Note: This interview originally appeared in the Aug. 18-25 double issue of BusinessWeek, "The Future of Technology".
Q: What shape will the tech recovery take?
A: If anybody thinks we're going back to where we were in the late '90s, they're wrong. That level of spending just isn't going to happen. There's general growth in the economy. There's a move to use technology to empower workers better. There's a move toward vendors that really offer comprehensive solutions. So there are a lot of interesting trends that mean there's some growth for companies like Microsoft (MSFT
). But it doesn't mean some return. The period we're in right now is more normal than the period we were in then.
Q: Does that suggest that the tech industry is mature?
A: The impact of technology is going to continue to be very dramatic. The cost of computation, and the cost of what you get in terms of the value of software, are going down at an incredible rate. So there are many scenarios that were never possible before, including some that got hyped up during the bubble, that actually become realistic. Most of the breakthroughs -- efficiency of e-commerce, collaboration -- are still in front of us.
Q: Does Microsoft's decision to issue a dividend and hand out restricted stock instead of options mean it's a mature, slow-growth company?
A: No. Obviously we're a bigger company today than we were 25 years ago. In terms of percentage growth, we had a lot of years where year after year we grew 60%. We're not a startup. If people are just recognizing that, it's kind of strange.
We are, on a relative basis, a very highly valued company. But we only get revenue as we innovate. Just to be a large company moving forward, we have to do a lot of innovation. And there's more innovation coming out of the work that we'll do in the next five years than in any five-year period in the history of the company.
Q: What will be the big areas of growth?
A: Look at business intelligence, workflow, collaboration, real-time communication: We've just scratched the surface. How do you make all those back-end systems easy to manage and secure? How do you make it easy to write Web-service applications that cut across the boundaries, inside a company and between companies? Now that we have all this Internet connectivity, how can buying and selling and planning be done differently? That's an unrealized dream. Our challenge is to make those dramatically simpler.
Q: Which products are the most promising?
A: IT tools get better. Inventions like Web services or Tablet computers [which can take handwriting as data input] or being able to use software like PlaceWare, where without traveling you can collaborate on documents, they just make people more efficient. And every year, those things get better.
And the people who apply those things effectively bring out more effectiveness in their knowledge workers. Their knowledge workers are a huge investment. And they're paying those knowledge workers to do product design, track the market, do customer service. So by having the best tools, those people deliver more to the customers.
If chips weren't improving, if chips weren't getting better, if we weren't spending $5 billion to make software better, then you would get to a point where you're standing still. There's no part of this technology that's standing still. Just take scheduling. You'll look back on how you've had to do scheduling the past and think what a joke that is compared to how software can make that better.
Q: How about the obstacles to the march of technology?
A: How do you make all those back-end systems easy to manage? How do you make those back-end systems secure? The dream, now that we have all this Internet connectivity, is for buying and selling and planning be done in a different way. That's an unrealized dream.
If you go to a purchasing agent's office, you'll see them scribbling things on paper and having a spreadsheet here and mail there, having to do some many things in a very manual way because we haven't captured those processes in a rich, structured way that really helps them do that job. The base standards, the industry standards around Web services and the software extensions we build onto that, will make a big difference there.
Q: Many buyers, it seems, blame the tech industry for expensive purchases they made in the late '90s. Why should they return to the market now?
A: Major product cycles with lots of customer input that are changing things. Now why are people finally shifting away from super-expensive Unix systems? Why are people finally shifting away from mainframes? Why are people finally finding that the amount of consulting around these things that they need is less than in the past?
[For] almost everyone of those things, it's either the hardware advances or the software advances that have changed what you can do -- and letting you do it without having to run up the investment levels in it to levels that were seen in the late '90s.
Q: Your cash is growing at $1 billion a month. In addition to dividends and buybacks, is there a way to manage it more aggressively?
A: Investing, paying dividends, and buybacks -- those are the three things. It's just some balance of those three things. The history of this company is not a history of ever being cash-constrained. And so ever since we've had a dollar in our treasury, since we went public in 1986, you can say, "O.K., your very conservative view has been very important in terms of the value of the company, the long-term approach to the company. It's not leveraged. It's not a super-capital-intensive business."
The board meets and discusses these things. About a year ago they decided to pay a dividend. Last year, we had more buyback activity than, I think, any year. I'm sure when we have analyst meetings and shareholders meetings, we get input from people. But then it's actually the board meeting when those things are discussed.