Microsoft 2.0

Microsoft: the most successful IT story of all time. Microsoft: the company that made Bill Gates the world’s richest man. Microsoft: the company that put a computer on ever desk and in every [First World] home. Microsoft: the juggernaut living in fear of losing out to Google, Apple and Linux

The media coverage that accompanied the retirement of Bill Gates in June was gushing in its respect for the software behemoth. And that makes this reality check from veteran Microsoft watcher Mary Jo Foley both welcome and timely.

Microsoft certainly has a big future, albeit an ambiguous one, with rivers of revenue continuing to flow from well-established business models, promising projects in the pipeline and $26 billion in cash reserves. (Gates once said of his arrest for speeding in 1975, “I’ve always tried to have a fair amount of cash with me. I like the idea of being able to bail myself out.”)

Microsoft up until this point “has been Gates”, argues Foley. “Gates has remained the constant star by which everything and everyone connected with the company has navigated,” she says. Microsoft under CEO Steve Ballmer won’t be a directionless corporate monolith, it will be a very different creature.

“Gates valued technology more than marketing and built Microsoft to reflect his priorities. Bill Gates is a nerd. [Former Proctor & Gamble executive] Steve Ballmer is a salesman,” Foley states bluntly, splitting the company’s managers into “Bill’s guys and Steve’s guys” and suggesting the result is “definitely not one, big, happy melting pot”.

While a sales and marketing-centric future might prove “unsettling” to people inside and outside Microsoft, on the other side Foley argues “computer science/electrical engineering degrees don’t prepare individuals to run teams of thousands”.

Foley’s view is that Windows will continue to be key to the company’s future (and income) for at least two to three years. Meanwhile, “Microsoft is now playing in several markets outside its core competency”, from games to MP3 players, and is capable of using its cash mountain for R&D or to wait for competitors’ innovations to arrive, copy their best ideas and then out-do them.

From Foley’s perspective, the main competition comes not from Google but from the company’s own platform products. Microsoft’s biggest challenge is to “make sure Windows stays relevant”, she argues. Where is the motivation to upgrade to resource-hogging Vista when XP works perfectly well? Likewise with Office: “A victim of its own success, its biggest competitor is existing versions of Office.”

Foley tips SharePoint as a possibility for “the next killer OS”, observing that Microsoft has slowly been tying more and more of its products to the popular collaboration platform and describing it as “either one of Microsoft’s best products or one of the worst things the company has ever introduced”.

Meanwhile, amid revenue-generating piracy crackdowns (such as Windows Genuine Advantage), Foley examines tactics Microsoft is using to enter developing economies, such as Windows Starter edition ($3 in China, with Office), pay-as-you-go hardware/software systems and its bid to become a major web media company through its (failed) Yahoo! acquisition.

While Microsoft officially distanced itself from Microsoft 2.0, refusing to comment despite the author’s offer of non-disclosure agreements to senior executives, the book has drawn on the authority of someone who has followed and written about the fortunes of Microsoft for almost 25 years.

Still, the lack of primary source material beyond the odd leaked email, memo or hot tip is a little disappointing for a book that purports to offer a vision of Microsoft’s future. Indeed, much of it is drawn instead from blogworld speculation and Foley’s own opinions.

She is perhaps a little close to her subject: she is clearly enamoured with the company, and states confidently that it can succeed in a new era. She also dedicates the book to Gates himself, and thanks all the Microsoft campus shuttle drivers who have frequently brought her into the heart of the beast.

Microsoft-lover or not, it is better a friendly face in the boardroom than a belligerent, ill-informed one at the gates.

Microsoft 2.0: How Microsoft plans to stay relevant in the post-Gates era. By Mary Jo Foley. Published by Wiley. Price: $27.95. ISBN: 9780470191385

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