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Ballmer tells MS troops to work harder, spend less

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Microsoft president Steve Ballmer is planning cutbacks - maybe. In a 4,000 word memo to staff leaked to CNet,* and followed up by a company-wide webcast on Tuesday, Ballmer called for a return to "the kind of cost-conscious culture that marked Microsoft's earlier years," and said investment would be scaled back from the original 2001 plan.

But his clarion call seems to have been somewhat short on specifics. He intends to cut back on travel and entertainment and "reduce planned expenditures very significantly both in the short term and over the longer term." He also cited the removal of two features from Office 10 as a kind of example, in that it allowed Microsoft to put more development effort behind the next version SQL Server.

The company isn't going to let staff go, and is still going invest in existing employees and hire great new people. And it's still going to build great new platforms like the Tablet PC and Xbox. But that, folks, is about it.

You do however begin to get the drift. Microsoft is going to carry on spending on development, but will try to focus it more, doing a better job of hitting schedules with new products and chopping features if this is needed to make the deadlines and meet the budgets. Ballmer spoke of Whistler as the most important release of Windows since Win95 (there, and you thought that was Win2k), so we can expect the company to be determined to ship this one on time. We can also presume equal determination to ship Xbox on time, although Ballmer doesn't seem to have mentioned this.

On the staffing side, he's probably trying to encourage managers to avoid throwing money away on unnecessary hires, and to imbue employees with a more realistic and less spendthrift culture. It's more complicated than that, however, as Microsoft staff historically haven't been that well-rewarded in terms of salary, and stock options have played a major role in keeping them sweet. This clearly doesn't work right now, and probably won't for the foreseeable future, and his assurances that the company will continue to view people as its most valuable resource have to be viewed in the light of his previous comments on the subject.

Ballmer has committed Microsoft to increasing remuneration, but has made it clear this will be performance-related, which means those viewed as the best and brightest are rewarded, while the "underformers" do worse than under the previous regime. It might be putting it too strong to suggest that fear stalks the corridors, but it's reasonable to assume that at least some of the staff are at least a little apprehensive.

But while the grunts can expect to have the fun stuff like travel and expenses clamped down on, and to be 'incentivised' into greater productivity, it's practically impossible to see Microsoft cutting back on the big ticket priorities. Ballmer's "seven business priorities" for 2001 are the ones we all knew about already (Windows, productivity software, enterprise server software and tools, MSN, small business applications, devices, and .Net), so no major chops there, and without the real Microsoft major expense, marketing, Microsoft wouldn't be Microsoft.

The company will no doubt try to squeeze ever more money out of the OEMs (we hear a price hike is impending) and its customers, so no change there either. But it's maybe conceivable that something unpleasant might happen to Microsoft Research, whose ability to produce "great new technologies" has been less than stellar. Being a smart cookie, Ballmer might just see this as an easy cut.

Otherwise, it really boils down to getting the troops to work harder and spend less. This is a culture/expectations gambit he's playing. ®

* We note that down the bottom it says that Mary-Jo 'Secret Files' Foley "contributed to this report." Presumably she gave the email to Joe Wilcox because her trunk's full already...

Related Link

CNet: Ballmer calls for cost-conscious Microsoft

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