Microsoft's Fit with Groove

By Jay Greene When Microsoft invested $51 million in Groove Networks in 2001, many wondered when the software giant would just be done with it and buy the company. Turns out, the answer was Mar. 10, 2005, when Redmond announced plans to acquire the Beverly (Mass.) company that makes software to help workers collaborate on projects and work more efficiently.

But this deal was about a lot more than Microsoft's (MSFT

) bid to boost its software portfolio. Microsoft also wanted Groove's founder, Ray Ozzie, in the fold. In closing the deal, Microsoft named Ozzie one of the company's three chief technical officers, along with Craig Mundie and David Vaskevitch. The deal's financial terms weren't disclosed.

Like Microsoft's Bill Gates, Ozzie can be counted among the handful of software pioneers who helped shape the technology landscape. In the early 1980s, he led a team at Lotus Development that built Symphony, one of the first suites of workplace productivity applications. He later developed Lotus Notes, a groundbreaking combination of e-mail and workplace-collaboration software that was a top-seller in the mid-1990s. IBM (IBM

) bought Lotus in 1995.

TEAM BUILDER. Ozzie launched Groove in 1997, raising eyebrows when he took Microsoft's investment four years later. After all, Lotus was one of the first companies in a long line of outfits that Microsoft vanquished. But if Ozzie harbored ill will toward Redmond, he made his peace with it long ago. In an interview with BusinessWeek Online on Mar. 10, Ozzie talked about how excited he was to work at Microsoft and collaborate with Gates: "I really look forward to working with him."

Gates is equally enthusiastic. "Ray has always assembled teams that do an amazing job of thinking through what workers need, and then build the technology that can help people be more productive," Gates said during a teleconference with journalists. He said he thought often of trying to hire Ozzie. "So it's a big day for me that it's finally taking place," Gates said.

The real question may be why it took so long. Microsoft followed its 2001 investment in Groove with a second round in 2003. Indeed, Groove's products were developed to work smoothly with Microsoft's Office software, and Ozzie often showcased Groove's new generation of collaboration software, which uses so-called peer-to-peer technology, with new Microsoft technology at trade shows.

KEY INGREDIENT. Ozzie's new role at Microsoft is still very much a work in progress. He'll report directly to Gates. But his expertise will likely have him spending time with the company's Office group, which has been expanding its offerings into collaboration software.

Gates said Groove's expertise in peer-to-peer systems and technology that authenticates who is accessing information on a computer network will find its way into the next version of Windows, code-named Longhorn. And Ozzie, who intends to keep his home in Massachusetts, expects to spend a lot of time on airplanes, flying back and forth from Seattle.

Microsoft may have picked up a collaboration software company, but the most important part of the deal might be the collaboration with Ozzie himself. Greene is BusinessWeek's Seattle bureau chief