Microsoft at 40

A lot of articles have been written lately about the 40th anniversary of Microsoft and so far they have been written by industry observers, who have covered but never worked at Microsoft.  An outsiders view. A lot has transpired since Paul Allen convinced Bill Gates to drop out of Harvard and run off to Albuquerque, New Mexico and write programs for the Altair. The growth and changes are not just a refection of the company but the industry and maybe most importantly, society.  It has been a long journey and I certainly remember those Microsoft offices that sat right off of 520 heading into Seattle in the late seventies.  The first time I remember using Microsoft software was when my friend Jon got an Apple II and in order to start it you had to insert the DOS 1.0 5.25 floppy boot disk.  Later I would walk the halls in Redmond delivering mail to anyone and everyone at Microsoft, including Bill Gates. It never occurred to me at that time that I wanted to or had a desire to work at Microsoft.  I would learn a lot about tech, the industry and business during my 18 years at Microsoft.  However Microsoft is much like me now: middle-aged.  It has, like me, seen its shares of ups and downs in life.  Microsoft has its own mid-life crisis to go through.

If we spend a quick moment we can look back at Microsoft in its late teens and early twenties, when it was naively conquering the world one desktop at a time.  It was a young dynamic company that was really the first of its kind. Passion and ideas were valued over experience.  It was viewed as a young mans company (I do not say this disrespectfully to women, but this was 1991).  There was no dress code.  It was more or less an extension of college where you were paid.  Employees hung out together after work.  There was usually beer at work.  Pop was free. These seem trivial now but at the time it was a new idea.  You had a stock price that was going always up and everyone was vesting via a generous stock option program.  The company had a vibe about it.  No matter what your job you were committed and felt important.  the line between work and play was blurred, in a very good and powerful way.  As we have learned time is a cruel vice.

Today Microsoft seems like a slightly thicker, out of shape middle-aged guy.  There is a lot that is still the same, but so much has changed. Microsoft is no longer the epicenter of the tech industry as many upstart and strong competitors have grown up around it. Recently I had lunch with a friend in building 18.  Part of the complex which includes one of many old buildings I sat in, building 16.  They had completely updated the building.  The lobby had wavy, very colorful couches with backs that were not attached.  Behind me were strands of glittering lights, that reminded me of the beaded doorways of the sixties, but were now modernized.  The halls were open and conference rooms were spacious and cool in both look and feel.  A lot of the halls were covered with nice maple colored wood paneling.  I think Google or Facebook would approve of these spaces.  The problem was the only ones enjoying this modern high-tech spaces were a bunch of middle-aged, grey haired developers.  In many ways this is an observation that highlights Microsoft’s challenges.  A simple thing called age.

What is the biggest change?  Well that has been going on for a long time.  It really stated when Steve Ballmer took over.  No it is not that he missed the mobile boat.  It really came out of the landmark DOJ case that Microsoft was involved in.  While everyone was focused on its eventual outcome another thing was happening at Microsoft.  The company was getting bigger, much bigger.  It had to manage that growth and figure that out quickly.  Jack Welch was the idol of every corporate CEO at the time and Steve was no exception to this idol worship.  One of Ballmer’s first initiatives was reading and learning all he could from Jack Welch.  I remember vividly that we needed some type of direction to manage this growth, the problem with the Welch model it was very structured and structure equals processes, which slows the pace of a company.  We became what Bill had so often feared, a company being attacked by smaller, more nimble, impassioned companies.  In the meantime Microsoft continued to grow, and as if this writing iv over 200,000 employees when you include vendors.

Part of the change at Microsoft had to do with just life in general as people grew older, got married, had kids, created debts, had divorces, more medical issues, etc..These are things that naturally suck the focus out of a company, but really are not a corporate lesson but life’s lessons.  When I joined Microsoft in 1991 the average age of an employee was less than 27 years old.  Today the average age is 38.7 years.  It may seem insignificant, but you certainly notice when you walk the halls of Microsoft.  Conversations filled with a lot of discussion about life outside of work.  A loss of people screaming about the intricacies of memory management.  The correct strategy to defeat WordPerfect. It is a natural evolution.  Thomas Jefferson recognized the passions of those under the age of 25, he did not seem to comment on those over the age of 45.  I can only hope it is wisdom.

Finally as mentioned earlier there is just the question of age and the passage of time.  In technology you can walk through the doors of any company and you can feel a certain vibe.  A level of excitement.  A movement that the company is going somewhere.  That vibe start sup at the top.  When Bill Gates led Microsoft he set the tempo for the day-to-day effort that went into every product.  When he spoke at internal events he had a way of speaking that made the future seem predictable.  And then the question to everyone was, “Do you want to be a part of defining this future?”.  After Bill departed this reverence and fear of the future slowly dissipated.  Replaced by corporate politics. With that transition a lot of talent and “vibe” went with it.

The good news for Microsoft is the industry is once again going through one of its great transitional phases.  Looking beyond mobility.  Microsoft has new leadership and it is trying to recapture some of that swagger that made it the envy of the corporate world.  It seems to be making a genuine effort to try to get out in front of industry trends.  Bill Gates is now dedicating more time back with the company.  He still makes great observations, but with only 30% of his time dedicated one can only hope it is a significant 30%.  He is there to help Satya Nadella, and though it is still early there is a sense that Satya gets it, he seems to understand the industry and where it is headed.  It’s a critical thing to the success of a technology company to know where it is headed rather than try to steer a rudderless ship. As we move from packaged products to cloud and services, it is a critical moment in time for the company.    Time is not Microsoft’s friend at the moment, but then it never seems to be when you are getting older.  As Satya has stated, in tech you cannot live in your past glories.  Microsoft is positioning itself to make a move, to perhaps wake from what has seemed a long winter slumber.  Middle age can be harsh on the body, but the experience of the mind can be very beneficial.  It may seem like a long time, 4o years, but in the grand scheme of things it is but an instant.  I look forward to the next 40 years.


Good Night and Good Luck

Hans Henrik Hoffmann April 13, 2015


Categories Uncategorized

The Dangerous Road of Tech Legacies

Tim Cook was recently quoted on CNet about what separates Apple from Microsoft and he said, “I think it’s different. Part of the reason Microsoft ran into an issue was that they didn’t want to walk away from legacy stuff.” It is an interesting and insightful comment and having lived through much of it, not an inaccurate comment.  The article goes on to highlight many of the geniuses of Steve Jobs.  My favorite goes back to Walter Isaacson’s fantastic biography (apparently Apple does not think so) of Steve Jobs where he said, “If you don’t cannibalize yourself, someone else will”.  In the existing technology landscape you cannot expect a cash cow to go on forever.  If you do in all likelihood you are doomed.  The problem with cash cows is they are hard-core drugs, very hard to ween yourself off of.  It’s a problem with technology, which is based on developer code, this is not Coca-Cola and a secret formula.  Technology moves quickly and so do the business models that support it.  By nature it is a disruptive force.  If you live in your history you are doomed to become a part of its history.

There are numerous companies that serve as examples of either dead or dying entities as they struggle to reinvent themselves.  Since he spoke of them, lets talk about Microsoft. Microsoft is and always will be an industry legend, and deservedly so.  Bill Gates saw the value of software long before anyone else did, including Steve Jobs (as acknowledged by Jobs, in Walt Mossberg’s legendary interview of Steve Jobs and Bill Gates).  The problem came when Steve Ballmer tried to extend Microsoft’s legacy with the same tried and true formula of Windows and Office. However the computing experience was moving and changing quickly .  What Microsoft failed to understand was the computing experience was shrinking and becoming more fashionable.  It went from a big Personal Computer tethered to the wall with a power cord and network cable, to a smaller and more nimble laptop.  But it did not stop there.  When Apple launched the iPhone in 2007 the ability to be free from your office and your keyboard was significantly altered.  Microsoft desperately wanted that mobile experience to be a Windows experience, but the list of reasons as to why that has not happened are numerous and in the aftermath Microsoft is left trying to re-establish its relevance in mobility.  In the tech industry size-mic shifts happen and you can either embrace them and move forward or hang on to what you know and lag behind

Microsoft’s success initially came at the expense of another competitor, IBM. There was a time in history where IBM defined everything in technology.  They essentially created the standards that everyone followed, until a ill-fated meeting with Bill Gates where they gifted Microsoft the rights to the software in the PC.  What seemed like a new beginning for IBM with the PC ended rather quickly.  IBM became rather confused as it tried to compete with Microsoft,  when Microsoft split from IBM over OS/2 and decided that Windows was the future, they decided to go with OS/2 and make a run at Microsoft’s growing empire.  It ended almost before it had begun.  The new PC’s with OS/2 loaded never really went anywhere and IBM’s status as a leader in technology was significantly wounded.  In this case IBM would recover and focus on what it was good at by going after the enterprise.  It had to realize that it was an enterprise consulting company.  In this case IBM moved to a differnet playingfield, one that they understood

Sun Microsystems was interesting.  During the early part of the dotcom boom they raged supreme.  They had a lot of great talent.   They were vocal in the industry to the point of extreme arrogance (which often is not a bad thing in the industry).  They hated Microsoft, which was becoming fashionable. They were a company that did a lot of things.  They made hardware.  They had their own microprocessor, SUN Sparc chip, their own OS, Solaris, their own programming language, Java.  They were cheaper than their UNIX competitors primarily IBM AIX and HP UX.  With Java and J2EE they had a solution that corporate customers loved and needed.  They were am alternative to the almighty Microsoft.  Only problem with all this focus is that they were not paying attention to another rising force: Open Source.  As big a threat as Open Source was to Microsoft’s business model, the immediate threat was to the UNIX incumbents.  When the dotcom boom went bust, SUN Microsystems went with it.  SUN was a shooting star, it rose with Java but before they had much of a legacy they were gone, gobbled up for cheap by Oracle.  SUN was successful but failed to realize it had chosen the wrong battle.

What is always of interest to me, simply because I called on them as a sales rep at Microsoft and I worked for one, AT&T, for a year is the role of the telco’s.  These ancient dinosaurs born out of the mind of Alexander Graham Bell, do not fit the mold or mindset of tech giants.  And yet they have been indispensable in the creation of the digital highway.   through the traditional world of Lanline and more modern era of wireless, their role has been huge.  Yet after having spend a year I realize that they are thoroughly confused as to what to do next.  The traditional world of  digital pipes is being squeezed.  In the world of wireless, this last year, we saw Google steal the Starbuck’s account from AT&T, using their typical disruptive ad model to say to Starbuck’s, “Don’t pay us, we will pay you”.  I can only imagine at Starbuck’s the only discussion was around making sure Google was not screwing them by taking too much money.  It’s tricky when you have a cash cow to devise a plan to let it die while you focus on new and more lucrative services.  The biggest problem is risk.  Telco’s are in trouble as risk is not in their nature.  As we transmit more and more data through the air and no longer rely on fiber under ground it will be cheaper (still very expensive) for new entrants with new business models to enter the market  that was once exclusive to Ma Bell’s domain.

The times are changing quickly and companies that were once defined in nice little bucks as energy companies or consumer staples and did not overlap cannot feel so safe anymore.  Apple already has changed the music industry. When I look at Amazon I see a company that will tear down Wal-Mart and Target.  I see Netflix altering the Hollywood Studios machine.  The legacies are no longer limited to those companies we directly associate with technology, but those that operate outside and have grand traditions of their own in American history.  It will impact every industry from automotive’s to oil and gas to your day-to-day household items.  We are entering a time of robotics, quantum computing, artificial intelligence, Internet of Things (IoT), drones, big data, renewable energies all interconnected all digitally enabled.  The big change is just the velocity of business as empires rise and fall quicker than before. Woolworth’s created the modern department store, but towards the middle of the 20th century was already fading and now are but a footnote in history . Bill Gates created the modern technology company and many seem lie streamlined imitations of what Microsoft created.  In all instance though  the speed of change does not allow time to reflect on a glorious history, because if you do you will be gone.


Good Night and Good Luck

Hans Henrik Hoffmann April 6, 2015