BUSINESSWEEK ONLINE : OCTOBER 30, 2000 ISSUE
COVER STORY Bill and Steve on Threats and Strategies Chairman William H. Gates III and CEO Steven A. Ballmer run Microsoft Corp. ( MSFT) in tandem. Gates is the chief software architect, driving the company's new .Net technology. Ballmer just reorganized Microsoft to align with the .Net strategy, which interweaves technology for creating Web services with Microsoft's traditional Windows software. BUSINESS WEEK correspondent Jay Greene and Senior Editor Kathy Rebello spoke with Gates and Ballmer separately. Some highlights: GATES ON: How Microsoft's Web strategy changed. GATES: From 1995 to 1999, we saw the Internet as a feature on your pc. If you turn on your computer, does it have this nice built-in browsing capability? Is it easy to get connected to the Web? Since then, we have been thinking about how all the Web-access devices are going to work together. We saw that if you have your address book on one machine and you change something, you had to make it change the information on another machine that you use. We began to look at: Is there a way to have a service that can do that? At the same time, we saw that you would need to find a way for data created on one Web site to be used on another site. Why they're trying to interweave .Net with Windows and the PC. GATES: Starting last fall, we had a series of meetings about how we get the most out of our strengths in Microsoft Office, operating systems, and MSN [the consumer Internet business]. And part of the debate was, essentially, how much does our strategy have to unify around one big thrust? Can you have the TV guys go and do what they want and the Office guys do what they want? You can envision a very extreme situation where Microsoft would almost be like a mutual fund--each part with a separate strategy. I think you need to have as much of a single strategy as possible. There are separate businesses and there are separate competitive battles. But it's got to be within one jihad. Microsoft's Web prospects. GATES: We know software is absolutely the key thing on the Net. Our core skill set is incredibly strong, and none of our competitors are playing the game the same way. You've got a competitor who's saying ''I have more online users than anybody else.'' Or a competitor saying ''It's about the database.'' A thousand startups are doing pieces of things. Some of those pieces are good, but if you really want to get people involved in using this stuff, you've got to create solutions--full, integrated experiences for computer users. We've got all the pieces. How long it will take to get traction with the new Net strategy. GATES: Right now we're all just putting in the foundation for .Net. You've got to get independent software developers enthused and make the strategy clear. But this is a five-year strategy. It was 1983 when we decided to make a graphic interface for the PC operating system. When was Windows a success? Probably 1990, if you really understood the dynamics in the industry in terms of when the independent software developers got on board, and the writing was on the wall. That's a long, long time. We don't think this one will take quite that long, but it's similar. BALLMER ON: Morale at Microsoft. BALLMER: I think it's pretty good. I don't think it was ever as bad as people anticipated it would be, given the kinds of antitrust case rulings we were getting from the district court. Really, what makes morale good or bad is the sense of future. Are we working on something important? Are we changing the world? Is that an opportunity to benefit financially? Those are the kinds of things that make a difference to people. .Net certainly has energized a lot of people. They're saying we're back. We've got a vision. We know what we're doing. We are going to work hard. Where do we start? Microsoft's competitors. BALLMER: I can list [computer maker] Sun Microsystems or [database softwaremaker] Oracle, but hey, I'm just going to eat their lunch. Every day we come to work and eat their lunch and eat their lunch. They never take market share from us. We take from them. It's all upside. So in a sense, when you want me to rank the competitors, I can't list the fun guys. Actually, I'd say AOL is No. 1 and Linux No. 2. If anybody has the potential to replace us or to threaten our position as the face of computing to the customer, it's AOL. I think we are still No. 1 in a lot of households that have AOL. It's a dogfight. I suppose I'd say AOL No. 1, Linux No. 2, and then you get Sun and Oracle. Why he dismisses Sun Microsystems as a major threat. BALLMER: People look at Sun's results and say, ''Bravissimo!'' They're taking market share. But the market they're in is not a growth market. I like to be in growth markets. Also, this is a software world and Sun is a hardware company. They don't understand the user interface. They wouldn't know an end user if it hit them over the head. Would I trade for the position they have, the position of being a big iron vendor when big iron's going away? No. Somebody might have said in 1980, should you trade for the position of IBM as the big iron vendor of that day, and the answer would have been, 'No.' Now, that doesn't mean that IBM couldn't have reinvented itself. Sun is actually taking a religious stance and saying, 'Heck no, we don't believe in doing it the other way.' They discount the fact that there are 500 million PCs in the world. They are being righteous, saying there is no value to these smart devices--smart PCs, smart cell phones. But the fact of the matter is there is a reason to have intelligence in these devices. And there is a reason for the user interface. And there is a reason why Intel-based servers will win over big overpriced iron that comes from Sun Microsystems. I wouldn't trade positions with Sun. Not in a nanosecond. How Microsoft balances its old products with new Net technologies. BALLMER: Can companies thrive on paradigm shifts? Most companies don't. The good news is that most paradigm shifts don't happen very quickly, and we think we can thrive and lead in the Net world. You've got to give disruptive technologies a chance to breathe. At the same time, you've got to make sure the big mother ship has a chance to breath. There's probably a bias at Microsoft to not go all out for the existing technology because we're so paranoid of technological change obsoleting what we do. But at the same time, we know that we have a lot of good existing businesses which are going to get bigger and stronger--a lot bigger and a lot stronger. So we let our teams have some opportunity to run--not as two competing approaches, but as two sets of objectives. In the end, though, it's understood that the two sides will be sharing technologies. _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ BACK TO TOP					RELATED ITEMS Microsoft's Big Bet COVER IMAGE: Microsoft's Big Bet TABLE: Microsoft's Internet Adventure TABLE: Honeywell Gets Caught Up in Microsoft's .Net TABLE: The Windows Defenders and the .Net Advocates Bill and Steve on Threats and Strategies INTERACT E-Mail to Business Week Online

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