Microsoft's New Word: Accountability


When it comes to closely guarded secrets at Microsoft (MSFT), the crown jewel is the shipping date for the next version of its flagship product, called Windows Vista.

Execs at the software giant hate setting expectations, lest they slip. So the company has been mum on the date, saying only that Vista will launch some time in the second half of 2006. Analysts have taken that to mean a shipment date some time near Christmas.

It turns out, the company plans to ship much sooner. According to an internal blog by Chris Jones, one of Microsoft's top Windows execs, the shipping target is Aug. 31. To be clear, that's not the day Vista will land on store shelves or be available on computers. Rather, that's the target to have software code complete and sent off to computer manufacturers. That way, they can test the software and start to build PCs in time for the holiday season.

LONGEST GAP. News of Jones's commitment may lead some analysts to alter financial projections for Microsoft. Many analysts haven't accounted for any Vista sales next year because they aren't sure when the operating system would debut.

If Microsoft keeps Jones's schedule, Vista could be available in October. The code for Windows XP, Vista's predecessor, was complete on Aug. 24, 2001, and launched on Oct. 25 that same year. "If they get something out by October, they could see a nice [sales] pop in the December quarter," Goldman Sachs analyst Rick Sherlund says.

Jones, vice-president of Windows core operating systems development, made the date disclosure in response to a question from an employee about low morale (see BW, 9/26/05, "Troubling Exits at Microsoft"). Some employees have grumbled that the Microsoft brass hasn't held managers accountable for missteps. And development delays with Vista are among the biggest stumbles of late.

The five-year span between XP and Vista is the longest such stretch between operating-system releases at Microsoft. And to get Vista out the door, Microsoft has had to significantly scale back aspirations. It has cut, for example, an ambitious design for a new file system that would have made it easier to store and retrieve information.

EXECUTIVE SHUFFLE. Jones's blog post appears to address the question of low morale head on. "If you want my personal accountability, I will not take a bonus if we don't ship Vista with high quality and the soul intact by August 31st, 2006," Jones writes in a Sept. 28 blog post that was obtained by BusinessWeek Online. "If there is more I can do, let me know."

Indeed, Microsoft may be entering a period of greater accountability, something the company's critics say is long overdue. The Vista deadline isn't the only evidence. On Nov. 17, Microsoft announced that Doug Burgum is giving up his operational responsibility for the Microsoft Business Solutions group. He'll become chairman of the division, which sells software that helps small and mid-sized companies run their businesses.

Microsoft was careful to avoid calling the move a promotion. As group chairman, Burgum will help build support among independent software developers. Burgum's replacement, for whom the company is searching, will report to Burgum's boss, Jeff Raikes -- not Burgum.

SURGING RIVALS. The group's problem is that it hasn't become the growth engine Microsoft expected when it bought Burgum's company -- Great Plains Software -- in 2001, and put him in charge. In the fiscal year that ended June 30, Microsoft Business Solutions' sales grew just 6%, to $803 million.

Burgum's biggest challenge has been integrating Great Plains with Navision, the Danish business-software company Microsoft acquired in 2002. In September, Microsoft announced plans to merge the product line under one banner, called Microsoft Dynamics.

But the process has been anything but dynamic. By the first quarter of 2006, when Microsoft is due to launch CRM 3.0, the next version of its customer relationship management software, it will have been three years since the last iteration. In the meantime, rivals such as Salesforce.com (CRM) have sprinted ahead in new markets, such as online customer-relationship management.

For his part, Burgum says the change had nothing to do with accountability. His group's financial challenges stem from Microsoft's decision to invest in the applications market for small and midsize companies. Redmond is making a long-term bet on the business, expecting to lose money in the early years -- a standard Microsoft strategy employed with significant success over the years. "I'm a strong believer in leadership accountability, but my planned move is not a data point for this thesis," Burgum wrote in an e-mail to BusinessWeek Online.

"STRONG LEADERSHIP." The Burgum move isn't the only recent change in senior leadership at the software giant. In September, Microsoft announced a management restructuring, putting the entire business under three groups (see BW Online 10/03/05, "Less Could Be More at Microsoft").

"The establishment of these president positions reflects the critical importance I place upon having strong leadership in all three groups and a commitment to ensure we continue to exceed our customers' expectations for years to come," Microsoft CEO Steven Ballmer wrote to employees at the time.

In addition, top Windows executive James Allchin said he would retire at the end of 2006, after Vista ships. At the time, Allchin said in an e-mail to employees that he was retiring, in part, because an undisclosed "medical event" in his life 2? years earlier led him to "take a step back and evaluate all my priorities." But like Burgum, Allchin led a group that has been slow to launch its next product.

BIG BET. Microsoft's top execs say the Burgum and Allchin moves were unrelated to the performance of their divisions. In an e-mail to Burgum's group discussing the change, Ballmer wrote: "I've known and worked with Doug for much of his time in the industry and truly value his past and future contributions to the entire industry and to Microsoft." When Allchin announced his retirement plans, Ballmer wrote to employees that "Jim has had an immeasurable impact on our success."

But it also may be that accountability is making a comeback at Microsoft. And Jones putting his bonus on the line may be only the beginning.

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