Microsoft Rolls Out Next Version
As Bill Gates begins the two-year process of cleaning out his desk at Microsoft Corp., the two men named to succeed him bring decidedly different experiences and personalities to the top technical jobs at the world’s most powerful software company.
The question: Whether Craig Mundie and Ray Ozzie can reshape computing the way Gates did.
“The challenge is moving beyond what Bill’s vision of the universe looks like and shaping the future of Microsoft in terms of their own vision, and of course, finding ways to work together,” said Michael Gartenberg, vice president of Jupiter Research. “Both of them represent two sides of the same coin in terms of charting the future and the direction Microsoft is going to move in.”
As chief strategist, Mundie will be charged with researching the next generation of products for Microsoft. And as chief software architect, Ozzie will have to build those products efficiently and elegantly. The two men, both 50, will report to Chief Executive Steve Ballmer after Gates surrenders the last of his daily responsibilities in July 2008.
Ozzie and Mundie are “both intensely competitive,” said Yankee Group technology analyst Laura DiDio, “but they’re more low-key than Gates and Ballmer.”
The Microsoft they will lead faces significantly different challenges from those Gates and Ballmer were able to conquer in the 1980s and 1990s. Fundamentally, the company must adapt to a technological environment powered less by relatively static prepackaged software and more by rapidly changing Internet services.
“Microsoft is crawling into the future of concise Internet services burdened by its bloated, over-engineered ... one-size-fits-all software model,” wrote Forrester Research analyst John R. Rymer in a report about the management transition. “Microsoft must now face the future of ad-supported or subscription-based on-demand software.”
Gates announced Thursday that he would relinquish day-to-day oversight of the company over the next two years to devote more time and energy to the Bill and Melinda Gates Foundation, the world’s largest philanthropic endowment.
Gates will continue as chairman and remain Microsoft’s single largest shareholder, with 9.6% of the shares of the company he started in 1975 with childhood friend Paul Allen.
Ozzie is widely perceived as Gates’ successor, both technically and culturally within Microsoft, where Gates is revered as an insightful thinker. Ozzie, likewise, is regarded as a software visionary. He made his reputation creating one of the earliest tools for sharing information within a corporation, Lotus Notes, and expanded that vision at Groove Networks, which moved collaboration software to the Web. Microsoft acquired his company in 2005.
“Ozzie is more in the style of ‘speak softly and carry a big stick,’ ” DiDio said. “Lotus was a very creative place, and with Gates basically stepping back he gets to spread his wings again. People really like Ozzie, and he’ll keep the bar very high. He knows the lay of the land, the players, the history. He’s a kinder, gentler version of Bill Gates.”
Ozzie is known as a methodical person, capable of managing large software projects, as well as a dynamic personality whose enthusiasm is infectious. And he was the most visible champion of Windows Live, which brings the company’s search and other services to the Web.
“He is literally the perfect pick to be your next software architect for Microsoft,” said longtime technology observer Tim Bajarin, president of Creative Strategies Inc. “At least on the issue of carrying Gates’ vision for creating great software, I don’t believe he will skip a beat.”
Some analysts are skeptical that Ozzie has a command of the direction Microsoft needs to follow: providing and monetizing more software and services online as its competitors Yahoo Inc., Google Inc. and America Online do already.
“He doesn’t have a track record in online services,” said Paul de Groot, an analyst with Directions on Microsoft, an independent analysis firm. “The areas which Microsoft is talking about moving into are not areas in which Ozzie has shown a lot of expertise. I would call it problematic. Microsoft has always been a product company, it has never been a services company. You simply can’t look at his history and say he’s an obvious choice to fill Bill Gates’ shoes.”
Mundie is regarded as the keeper of the Microsoft flame. A long-time confidant of Gates and Ballmer, Mundie is often the diplomat who represents the company to business partners or governments around the globe.
Analysts described Mundie as exceptionally bright and his Consumer Platforms Division pushed Microsoft beyond the computer desktop. He is associated with experimental, if not always successful, ventures including the Windows CE operating system that brought the company’s software to hand-held devices; the AutoPC, which brought e-mail and other computer functions into the car dashboard; and WebTV Networks, a first attempt to marry the Internet and television.
“He had to be a chaperon for some very bad dates,” said Richard Doherty of The Envisioneering Group. “He’s a brilliant strategist and he hasn’t been fully exploited.”
Microsoft generates virtually all its revenue by selling software licenses for products like the Windows operating system and the dominant Office productivity programs, de Groot noted. Services don’t generate the same sort of dependable revenue streams as licensing. If Microsoft tries to shift from products that immediately generate billions of dollars in revenue to products that require customers to pay subscriptions of a few dollars a month, Ozzie could be in unfamiliar territory.
“Nobody gets the 80%-90% profit margins from services that Microsoft has been getting from its licenses,” de Groot said.
The newest version of Microsoft’s operating system, Vista, is five years late. The company’s stock has slid in recent months after stagnating for years, although it rose 3 cents Friday to $22.10.
“The big story line, I think, is they’ve got to do something,” said Rymer. “Their stock has been in the doldrums for five years and nobody believes they’re a big growth company, even though they’ve registered good results.... These are big, big challenges. And Gates isn’t going to be the guy who guides them through that. It’s going to be Ozzie, Mundie and Ballmer.”
