Steve Ballmer at the Microsoft VC Summit 2006

One of the highlights of a Microsoft VC Summit is always Steve Ballmer’s intervention and the following Q&A. I have already referred to an interesting part of his talk regarding acquisitions, but the most interesting learning I got from the session is Ballmer’s clear determination to go after Google and its position of search and online advertising leader. Microsoft has the might, and the resources, to take a long-term view and give Google a run for its money. The consumer can only benefit from such a competition.

Here are a few more tidbits he covered:

• VC investment levels up — including in early stage since 2005, with resource shortages in certain places (especially where Google has a development center)
• Consolidation in the industry is happening, with M&A being the primary exit option
• Consumer markets are driving enterprise expectations, as applications and services available in the cloud to consumers lead to enterprise demands
• Open source is leading in the enterprise through pragmatism: it is about value delivered, reliability and cost savings. There is still an issue of IP protection, and what will happen when a company selling open source software is sued for a patent infringement.
• Service-oriented software is very difficult to balance between extensibility/customization inside the firewall, and the cost savings through a standard platform in the cloud.
• Venture investment correlates to Microsoft’s business.
• Phones are going from dumb to smart.
• Web 2.0 = Intelligence in all devices, and communication between all devices.
• Still a lot of issues with open source companies, or companies relying on open source stacks that they modify without paying a lot of attention to contribution obligations related to the license.
• Innovation investments targeted by Microsoft:
  • Windows: The Live Software Ecosystem
  • Software Development: Up a Semantic Level — as opposed to using low-level declarative programming
  • Delegating IT
  • In Control: Professionally and Personally
  • Rewiring the Economy: moving away from paperwork through enterprise and extrarprise workflows
  • Redefining Personal Entertainment & Creativity

Following the presentation, a brief Q&A took place with the audience:

• On the issue of speed of execution and delivery vs. Google, Ballmer states that companies can’t deliver fundamental innovation in 6 months chunks with loose coordination. At the same time, he jokes about Microsoft’s tendencies of having super long sales cycles on products and services.
• On the Microsoft stock: “I would not sell now baby” :-).
• How does Microsoft set the price on technology acquisitions? That valuation is often based on what it is worth for Microsoft to have, as opposed to pure financial metrics.
• What can VCs invest in if Google or Microsoft end up building all major pieces of Internet services by themselves? Microsoft will be happy to work with VCs to indicate what is strategic as Microsoft builds a competitive monetization platform to AdSense.
• Which deal/acquisition do you wish you had done? Steve wishes he had gone ahead with the SAP acquisition/merger — but does not go through the reasons why.
• Can you comment on the spin-out of Wallop from Microsoft, and social networks in general? Microsoft will deliver social network functionality in their products for the enterprise, but Ballmer does not seem that excited about owning one of these sites.
• What is the solution to avoid the proliferation of malware? Windows Vista, which has anti-virus/malware protection at its core. Less than 50% of PCs have a form of anti-malware enabled.

More:

• Buddy Ed Sim has a good post about the event.
• On the same day, Ballmer was also the guest of a Churchill Club event in Santa Clara. Dan Farber has published podcasts of the event.