet-based delivery change the way software is built and delivered?" And the answer to that question is yes, and we're going to lead the charge, and that's Ray Ozzie's focus.

The second question is how software's going to get paid for, and there's new ways to pay for software, notably advertising. [But] if I was to go to a large customer here in the Boston area, say Raytheon, and say, "Hey, you can have all our software. All you have to do is let your people read our ads at work. And we're going to read your e-mail. And we're going to put up ads that are appropriate," I don't think Raytheon, as a defense contractor, wants us or anybody else reading their e-mail. They'd probably prefer to just pay for the software.

Which brings us to Google. Many people think Google is developing an alternative software ecosystem on the Internet and may be developing a Google PC that bypasses Windows. How serious a threat is Google?

Just as we confronted commercial companies and built great capability to compete, and we've confronted open source and build great capability to compete, we'll confront advertising-funded guys, and we'll have great ability to compete. Whether that's Google or Yahoo or whoever else wants to play that game.

Now the thing that distinguishes us from Google or anybody else is that we've actually proven that we can do more than one thing well.

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