The Dotcom Boom

I guess it is time to get back to the focus of my blog which is my career at Microsoft.  We are into 1998 moving quickly to 1999.  Though it had not been by design I had landed myself in the middle of the Dotcom bubble.  Our telesales organization was sought after by many  within Microsoft as we called on Internet Service Providers around the country, we were capturing intelligence and were on the front line of understanding what the customers were looking for, but in many cases the customers did not know what they wanted.  Our group wa literally talking to the pulse of what was becoming the internet. Everybody had big ideas and grand visions. I will try and break down the Dotcom boom into two phases: Access and Applications.

The first part of the bubble was all about access.  How do I get on the internet and who is providing the service.  A lot of people thought that the service piece was going to make them a lot of money.  The big names in terms of “dial-up” users were AOL, Mindspring, Earthlink, Compuserve and a few others.   There was a whole host of companies that started up and spent the first years laying down the fiber or probably a better term the “backbone” of the internet.  These were companies like Qwest (before they acquired US West), Level 3, Williams Communications, Savvis, Global Crossing and a whole host of others. The Telco’s were really not in the game yet though everyone knew they were coming, the same could be said for the Cable providers.  Those two industries owned the most important piece, what we called the last mile.  They owned the fiber that ran into the home.  Another entity that had access to the home was the utility companies – and there were a few that played around with internet access offering.  So what was Microsoft’s strategy in this phase?  Well first and foremost it was about the browser and getting ahead of Netscape.  It did not matter whether they were large or small, we wanted them to deploy Internet Explorer.  Over time this was actually successful as Netscape tried to monetize the browser and Microsoft gave away for free (eventually as part of the operating system).  The second item was getting service providers to use our software to deliver email, hosting services etc..This proved a daunting task as none of our software and been designed.  One of the early whiteboard sessions I sat in on was a discussion around the internet infrastructure, and what was clear is once you left the desktop and got on the wire it was all Unix.  As usual Microsoft thought that needed to be changed.

Before we launch into the second phase an update on what was happening organizationally. Our group under Linda Griffin was changing to at this time, a colleague David George, left Microsoft for his exciting dotcom opportunity (what we called the expensive MBA program).  He joined a Dallas based hosting company called Data Return.  Our relationship with our friends in the Internet Customer Unit would change as well.  They had hired a new director, Mark Chestnut, who was returning to Microsoft.  This  would set in motion the move of the telesales team from our home in Ridgewood over to the main Microsoft campus, so in the middle of 1999 Ken Fiore, Steve Bissell and our new hire Sean Maplethorpe would move to Mark’s team.  In addition to this move Mark hired a middle manager, the Frenchman, Pascal Martin.   On top of all this Cameron Myhrvold, who was VP of ICU was leaving Microsoft and being replaced by the former head of Microsoft Germany, Thomas Koll.  The name of ICU was changed to the Network Service Providers Group.

As we moved into 1999 I was still covering Canada and the Central region of the United States.  Early in 1999 I was asked to fly to Houston to meet with an Application Service Provider called Interliant.  It would be a chance meeting that would lead to one of the more exciting opps in account management with Microsoft.   Interliant was not an access provider they were providing application services to customers.  Specifically they were offering Lotus Nots apps.  The idea was that a company could host your application rather than the customer having to support it on premise.  Thus they did not need to buy hardware or hire application developers.   This, for me, would launch into the second phase of the Dotcom boom – the application service provider phase.

As the second phase kicked off of the internet  boom it was again being spear-headed to a large degree by Sun.  They had hit upon this idea that software should run like a utility.  Your computer should turn on just lie your light.  It made for good PR and great marketing slogans, it was a bit far from reality, but I think that the basic idea fueled a lot of what the application service provider model was all about.  Before we knew it we had account lists and most of the accounts one the list were these so – called ASP’s.  I had a bunch – Interliant, Corio, CenterBeam, Exodus, Interland, AIT, Data Return, Excite@home, Equant, Allegrix and a bunch more.  They were all over the country and I flew all over the country hearing about their grand schemes.  Everyone had pretty much the same idea – we will deliver an application and you pay us a monthly fee based on users, hours etc..Some were more ambitious than others.  Corio had a former Oracle exec as CTO, Tom Spagnola, who wanted to deliver cookie cutter CRM apps built with Siebel.  For those who have used Siebel, stop laughing and stay with me.  For those who have never used CRM software let me say this;  every customer I have dealt with wants to feel special and how they receive and deliver software is no exception, there is always something specific to their business that they want or need because it makes them unique.  It’s a simple concept because at its core its human nature.

As things progressed NSG got into a new business – investments.  At the time NSG covered big and small, they had acct execs on ATT, SBC, Bell Atlantic, Lucent, Cisco down to the start-ups that I worked with etc..and though many were not using our software we did have one thing they needed…cash.  And so the investment game began.  At first they were big – ATT received a huge infusion of over $500 million.  The Microsoft CFO at the time was Greg Maffei.  Unlike earlier CFO’s who manged money, Greg liked the deal.  In time that would put him at odds with Steve Ballmer.  If I have time I will come back to my investment deals.  They were fun and a great learning experience in negotiations.

Another thing that was happening was many of these companies were going public.  As an account executive I started receiving offers to participate in the friends and family plans for these startups.  At first I was a bit hesitant because I felt there may some conflict of interest, but at the time Microsoft had no policies on this so I jumped on two offers I received at Interliant and Data Return.  I did end up making a bit of money in the long run, but had I sold at the peak of the bubble I would have made a lot more.  Later on executive VP Jeff Raikes would send out an email saying to “stop” this practice of participating in these offerings.

On a personal note somewhere during this chaos I added more chaos to my life.  On February 24th, 1999 Jean and welcomed the birth of our first child, Henrik Thomas Mernaugh Hoffmann.  Had our last name stated with a “L” instead of an “H” his initials would have been HTML.  That is a technical joke so for those who are not technical please ignore.  It was a difficult birth that left little Henrik in intensive care at the University of Washington Hospital.  It was a difficult way to start parenthood.   Luckily two weeks later we were able to bring him home.  He still lives with us. 

During this period the world seemed at everyone’s feet, people were making money hand over fist, the start-ups were young and exciting, when we went to events like ISPCon in San José, it was just party after party.  I was on the jet setter life style traveling 2-3 weeks every month.  But amidst it all things were not all well at Microsoft.  When we talked to potential partners it always seemed they were never interested in what Microsoft could do from a technology perspective, but were more interested in what we could give them financially. No one wanted to talk about Windows or Office.  It seemed some of our competitors were angry and they knew how to play the political game.  Microsoft was not there.  In one of my last meeting in Ridgewood, before we moved over to campus under Mark Chestnut one of our VP’s came to review our business.  His name was Sam Jadallah, a long time Microsoft exec.  During a casual moment he spoke of a dinner meeting the other exexs had with Microsoft VP of legal, Bill Neukom.  At dinner Bill had been quite clear.  It is time for Microsoft execs to stat meeting with Senators and Congressmen.  To give to political campaigns and foster powerful relationships.  Sam said that all the VP’s (who were all technical guys) had difficulty grasping this new concept or even desiring to do so.  After the meeting Sam was rushed back to campus where a helicopter was waiting to transport him down to Billg’s Hood Canal compound, for a big executive meeting.  The winds of the DOJ were becoming ever clearer and growing stronger.