Category: Microsoft

Keeping on the theme of the dotcom era there were some interesting things that happened on the journey and some valuable learning that came out of it.  During this time everyone thought they were going to make a fortune on the stock market and stocks seemed to regularly shoot up by $5-$10 in a day.  I had a few myself – Data Return and Interliant.  Data Return I remember went over $90..if only I had sold.  On top of those great stock prices I was managing both Data Return and Interliant as the account manager.   It probably was a conflict of interest, but that was how things were run in those days.

At Microsoft HQ the CFO at the time, Gregg Maffei had an epiphany.  Why not take the Microsoft billions and invest in these companies.  We could take  an equity stake in these established companies and startups and then sell the stock for huge profits?  And thus the rush for gold began.

At the time I was a Business Development Manager working under the talented, but totalitarian Frenchman Pascal Martin (I think he would be pleased with both comments).  During the dotcom era Microsoft was a lost soul as everyone was racing for the internet and Microsoft was viewed as the Windows and Office company.  At the time we did not have a whole lot to offer.  We did, however, have one thing that every start-up on the planet needs…cash.  As much as the venture capitalists had, we had much more just sitting in the bank.  At the time Microsoft had in the bank between $15-$20 billion.

Needless to say when the investments started making the press my accounts came and started asking.  Some of the deals Microsoft did were huge, in the hundreds of millions.  The big one being AT&T – at the time AT&T owned what would later become Comcast.  There were  other big investments in what were deemed then to be major dotcom players like US Internetworking and Winstar.  From my neck of the woods came Interliant.  Their VP of Business Development, Jesse Bornfruend would be the major driver from their side and from Microsoft’s it would be myself.

The interesting thing about doing an investment deal was all the moving parts you had to bring together.  First there was my boss, Pascal Martin, to support the effort and provide his blessing.  Then we needed the product group.  From our side that meant the Microsoft Exchange team and the program Manager who led the effort was Keith McCall.  He and Jesse had a relationship dating back to their days at IBM.  We needed an attorney, who I cannot remember her name, but she was a single Mom who worked hard for us.  Then we needed the finance guy, Michael Leitner.  We only needed Michael to determine the amount of the investment.  When we needed a heavy hitter in negotiations we brought in our GM Mark Chestnut.  Mark had developed his negotiating skills during his days in the OEM business and working with IBM.

So why were even considering this deal?  To make money off of Interliant stock?  That was part of the deal but that was more about hedging our bets.  Interliant had something that Exchange team needed.  The two CTO’s at Interliant, Eric Sachs and Robert Dana had architected for Lotus Notes the ability on a single instance of Notes to house multiple companies.  This basically meant that Company A had an exclusive space for their applications.  Company B had their own space etc..  Microsoft Exchange could not do this.  If you tried to put multiple companies on an exchange server Company A would see what Company B has etc..In order to make Exchange useful for the Internet, it needed this “multi-tenant” capability.

The deal would take a few months to complete.  The main issue being to create a suitable contract for each party.  It was a fantastic learning experience.  I learned the great thing about lawyers around creating a contract, which was the correct wording of the contract, having the right definitions in the contract.  I also learned that you have to reign them in from time to time since they seem to think they own the negotiations when in reality they are there to advise.  I am sure our lawyer beyond the words had no clue what we were negotiating to acquire.

As things got close to the end it was time for us to bring Mark into the fold as from the Interliant side they had brought in Brad Feld, who was a member of the board and a major VC player in the valley. Interliant was looking for $20 million from Microsoft and we were looking to make sure we got the IP we wanted.  Things at times got heated with Mark and Brad, but in the end we reached an agreement.  However finance (Michael) had made it clear the number would not be $20 million. In the end we agreed on a $10 million investment for the right to acquire the IP from Interliant.  We received the signed contract and  Pascal and I took the contract to our VP, Thomas Koll, to sign the agreement.  Then we went out to celebrate at El Goucho, a great steak house in Seattle.

Pascal and I flew down to Houston after the deal was done where we had lunch with Jesse and a few others from Interliant at the Hilton Hotel.  We were in the kitchen  at the chef’s table.  We had a great lunch with great wine.  On the wall was the signature of President Bill Clinton.  Life was a wonderful adventure

Within 2 months of the agreement both Robert Dana and Eric Sachs resigned from Interliant.  We had the code, we had a team of devs at Interliant, but the IP had walked out the door.  It was a good lesson to learn.  It was a stressful period with a lot of late night conference calls, lots of emails, lots of travel, lot so dinners. 

Since that time Microsoft Exchange does now have “multi-tenant” capabilities and Microsoft under the guidance of Pascal have a hosted Exchange option.  It was a lot of fun at the beginning.

A second, but smaller deal I worked was with a small ASP called Allegrix.  I will say initially Allegrix wanted the investment deal like the rest of the Dotcoms.  We started down that path, but the reality was it was late in the game and the interest in doing these type of deals was beginning to fade.  One day I flew down to San Jose for a dinner with my friends at Allegrix.  It was at Gopi’s house, where his wife, Patricia, served really awesome Indian food .  Of course the downer was I had to deliver the news that Microsoft would not be investing in Allegrix.  At that moment I think I defined the term “bad dinner guest”.  Luckily there was still a deal to de done.

It helped that the people at Allegrix from President Chris Clabaugh, to Gopi Kallayil were not just first-rate professionals but a pleasure to work with and get to know.   I still stay in touch with many of them to this day.

Allegrix had a creative marketing guy, named Mike Foster who had created this little marketing packet called “ASP in a Box”.  It turned out the partner marketing group was interested in acquiring the content, so off I went in assembling another team – lawyer, finance, partner team, etc..Since it was a smaller deal the team was smaller and the financing came from the partner marketing team as they had budget for it.  Sometimes the smaller deals are the most fun.  Because the dollars were not as large it was less stressful.   Because of the experience I had gained from the larger deal I was really able to own and drive the deal forward  and be on point for everything. The end price was $200k and by the next time I saw Mike he was already working in his next idea, something or other to do with ASP on a coffee table. 

Reflecting back on this period it does show that even though a company with as large a “recent” history as Microsoft, who was not cool or even considered the future at the time, if you have a big horde of cash you will be relevant.  In one of the earnings statements it came out that Microsoft has made $1 billion on its investments.  Wall Street was not thrilled about this as they did not see how this fit into Microsoft’s business strategy and it was also at this time that an apparent riff surfaced between Steve Ballmer and our CFO Greg Maffei.  Gregg as time would show always had ideas of a bigger role for himself.  At Microsoft it was a two-horse show: Steve and Bill.  There was no room for a third.  Gregg left not too long after the investment rush.  Microsoft got back to basics and focussed on Windows and Office (not a bad decision).  The billion we made we gave back when the dotcom went dotbomb.

Good Night and Good Luck.

Hans H Hoffmann

March 10th, 2010

All good things come to an end and the Dotcom era was no different.  I  was reading the latest issue of Wired and they did a small little commentary on the dotcom era, a look 10 years back.  I figured it would be a good time for me to reflect upon the end of an era as well. At the time I had a job in the Microsoft Network Service Providers group, soon to be renamed the Communications Sector of North America.  I was working with the  Telecom providers and the Network Equipment Providers.  As the article points out the NASDAQ hit 5049 on March 10, 2000.  A pinnacle it has not gotten close to since.    A popular book was DOW 36000.  Looking back at it now the idea that the DOW would reach 3600 seems very dim-witted.  A generation of youth was about to be lost, not because they had been killed in a war, but they were all going to be so filthy rich by 25 they would not need to work.

When the bust hit it hurt my job pretty severely as all the customers I was covering at the time were either in or tied to the Telecom industry.  Budgets dried up as most of the companies had overspent on infrastructure and were not recouping their costs.  As a whole the communication Sector at Microsoft was left struggling with what to do next.  Where was revenue going to come from?  Every customer had the save me money pitch ready, sounds very familiar in today’s world.  We did not have a silver bullet.  Then like today Microsoft was a platform company.  When we did savings calculations it was with fuzzy math and fuzzy logic.  Always with the mantra, buy now and save later.

From a technology perspective however there were good things happening on the platform during the dotcom collapse.  The Windows Active Directory was becoming the standard directory service  in major enterprises.  Microsoft Exchange was winning over Lotus Notes , to become the corporate email standard.  Microsoft SQL Server continued to improve and in most accounts you would find two DataBases (Microsoft SQL Server and Oracle).  We were releasing Microsoft Sharepoint Server which in time would become a $1 billion business.

When I look back at this era a coupe of things standout to me.  The Venture Capital floating around was like nothing we will ever see again.  I made frequent trips down to the valley so I witnessed a lot of what money could buy.  I remember towards the end of the dotcom era I was having a beer with my friend Gopi and the bar was empty, except for a group of 10-15 people who seemed to be celebrating.  they were young (we all were).  Gopi said to me upon seeing them, “It used to be that this meant they just received funding, now it means they are going out of business”.  Not long after the company Gopi worked for, Allegrix, would watch as their VC would pull the money out from under them.  As quickly as the money came it went.

A second thing was when these companies got money they spent money.  If you give a bunch of young single people a bunch of money, there is no telling how they will spend it.  Based on the furniture some of these offices had they spent it well.  Being young companies they liked to party.  I was at a Microsoft Partner Summit in Atlanta.  A company called Coppernet rented out the top floor of the Westin Hotel (70th Floor).   To this day I do not know what Coppernet did.  Never heard of them before,  never heard of them since.  It was there I met a few executives from this company called Enron. 

A third area we seemed to neglect during this period was basic business fundamentals. There was so much hype about a new world of business and the breaking down of old models that we seemed to forget what was good about business.  The basic principles set forth by Luca Pacioli still did apply.  You need debits and credits and things like Income statements, Balance Sheets and Cash Flow statements do matter.

You can look back on this and think of all the money people lost and say what a failure.  But I think that would miss the point.  Around this time Bill Gates was at the yearly Davos Conference in Switzerland.  He was being grilled by reporters about this whole Dotcom explosion and asked repeatedly, ” how will these companies make money?”.  Finally an exasperated Gates said, “You’re missing the point!  It’s the build out of the infrastructure that is important”.  I think that is the true legacy of the dotcom era.  A lot of companies had the right vision, but the infrastructure was not there.  During this time telecom Providers were building out DSL service.  Cable Companies were working on Cable Modem offerings.  At the time they were crude and a bit hard to set up.  The Wi-Fi services we have come to expect wherever we go were still being built out.  Around all this was what the capabilities of these services were, still were not fully understood.  I remember a Telecom provider of Wi-Fi services wanted to provide hotspots in airports where people could pull up with laptops and download a movie over wi-fi they could watch on the plane.  Sounds nice, but at 10 mbs it will take a long time to download a movie.  Not to mention you need to build an inventory of movies and a billing system.  I am not saying it will not happen but in the year 2000 the technology was visible, but not ready for prime time yet.

If you fast forward to todays world many of the new market offerings we see today were laid down 10 years ago.  The idea of Software as a Service (not AND, for the Microsoft folks reading).  We can look to SalesForce.Com as one the survivors from that era and true success stories.  If you look at Cloud Computing this is a “big boy” version of the Application Service Provider model.  Rather than small start-ups with data center space at Exodus or Level3, you have companies like Google, Amazon and Microsoft providing the infrastructure or platform ( I believe Microsoft is making a big mistake with Azure the platform, but that is another blog)..

Unlike the current financial crisis I shall look back at the dotcom era very fondly and we should all be thankful for the legacy it has left us.  The internet was born in this era and so many of the promises it did not fulfill at the time are now becoming reality.  It was a wild ride at the time but it was also a lot of fun.    I have often said when business is in a state of chaos it is one of the times you will feel the most alive.  Thanks dotcom era, may you rest in peace.

Good Night and Good Luck

Hans Hoffmann

March 2, 2010

As I said when I started my blog this was not just going to be a Microsoft love fest and now we enter an area where I was probably the most disappointed in the company.  With the announcement of Windows Phone 7 it may be a good time to look back at Microsoft’s entry into the mobile phone business.  It has been a rough ride of late for the mobile business at Microsoft.  I will admit even when they thought they were doing well I was never that impressed with the products they were delivering.  I may be a “non” Microsoftee on this analysis, but it is how I saw things and though I never worked directly in the group I sat in the building (Building 117) with them for several years and saw how they went about their business.  I also covered some of the accounts that they called into;  ATT Wireless, Western Wireless and T-Mobile.

The first time I ever saw a Microsoft phone was around 1999 at a Microsoft Telecom Service providers event in downtown Seattle.  At the time it was a project code-named “Stingray” or “Stinger”.  It was as expected a brick, but it was the first step.  For Microsoft it made sense to go into the Mobile space, simply for one reason: During the 90’s the mobile phone had gone beyond being just a phone, it now had a user Interface (UI) which you could do things with, like texting.  If there was a UI then there was an opportunity for Microsoft to play, in fact it was so ingrained into Microsoft’s DNA  that it had to play and it had to be the leader.

Early on Microsoft tapped a former exec of Symbian, the OS used in most mobile phones at the time, he was a Dane (so naturally I thought that was cool) named Juha Christiansen.  Later on they would call back from Asia, Pieter Knook to act as Senior VP reporting straight to Ballmer.  They decided early on that Microsoft’s strategy would be to take down Research in Motion (RIM) with their cool Blackberry device.  Microsoft wanted to focus on business professionals and the smartphone market.  I think this strategy was significant as it meant that Microsoft would not provide consumers with an offering for mobile phones.  Second I will add I am not a big fan of the term “smartphone”.  To me all that means is feature creep, as phones get more powerful they add more features and before you know it all phones are “smartphones”, but I guess marketing people like these kind of things to show they are monitoring something important, no matter how obvious it is.

A second thing that Microsoft was thinking was the role of software with the phone.  Microsoft viewed hardware and software as two different things and were still under the guise of Bill Gates who said “you are either  a hardware vendor or software vendor but not both”.  Microsoft thought it could sell the software separately from the phone, so if you bought a mobile phone and an update came out for Windows Mobile, you could purchase for $5-$10 off of a website and upgrade your phone.  Then and today it is still amazing to me how Microsoft was so not in tune with the end-user.  Microsoft also wanted to replicate the OEM channel like it had with the PC by getting Motorola, Samsung, LG, Ericsson, and all the big mobile phone providers, minus Nokia to act as a channel. The problem here is unlike the PC, which was virgin territory and created companies like Dell, Compaq, and Gateway, Microsoft was dealing with mature established companies.  These companies did not need to be educated about the mobile market place.

A third area was Microsoft did not get SMS (texting).  Texting had become a global phenomena, driven by the younger audience.  It is a crude technology as you have a limit of 160 characters (140 bytes).  It looks like a mobile version of DOS.  But it is useful.    I asked one of my nieces once why she liked it  (we shall call her the Russian Princess) and the Russian princess relied, “A lot of times I just have a question I need answered and I do not want the formality of a phone call”.  Smart girl.  I can only guess here what the discussions were at Microsoft but based on the actions of the Bus Development folks, I think Microsoft looked at SMS as old, simple and stupid.  Why not use a rich email client to do the same thing?  Microsoft Outlook offered way more for the end-user than a text message. Two reasons why that did not really work: 1) consumers wanted light and simple (outlook is feature rich and big) 2) Telecom carriers make a huge amount of money per text and what Microsoft was offering was part of a flat rate data plan.  Telling Fortune 1000 companies to cannibalize their revenue stream was not a smart idea.  Today over 2 trillion text message are sent annually around the globe, which in monetary terms equals billions of dollars of profit to telecommunications carriers.

The first task for Microsoft Mobile was to get a carrier to resell the Microsoft phone and that duty fell onto my client ATT Wireless.  The hardware manufacturer was a Taiwanese company, HTC.    The first phone cannot be called elegant.  It was not great, but it was the first and soon thereafter a lot of people on the Microsoft campus had them.  It was a significant change as now as an employee you get your email anywhere (at Microsoft email is king).  Microsoft was on its way.  Pieter Knook had laid out a plan to ship 1 billion phones with Microsoft software in 5 years.

As time went by the phones went global and more manufacturers came on board Motorola and Samsung released Windows Mobile  phones and through time I would own about 10 different phones.  Some good, some bad none were great.  My issues with the Microsoft Mobile offering were more corporate.  For starters corporate marketing required that the phone experience be in line with the Windows OS, so the look and feel was Windows.  It had a start button.  The browser experience was usually not good and sometimes just plain awful.  It really highlighted to me a lack of the fundamental understanding of the end-user experience.

A second issue that cane to light was internal politics.  As the realm of mobile applications became larger it was natural that other groups within Microsoft would have their own mobile offering.  There was CRM ERP and MSN offerings.  The problem was from the Mobile team not all offerings were Windows Mobile specific.   The MSN team could not limit themselves to Windows Mobile phones since that covered less than 20 percent of the market place.  However the bus development folks would make a point of trying to keep them out of accounts.  I can certainly understand a passion for your product, I know the people in Windows Mobile worked hard, but at the same time I felt arrogance got in the way of reality.  To say you needed to limit MSN offerings like Hotmail to Windows Mobile would cede the market to the main competition at the time: Yahoo and AOL. 

Despite all the issues with Windows Mobile through the first part of the decade they did pretty well as they saw global market share increase, but as in many things you do not know reality until you look under the covers.  The core code was fragmented and it seemed like rather than innovating new features Windows Mobile was just trying to replicate what others were doing in the market.  This would all catch up to Microsoft on  June 21, 2007, that was the day that ATT launched the Apple iPhone.  It was hilarious in an infuriating way how the Windows Mobile team tried to downplay this launch and provide info on all the things the iPhone could not do.  For example it could not copy and paste.  Funny I did not know Windows Mobile could do that, but then I have never used Pocket Word to write an essay.  How stupid could I be.  When Bill Gates saw the iPhone he said, “Microsoft did not set the bar high enough”.

I think Apple hit a home run in several areas.  First and foremost was the touch screen which remains to this day the best I have seen and used.  It enables everything from there.  When I clicked on apps it was responsive.  By being so responsive it created the apps for the iPhone phenomena.  Finally the browse experience was the best I have seen.  It is easy, useful and responsive.  In short Apple controlled the whole experience.   

It raises significant questions about business models.  Apple’s experience is contained in one form factor (there is only one Apple hardware/software experience).  RIM does this to a certain extent but has more form factors.  Microsoft and Google Android chose to distribute to any hardware vendor who is interested.  Microsoft was really big into choice.  I always thought this was a big mistake and frankly positioned very poorly.  First off consumers always had choice. It was not like Microsoft invented it.  You walk into any ATT or Verizon Wireless store you have wall to wall choices in phones.  Microsoft does not enable choice the carrier does.  Second user experience is very personal and it is based on the hardware and software experience.  I met a sharp girl in San Francisco once at a Microsoft dinner.  She had a Motorola Razor.  Why?  She liked the color (Pink) and it was so slim she could put it in her back pocket, without a  bulge.  Girls do not like to look fat.  If Microsoft could develop Mobile software for that, well then they would be on to something.

When I left Microsoft there were 7000 iPhones on the Microsoft network.  Certain groups (XBox and Zune) encouraged employees to get an iPhone as a challenge to the Windows Mobile team.  They even embarked ona “skunk’ works project to develop a Zune phone.  One of the last executives I ever saw talk was Scott Guthrie, VP of development Tools.  He had a iPhone and mapped out what was happening.  The kernel code for Windows Mobile had to be scrapped and they needed to start over.  Andy Lees, VP of Windows Mobile was brought over to revamp the team (Pieter Knook had left and taken a job with Vodafone).  Andy did not want the job, but when SteveB tells you this is what you will be  doing it is not a negotiation.  the few times I have seen Andy speak he has not looked comfortable.  I think he realizes that mobile software and the mobile industry in general require sex and sizzle.  Andy is a very smart guy but he has no sex and sizzle.

With Ballmer’s recent announcement of the launch of Windows Phone 7 for the holidays (which is 9 months from now) it will challenge the Microsoft partner model.  All I  can say is every phone I have had though they have the same look the experience is greatly different.  The market is also getting very crowded (Apple, RIM, Nokia, Google, Palm, Samsung, LG, Motorola etc..).  Form factors are also getting more plentiful as the world of mobility expands.  You have Laptops, Tablets, Netbooks, PDA’s, Smartphones etc..It is a very exciting time in the world of mobility but the question will be what is Microsoft’s role?

Good night and good luck.

Hans Hoffmann

February 24th , 2010 (Happy B-day to me eldest son)

As I continue my journey into the next decade at Microsoft it is probably worth while to look back at just how far we had come and what it meant.  It had been a magical journey, something that may rekindle thoughts of other industries, like the great railroads that were constructed in the mid to latter 1800’s (check out Stephen Ambrose’s book “Nothing Like it in the World”).  Or the start of the automotive industry.  I had been in the game at the start of something huge, something that will define the 21st century.  Like so many things in history it all started so innocently. 

When I joined the company on November 4th, 1991 the company was only 7500 employees and the organizational structure was very flat with almost every employee only 3-4 jumps away from Bill Gates.  The product line was about two things; Windows and Office.  The industry was adopting desktop PC’s and they were also making their way into the home.  By 2000 things had changed as Microsoft had entered the networking arena with a lot of Server technology being pushed out the  pipe and the game changing force of the Internet had started to build momentum.

What I remember early on is a lot of good people came through telesales, where I started and many of those people had no technology exposure.  In fact many did not have college degrees.  But many of those people developed a passion for technology and became stalwart employees.  Everyone was young and having a lot fo fun, from the product managers who came over and presented the latest and greatest products to the new rep taking their first call on the phone and not having a clue what the person on the other end was talking about.  The sad downside of explosive growth and bitter competition is those people will never have the opportunity to work at todays Microsoft.  Finding the diamond in the rough is not in the cards anymore.  Don’t get me wrong, I am not bitter about this.  When companies become large they just have more processes in place, they become more systematic, and they are far less willing to take risk, because they do not have to. 

There seemed to be a party for everything.  A new product release?  We need a party? Christmas?  A big party.  Global Sales Summit? A bigger party.  Because it was a young organization with many employees single and in their late 20’s people hung out a lot together after work.  It could be drinking beer or doing co-ed sports after work like soccer or baseball.  Early on it seemed every time I saw a product demo I got a T-Shirt, so I had stacks of t-shirts for Microsoft Test, MASM, FORTRAN, Visual C++, DOS  etc. Microsoft in those days was an extension of college, except I got paid.  Like everything else in life you hit milestones, you get married, you have kids and the dynamics of your life changes. 

When Microsoft failed in those days it was not as big a deal.  A classic case was Microsoft Bob.  A simple idea really related to simplifying and humanizing the user interface for Windows I had first seen it in San Diego as a demo for something code-named “Utopia”, it seemed a bit clunky to me.  The graphical UI in Bob which allowed you to look at files like you were literally in a library, was at best described as veneer you would put over your Windows Operating system..  But I thought maybe it was something the new PC user might gravitate towards.  They did not. It was a risk and in the end a complete flop.  But Bill netted a wife out of it so it could not be all bad.  

The PC was new to the general public so many were naturally intimidated by this technological paradigm shift. This was the era of “the geek”.  They could come out of their closet and join the human race.  They could attend parties and talk technical and people were interested in what they would say.  They were also young and rich.  Microsoft was in its element at a societal level that no engineer had ever experienced before.  A vivid memory of this time I had when went to the company store one day and out came four technical geeks with their copies of Visual C++ (a big, big box…with lots of books, remember the CD for the PC was still early on at this point) and they all hopped into a shiny Rolls-Royce.  Nice.

As the decade started to come to a close things started to change very quickly.  The internet was going to solve everything.  What is interesting to look back on is that though the internet was cool and seemed to be making Microsoft irrelevant, the reality was that was not happening.  In order to connect to the internet people needed software they trusted.  Apple was still very expensive and Linux, though free, required a PHd to install.  So people bought PC’s.  In many ways the internet brought the grand vision of a “A PC on every desktop and in every home” to its conclusion.  I think the fact that Microsoft achieved a vision is pretty significant, how many people work for companies and never know what the mission statement is?  The beauty of the statement is nowhere does it mention the business that Microsoft is in.  We did not make PC’s we made software.  Billg always would say, “Software, that is where the magic happens”.

As I sat in the audience in September 2000 for the annual Microsoft company meeting, I listened to Bill talk about the upcoming decade.  He called the new decade the “Software decade”.  As he is so often when talking about the future he was right.  It would seem this would be the era that Microsoft would be come even bigger and more glorious. After all we were the largest software company on the planet.   Microsoft certainly has become much larger but the glory has not followed.  The software decade meant that software would become pervasive in many of the things we do.  As digital convergence happened the expectation is that the software would just work and tha Mr. end customer would not need to call his “geek” friend.  With the rebirth of Apple, the rise of mobile phones and pretty much everything in color, technology was cool and becoming part of fashion  The geek world was gone, geek’s don’t do Armani.  But the decade while it lasted was one greatest periods of my professional career.

Good night and good luck,

Hans Hoffmann

February 17, 2010

I am a member of the Microsoft Political Action Committee.  Even though I am no longer at Microsoft I maintain close relations with fellow MSPAC members and am still invited to events.  The other day they had Michael Brown, founder of a non-profit called City Year.  Before speaking he showed a video of teachers, administrators and supporters.  Among those supporters was an attorney named Joel Klein.  Had Michael showed this video 10 years earlier he would have been escorted out of the room.  For those who did not follow or do not remember, Mr Klein was the lead attorney for the Department of Justice in their landmark case of the US versus Microsoft.  Since I had already decided the DOJ would be my next topic I can only say “how fortunate can a blogger be?”.

The winds of the DOJ had already started following the release of Windows 95.  As Netscape started to lose ground in the browser war it was increasingly clear that they would not be able to compete.  Internally around 1997 or 1998 a memo went around in email written by Jim Alchin.  It was pretty simple – Microsoft should leverage its greatest asset in the browser wars, the Windows Operating System.  Even at that time I did not think twice, it made total sense for Microsoft to bundle the browser with the operating system.  However the industry did not see things the same way and so the rumors began to swirl and build. 

 The case had already begun in Spring of 1998.  At the Microsoft Global Sales Summit in 1999, held in San Francisco it was almost eery how the DOJ cast a shadow over the event. . For starters on the opening night everyone went to the usual reception part, everyone froze their butt off.  Unlike previous events in Orlando, New Orléans or San Diego, we were not trying to cool off with a beer or six.  It was a cold summer night in San Francisco.  It brought to life the famous Mark Twain quote, “The coldest winter I ever spent was a summer night in San Francisco”.  The event lacked luster after that.  There were no big product releases, nothing really to rally around.  When Ballmer did his keynote he ran around the audience like a crazed lunatic (he still does to this day).  When he finally settled down and got onstage it took him 5 minutes to catch his breadth.  I thought he was going to have a heart-attack.  I thought to myself, not only is the company being  targeted by the DOJ, now one of our key executives is going to die on stage in front of 10,000 people.  I remember leaving MGS that year not as in love with the company as I had been in the past.  It seemed like we had lost something.  On a good note the last evenings entertainment was the B-52’s!!

Back at corporate it was very hard I believe on all the employees.  For starters for those of you who hate big government and don’t believe they can do anything right, this is not your story.  However you feel about Microsoft, anti-trust, or government intervention in markets etc..the DOJ from a marketing and PR standpoint simply crushed Microsoft.  It was embarrassing.  At one internal company town hall an employee got up obviously flustered and said “I don’t even recognize the company being portrayed in the media”.  It was sad, but how true it was.  Every executive who testified in court seemed over matched from the start.  It seemed every day I went to work during the trial that nothing was going well.  I was traveling a lot in those days around the country meeting with customers.  It seemed like every conversation had to start with a talk about the state of the DOJ case.  To the DOJ’s credit every mistake made on the stand was a chance to show the world via the cable networks how bad we were, they were always attacking and we were always defending.  As much as executives tried to say don’t worry about the DOJ just focus on your work, in the age of the internet it was just impossible to ignore.

As the case wound down Netscape was aquired by AOL.  It put some temporary brakes on the DOJ momentum, but not much.  The Microsoft take was the technology industry was too innovative and fast paced, that change would happen by itself and needed to regulation.  As Windows and Office today slowly begin to die I feel that was true then and is still true today.  But to try and explain to courts and the public was difficult.  In hearings before congress you would have Scott McNeely and Jim Barksdale sitting next to Steve and Bill.  Scott and Jim talked about the challenges of competing against a “monopoly”.  The case was essentially about Microsoft’s ability to use the OS to bundle new software offering thus limiting the ability of the competition.  In this case the new software offering was the browser. Bill would say this was the weakest case that could have  been brought against Microsoft.  Had they gone after the OEM business, in my opinion, the case could have got ugly fast.

I had a business trip scheduled back east in November of 2000.  I was on United Airlines flying to Washington DC and had brought my latest issue of Wired Magazine.  It was titled “The Truth,  The Whole Truth and Nothing But The Truth” by John Heilermann.  It was a very long and thorough article on the inner workings of the DOJ trial.  How the DOJ was pushing hard to get Steve Jobs to testify, the emotional toll the case was taking on Bill Gates, how the Microsoft competition were lobbying on Capitol Hill.  It took me all 5 hours on the plane to read the article and when I landed I was tired.  From a Microsoft standpoint the article was emotional and hard to swallow.  Could this be true?

On the way home from DC I was with a fellow co-worker Janet Wu.  We were in the United Red Carpet club.  As everyone did we went to laptop lane.  This was still Dotcom boom time so every plane was cramped and the airport was always super busy. In laptop lane you had wall to wall modems set up so it was just a question of finding space and getting connected.  Getting connected was not easy.  You had to VPN in and of course it was all dial-up.  I had a Toshiba laptop and found a spot.  Janet was at the other end.  I remember I struggled trying to get connected.  I finally got frustrated and went down to see if Janet had got connected.  She had so I went back to my laptop sand sat down and…Iwas connected!!  The strange thing was in my inbox the fonts were different and I had a lot of emails from executives.  I remember Steve Guggenheimer (now a VP at MS)  had sent me an email.  I was a bit confused by my new found popularity.  I looked to the person next to me, but the chair was empty.  They had a Toshiba laptop too.  Son of a bitch I had sat down at the wrong laptop!! When the person came back I apologized..greatly, as it was clear this was a person of some power.  Turns out the person  was David Heiner, anti-trust attorney.  I had just been reading emails about one of the largest cases of the century.  Of course it did raise questions of David’s basic knowledge of PC Security.  We left, Janet and I to catch our flight.

I got to my seat ( a middle seat!!) on United’s filled to capacity flight back to Seattle and who should sit next to me..David Heiner!!  We got to talking and I learned the David was now starting to focus on what was going in Europe as they spun up their own case through the European Union (EU).  I then mentioned that I had read the article in Wired Magazine.  David lit up, “that article is absolute bullshit!!” He then proceeded to go on a small little tirade on why.  However in the end as the conversation winded down he uttered the words I’ll never forget, “…but man that guy had good sources”.  I guess it was all true.

As it became increasing clear that Microsoft was not going to win  the remedy plans started to surface.  One thing I never understood was the scenarios that were being proposed to break Microsoft up.  Some were stupid.  One was an idea to follow the baby Bell model.  We would have had regional OS’s – I don’t think anyone took that seriously.  Others wanted to separate the Office and Windows business.  Split off the MSN business.  In the end the settlement  that was finalized on Nov 2, 2001 was what many view as a slap on the wrist.  Microsoft was allowed to continue to bundle software withe OS, but had to share some API’s.  Many view the settlement as a failure, but the tarnish to Microsoft’s public image had been done.

Reflecting back the DOJ trial was a titanic shift for Microsoft and it’s employees.  It hurt everyone there at the time.  It was a loss of our innocence.  I would get very involved with the MSPAC after the events of the DOJ, because to sit outside the political game was no longer reality.  Gone were the days of admiration just because you worked at Microsoft.    The arrogance and self confidence that had created Microsoft’s success was now a detriment.  Soon there after the brain drain would begin.  There was a time when no one left Microsoft, but things were changing and there were exciting things happening elsewhere in the industry.  It was a challenging time to be at Microsoft and it was a time I will never forget.