Microsoft's new mantra: Save people money

When the stock market tanked on Sept. 29, Microsoft Chief Operating Officer Kevin Turner was flying to New York to meet with Wall Street investment banks. He got off the plane and heard about it from a baggage handler. The Dow Jones index fell 777 points, or 7 percent, that day.

Turner, who had spent 20 years working at Wal-Mart, returned to Redmond and e-mailed everyone at Microsoft.

The company had a new message: Save people money.

That message has since permeated the company's pores, from its laptop-hunter ads highlighting the price of PCs, to its sales pitch to partners who sell Microsoft products, to how the company priced Windows 7 lower than the previous version, Vista.

How successful that strategy has been should become clear Thursday, when Microsoft announces its sales and profit numbers for its fourth quarter and the fiscal year that ended June 30.

It has been the most challenging economic environment Microsoft has faced in its history; the company in April reported its first-ever quarterly revenue drop and had its first major layoffs, cutting 5,000 jobs.

The earnings report also will set up one of the most important years in Microsoft's 34-year history, when the software company will introduce new versions of almost every major product it sells: Windows, Office, Windows Mobile, server software and Azure, its new cloud-computing platform.

It will be the largest volume of software Microsoft has ever released in a 12-month period, and it's coming during the worst economy the company has faced.

The economic reality is daunting. Microsoft CEO Steve Ballmer said he does not expect a quick rebound.

"I refer to what we're going through globally as an economic reset — not a recession, not a depression," Ballmer said in a speech last week at Microsoft's Worldwide Partners Conference in New Orleans.

"Literally, the world economy got overheated. People borrowed, businesses and consumers borrowed too much money. When debt came out of the system, the level of economic activity has to come down. It doesn't have to come down and go back up. It has to come back down."

Revenue wild card

Even Ballmer hinted that the company's revenue situation is beyond its control.

"You cannot control how this year's revenue compares to last year's revenue. You can't control it," he said. But "you can control market share. You can control customer satisfaction."

Microsoft's ability to convince budget-strapped customers that its software is worth buying will depend almost entirely on the company's network of partners, which resell, install and build on Microsoft products.

Of $60.42 billion in sales Microsoft made in the 2008 fiscal year, 95 percent was related to partners.

"We're in the most important economic time in our lifetime and at the beginning of a technology wave" at Microsoft, Allison Watson, corporate vice president for the Worldwide Partner Group, said this month.

When the stock market turned in the fall, she canceled a trip to a women's business conference.

Her team then researched recessions going back 150 years and the characteristics of companies that survived previous downturns.

She ticked off the traits: "What we found was people who have vision are going to win. Investing in sales and marketing. Focus on salesmanship."

That turned into a series of speeches that she gave in venues ranging from one-on-one meetings to gatherings of thousands of people, culminating at last week's partners conference.

The sales strategy she pushes to partners echoes what Turner said: Here is how we can save you money.

That ranges from taking advantage of all the features in the products they already have, such as power-saving features that can help reduce a company's utility bill.

It can mean using communications software to eliminate traveling for meetings or switching from a more expensive product by a competitor to a less expensive product by Microsoft.

It can mean getting rid of a product.

"It's been the most successful campaign and initiatives we've ever launched in Microsoft in immediately getting and resonating with customers," Turner said.

"What customer isn't going to give you an appointment if you've got 13, 14, 15 things to help them derive business value and show them the ability to save money?"

Partner companies that can offer clear cost savings have managed to grow sales over the past year. IDE, a small Swedish company that does outsourced IT services for medium-sized businesses in Europe, said its sales have grown 60 percent.

When he goes in to pitch a customer, CEO Per Werngren says a business can cut technology costs in half by outsourcing to IDE's data centers and having his company manage it.

"Our approaches are a fit for this economy," Werngren said.

"It is good because IT budgets this year are lower than last year."

Other companies, however, are struggling to make the case for customers to invest in new software.

Kristi LeaMaster runs a small company in Snohomish County called KI Systems, which sells customized Office documents built on Microsoft Office and SQL Server to legal firms.

Sales have fallen 20 to 25 percent since October, she said.

Collapsed deals

"It has been difficult," she said. "The legal environment is slow to adopt anyway." Several deals she had going in October fell through.

Her company offered discounts of 25 percent in the first quarter of the year.

"We have to be really creative now," she said. Even if her customers aren't in the market to buy new software, she offers to help with developing other programs they need help with.

"If they want a small project, maybe we'll offer to do it for them," she said.

The goal is "to do more for your customer so that they'll remember you, and when it comes to making a critical decision about a whole software product, they will remember your name."

Sharon Pian Chan: 206-464-2958 or schan@seattletimes.com