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Microsoft in $500 million business services push

Microsoft plans to spend $500 mn to persuade businesses to use its software rather than hire Business Machines consultants.

india Updated: Mar 17, 2006 18:15 IST

Microsoft Corp said on Thursday that it plans to spend $500 million over the next year trying to persuade businesses to use its software rather than hire International Business Machines consultants.

At a press event in New York, Microsoft Chief Executive Steve Ballmer showcased forthcoming versions of the company's Microsoft Office and Windows Mobile computer systems, which are being tested by some businesses now and are expected to be widely available later this year.

Ballmer said the new software allows companies to let their employees perform tasks that they may now be paying IBM's huge services operation to handle.

"Getting the most out of their people is on the mind of every business leader I speak with," Ballmer said. "(We) are passionate about the idea that the right software can provide the tools to empower workers to become the drivers of business success."

Microsoft's push, called "People-Ready," was kicked off on Thursday with eight-page pull-out advertisements in several major US newspapers.

The company said that new software systems like the Vista operating system and the Sharepoint Web site scheduling system, as well as the updated Office suite of applications including word processing and e-mail programs, were the result of $20 billion in research and development spending over three years.

These kinds of software and software-based services are tools to help employees be more successful, added Jeff Raikes, President of Microsoft's Business Division, in an interview.

"Innovation is home-grown, it's not outsourced," he said. "IBM has an army of relatively expensive consultants. They enable their people to run your business. We enable your people to run your business, not take our people to run your business."

In a statement, IBM responded: "Microsoft's marketing campaign -- you can't really call it a strategy -- is Window dressing for a pitch to keep a one-size-fits-all, proprietary Windows world.

"This is a product-driven, instead of a customer-driven approach. It's clear our survey of some 700 CEOs indicates that business process and business model innovation is what matters most to clients, and that can't be achieved by another proprietary piece of software."

IBM's global services business had revenue of $12.6 billion in the fourth quarter.

Microsoft dominates the market for software installed on a computer's hard drive with its Windows operating system and its Office business application franchise.

But a host of competitors is challenging the company with services and software that receive automatic information updates via the Internet.

On the sidelines of the event, Gartner analyst Tom Austin said Microsoft delivered a "good campaign message" that showed that its services can compete with those rivals, but said the company still needs to spell out its plans further.

"They have some good product. But I was hoping to hear a more intelligent discussion about what kind of help these people need to discover opportunities and innovate," he said.

Comments by Microsoft's executives on Thursday echoed those made in January by Chairman Bill Gates, who told Reuters: "IBM has always been our biggest competitor."

IBM, which offers computer services, software and hardware, poses a challenge to Microsoft in defining how Web services will work together in the future.