If you thought Microsoft's Steve Ballmer was likely to be little more than a rubber-stamp president, think again. Ballmer is doing a lot more inside Microsoft than pounding tables and penning speeches. In fact, it's Ballmer -- and not CEO Bill Gates -- who is sounding the alarm about what's wrong at the company. And the list of troubles ailing Microsoft may be more serious than even those closest to the company ever thought. ZDNet's sister magazine, Sm@rt Reseller, has learned that Ballmer, flanked by Gates, led a spirited Microsoft managers meeting the first week of December. At that time, Ballmer pinpointed several major problems at the company and outlined his strategy for getting Microsoft back on track Besides striving to get back in touch with the company's customers, Ballmer discussed strategies for revitalising Microsoft's planning, prioritising, engineering and leadership policies. The discussion was a wake-up call for Microsoft's managers, who are racing to get new products out the door, and struggling to somehow manage a swelling workforce. "We're at a very important point for the company's long-term health and viability," Ballmer told the 50 or so managers in attendance. "If we don't do the right thing, we just won't be in a great place three to four years from now." Ballmer expressed concerns about both Microsoft's oldest franchise (Windows) and its newest (MSN). Its path toward unifying Windows NT and Windows 9x has been rocky, he acknowledged. And the company's "Darwinian" strategy of pitting one development team against another and allowing the best technology to triumph has gotten Microsoft into hot water, he admitted. Gates concurred: "We have asked the Windows group to do too many things. We've asked IMG [Interactive Media Group] to do too many things. It's not clear which ones absolutely had to get done. It's kind of sad, but we have to recognise our finite capabilities." Ballmer said he came to those conclusions following a series of one-on-one meetings he conducted with the company's top managers through the end of last year. When group VP Pete Higgins announced he was taking indefinite leave last November, Ballmer stepped in as acting director of IMG, moved his offices to the Red West campus and supplemented his regular briefings with customers with closed-door, no-holds-barred gripe sessions with Microsoft managers. He got an earful, especially about Microsoft's increasing quality problems on the engineering and test fronts. Microsoft's failure to "scale up" its tools and approach to building and testing has set the company back, he claimed. "I was shocked at the number of people who told me I should go to a bug-triage meeting or sit in a build-lab for a day," Ballmer said. "We need to recommit to software engineering as a discipline." Ballmer banged the simplicity drum as well, telling those in attendance that Microsoft's products are "too much hassle," with too many unwieldy features that aren't meeting customer needs. At the same time, it's not just tools and technologies that Microsoft needs to fix. "We need to make sure our great people are doing what they do best-not to try to stretch them or have them do things that aren't their top skills," he told the company's managers. "If we don't, two things will happen: We won't build products that win, and it won't be fun to build these products, anyway. We will get into, what I'd call, a vicious downward spiral." In a Q-and-A session following Ballmer's and Gates' remarks, Microsoft managers peppered the duo with questions on some of the company's less-than-popular practices. The problems with its plans to move to a unified NT code base topped a number of Microsoft managers' lists. Gates acknowledged that Microsoft may have prematurely moved almost all of its Windows 9x developers onto NT. Now, the company plans to release at least one minor Win9x upgrade before it can move to a pure NT-kernel-based product family. Nonetheless, Gates defended Microsoft's unification strategy. "Unification is how we will reduce the complexity of our products. It's true that groups wouldn't bump into each other if we just had 20 replications, 20 security modules, 20 stores, 20 ways of programming these stores. But [without unification], our products will have too many commands, too many utilities, too many ways of programming against them." Ballmer told Microsoft managers to market the customer benefits of unification and code sharing. "It's not a case of making our life simpler or saving money. The goal of sharing code is providing people with a consistent user experience. We don't do a good job of marketing why we do integration." Ballmer isn't throwing up his hands in dismay, after his eight weeks and 150 hours of meetings. His conclusion: "People are frustrated about decisions that aren't being made, priorities that aren't getting set, tools that aren't being invested in. But they are frustrated about things that we can address, not the malaise of the world."