The future of Microsoft after Gates

Following Bill Gates' plan to withdraw fronm Microsoft, IT directors are looking to his successors to push the company's enterprise strategy


Bill Gates’ decision to give up his day-to-day role at Microsoft from July 2008, and to relinquish some of his key tasks immediately, comes at a crucial time for the company he co-founded.

Gates and Microsoft revolutionised the way software was produced, used and sold, but the company is facing criticism from corporate users that it has lost focus on the products they need. It is also grappling with competition from younger, more nimble rivals.

According to analyst group Gartner, Microsoft is facing one of its greatest challenges yet. “Recent trends such as Web 2.0, software as a service and open source software are increasingly threatening the company’s pre-eminence within the IT industry. Google represents the most obvious challenge.”

The response to this challenge will be led by chief technology officer Craig Mundie, who will take on Gates’ research and strategy responsibilities, and Ray Ozzie, who will become chief software architect.

Both have a background in developing business technologies. Ozzie headed up Lotus and founded collaborative technology company Groove Networks, while Mundie played a major role in the development of Microsoft’s Windows Mobile strategy.

Commenting on the change, George Kalorkoti, group chief information officer at solicitors Herbert Smith, said, “Microsoft is at the stage in its evolution where a fresh set of directions, in response to the business challenges it faces from the likes of Google, Linux and the EU (competition issues), is going to benefit it and its customers.”

How much focus Mundie and Ozzie put on the needs of corporate users will be watched anxiously over the coming months, but analysts are clear that Microsoft will increasingly align its products to the web.

Forrester Research is predicting that Microsoft will look at offering services like desktop management, mirroring the shift in focus to services that occurred at IBM when Lou Gerstner headed the company. Forrester said it was even possible that Microsoft would change its stance on Linux by porting SQL Server and other products to Linux.

Gartner also believes there will be a move into services. “While competitors like Google pose a new threat to Microsoft’s successful Windows and Office franchises, Microsoft will bring a number of online, desktop and server assets to this challenge.”

Microsoft has already signalled its intent to invest more than £1bn in research and development to adapt to Web 2.0. Gartner also highlighted the importance of Ozzie’s “Live” vision, which combines Microsoft software with software as a service-based services to deliver what Microsoft considers to be an optimum IT environment for the next generation of computing.

Microsoft has spent considerable time and effort telling users why open source technology is not an alternative to its products. However, many users and commentators feel it has so far missed the challenge of the increasingly compelling alternative software now available from Google.

Peter Leahy, head of IT at Endsleigh Insurance Services, wants Microsoft to create an overall framework, both technologically and commercially, where users can select a service and run it from a suitable hardware device, for the time that they want.

Leahy suggested that all computer applications should have the potential to be delivered on an on-demand basis, in a similar way to mobile phone services.

While individual companies would continue to need developer tools and platforms to create their own software, he expects mass market applications such as e-mail, document storage and instant messaging would be run by specialist service providers.

Pressure for Microsoft to move in this direction is increasing due to the delay of Vista, the next desktop Windows operating system, and investors’ concerns over its Q3 2006 results, said Forrester.

“Microsoft is crawling into the future of concise internet services burdened by its bloated, over-engineered, pay-by-the-CAL [client access licence], one-size-fits-all software model. It must now face the future of ad-supported or subscription-based on-demand software,” Forrester said.

This is compounded by the widespread reluctance of users to migrate to the latest Microsoft software. A recent board meeting of the Corporate IT Forum, whose members represent the IT departments of many blue-chip companies in the UK, agreed unanimously that they would not rush to migrate to Vista when it was released in 2007.

According to the forum’s services board, “Many organisations are only now migrating fully to XP. As far as most of those with large PC estates are concerned, the technology needs to be established, stable and probably have at least the first service pack available and deployable.

“We expect that during 2007 organisations will observe this technology (Vista) closely and have pilot implementations under evaluation. The board would be surprised if many large organisations were migrating before 2009.”

One of the great achievements of Microsoft has been to offer a standard platform on which enterprise applications can be developed.

“Bill’s greatest legacy to the corporate world is interoperability. Microsoft’s success in the past two decades under Bill Gates was undoubtedly based on creating a lingua franca, via application interfaces, that positively shaped technology management and provided a much-needed platform for skills,” said interim IT director Colin Beveridge.

However, Tim Jennings, research director at analyst firm Butler Group, said IT directors would be disappointed if they wanted more focus from Microsoft on enhancing IT infrastructure and platforms.

“Had the appointments been reversed – Mundie to lead the here and now architecture and Ozzie to lead the future research – then there might have been more evidence of a shift towards enterprise IT. But as it is, I believe Ozzie’s attention will primarily be on moving towards IT as a service, rather than on building enterprise infrastructure,” he said.

Ozzie’s experience developing Lotus Notes, the breakthrough collaborative technology now owned by IBM, could help Microsoft put collaboration at the heart of a new enterprise software focus.

It is a prospect that excites some users. David Tidey, head of information systems at The Royal Borough of Kensington and Chelsea, said, “We are now working to phase out Lotus Notes. It was only ever used as an application environment, not a collaboration environment. We are replacing it with a . net MS development.”

Ray Titcombe, chairman of the Strategic Supplier Relationship Group, a consortium of 11 user groups, added, “Microsoft has a perfect opportunity and is ideally placed to move collaborative technology forward.”

The Trustworthy Computing Initiative

Microsoft has fought a long, debilitating battle to ensure the security of its software. The Trustworthy Computing Initiat ive – the 2002 announcement by Bill Gates that the company was to make security a top priority in its product development – proved far tougher than the Microsoft founder envisaged.

However, it does seem to be working, according to Paul Dory, vice-president of digital security at BP. “I do not expect a major change in security strategy in Microsoft from the direction that Bill framed in his famous security direction memo of 2002 and subsequent follow-ups,” he said.

“I have had the opportunity to speak with both Craig Mundie and Ray Ozzie and it is clear that safe and trusted computing is front of mind for them,” he added.

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