Ballmer: Don't Just Count Users

That could mean more products akin to Microsoft's successful Small Business Server (SBS) line. At the same time, Ballmer downplayed the notion that Microsoft is studying changes to its licensing policies, during an interview with CRN at the Microsoft Worldwide Partner Conference in Toronto.

"Even positive change implies churn, and customers don't like churn. I don't really see any licensing changes, frankly. What I do think--nothing to announce, nothing concrete--but I think that the success we've had with SBS, which was strong and really has jumped dramatically with the new product, makes us ask the question more forcefully, 'Is there a concept like SBS for the next size company up?' "

Targeting certain products by the number of users isn't really the only measure partners"-or Microsoft-"should use to assess sales opportunities, Ballmer said.

In recent months, Microsoft executives have "wallowed" in the IT concerns of close to 100 midmarket customers. Through that research, Microsoft has discovered that a company's tolerance for IT complexity may offer the better gauge for winning its business.

During Tuesday's keynote, Ballmer said enterprises have a higher ability to tolerate complexity, while those with two to five servers have only a moderate tolerance. "The real difference in these businesses isn't the number of employees they have, it's the complexity they have in running their businesses," he said during the keynote.

In his interview later, Ballmer asserted that customers who have processes requiring two to five servers "want more flexibility than SBS, but aren't prepared to deal with as much freedom as our entire product line provides."

Ballmer also discussed Microsoft's drive to position Office System as a front end to other applications--a cornerstone theme of the company's Information Worker competency effort. Microsoft has had its challenges helping ISVs and custom application developers think differently about Office.

"ISVs prerequire Windows. Do they prereq Office? Do they exploit it if it's there, or do they have easy export?" he said. "The truth of the matter is, if you're an ISV, the less you prereq, the better. If ISVs could get away without prereqing an operating system, they would. Or a database, they would. Most ISVs do prereq those. You don't have to prereq Office. And most ISVs just say, 'I'll have a [user interface] that doesn't prereq Office.' I happen to think that's short-sighted."

Asked about Microsoft's ever-looming focus on improving security in its operating system, Ballmer said Microsoft is working to make tools and technology from its evolving security framework more readily available to ISVs and partners so they can keep their own solutions in better lockstep with Microsoft's security agenda.

In particular, many tools that Microsoft has used to flesh out its own security will be included in the next version of Visual Studio, he said.

In the short term, Ballmer acknowledged that some tweaks to the forthcoming Windows XP Service Pack 2 were the result of ISV and partner feedback after it was discovered that some applications were incompatible with certain Service Pack elements.

"There's one feature that we had turned on for the OS and all apps by default that is used under the new hardware protection stuff in the new Intel and AMD chips," Ballmer said, referring to a feature in forthcoming microprocessors that will thwart the buffer overruns commonly exploited by malware. "The OS is fine, but there were some applications that weren't compatible if you had this running. So we've now put this under user control."