Hans Hoffmann's Blog

Steve Ballmer was in Brazil last week at the University of Sao Paulo talking about the new release of Live Messenger, formerly MSN Messenger.  It has a new social networking focus, which I am sure is cool as everything Microsoft is doing lately for consumers has a social networking component.  It did get me to thinking about Windows Live and MSN and how it evolved while I was at Microsoft. When I look back at the legacy of the internet and how Microsoft responded one group always stands out to me: MSN.  It is an interesting journey.  The original MSN (Microsoft Network) debuted back in August of 1995.  It was to coincide with the release of Windows 95.  To put this all into perspective both MSN and Windows 95 were designed and released without the internet in mind.  To my younger readers, yes there was a world without the internet.   Since that time MSN has changed direction so many times it was even hard internally to keep track of what they were doing or where they were going. 

 The original MSN was built to compete with AOL and CompuServe.  These were what we called “walled garden” services.  What this meant was as a MSN or AOL partner I would sign up to deliver my services over their particular network.  When I went to AOL I got options for all sorts of things.  It could be “Mama’s cookie recipes'” or “Bob’s train collectible’s”, the point being these were only available to AOL subscribers.  When Microsoft in 1996 announced MSN 2.0 it was apparent right away the impact the Internet was having.  All these partners who had signed up for the walled garden approach came to Redmond and were told, the internet is the future and you are all on your own.

It was around 1999/2000 that the group I was in was briefly re-organized under MSN.  At the time MSN was being led by Brad Chase (Windows 95 fame) and Jon DeVaan, an engineer.  Thomas Koll was our VP for what was then the Network Service Provider Group (NSP).  We were introduced to the new organization at the Bellevue Convention Center.  Brad was the “showman” so he did most of the talking.  Jon was an engineer, did I already say that?  Brad talked about MSN as “The comeback kids”.  In order to have a “comeback”, you had to have achieved some measure of success in the past.   Something MSN had not really experienced. Everything Brad talked about was very consumer focused.  The NSP folks in the audience were Business Development people used to doing deals with large Telco’s and Network Equipment Providers.   We were like deer in headlights.  Speechless and confused.  It was apparent in the weeks following that Thomas pleaded with someone  to change this pending train wreck.  But I can say for at least 2 weeks I was a part of MSN.

At Microsoft MSN was its own entity doing its own thing.  This was highlighted more or less by Microsoft’s move into mobile phones.  The mobile phone folks believed in a world on windows.  The MSN folks just wanted to be a relative service, regardless of the platform.  The mobile world had a lot of different platforms, which Google, AOL and Yahoo played on all of them  – Symbian, Palm, RIM, Windows Mobile etc..They were offering services lile instant messaging, email and search.  Needless to say the MSN folks did this as well across all platforms.  The Windows mobile guys working with the wireless carriers did not like this one bit and only wanted those services available on the Microsoft based phones.  What happened then was the MSN mobile team  and Windows Mobile team each went into the carriers alone to strike their own deal.  The wireless carriers were confused as to whom they should be working with at Microsoft.  At the same time Bill Gates was out their talking about integrated innovation and better together.  Problem was internal politics (to this day) did not allow for that to happen.  On this issue I will be honest I was with the MSN folks, I did not ever understand the logic of the Windows Mobile groups thinking.  I am sure Microsoft is not unique in these type of political plays, but in the end the results are all the same, the customer loses.

When the internet changed yet again with services like Google and Yahoo! starting to dominate the Internet landscape it seemed ripe for change yet again in MSN land.  In particular like I highlighted in my earlier blog post on  Google, search was now the big game changing beast on the internet so Microsoft jumped on board and launched Live in 2005.  The search strategy was owned at Microsoft by MSN.  As is usually the case when Microsoft thinks too much the whole Live branding experience (Live Search, Live ID, Live Messenger etc..)  was a bust.  The common thing you heard was that Google was a verb and how do you compete with that.  As I have said before Microsoft is not good at sex and sizzle.  The whole Live strategy I found confusing the fact that it still lives on, even now after the launch of Bing, has made the brand even more confusing to me.  To muddle things even more according to Alexa Live search still ranks higher than Bing at #5 while Bing sits at #24.  I believe that is a big challenge when Microsoft changes strategies that before they compete effectively they have to undo what they have already marketed to consumers. 

I guess this brings me back to Sao Paulo and the new Live Messenger.  When I read it, it made me realize l do not know where the whole Live brand fits in overall to what Microsoft is trying to accomplish against Google.  I probably should since I worked at Microsoft for 18 years, maybe I did not pay close enough attention, but if I can’t make sense of it how can consumers??

In the end MSN has been through a lot in its now 15 year history at Microsoft.  They have had downs and they have had some slight ups.  Though those ups rarely happened around earnings season.  They continue to try new things and drive new revenue streams (advertising driven revenue).  They have seen every trend the internet has thrown their way and failed more times than I can remember (Anyone ever use Soapbox?  It was the YouTube killer…I am being serious).  They need an infusion of youth to help them think ahead of the curve.  Bringing in veteran’s of Microsoft leads to old ways of thinking.  They need a Sun Tzu moment where they change the playing field otherwise they will continue to follow.  Until they do they will…well they will just continue to be the same old MSN.  Or as Bruce Springsteen was sang about  MSN (not really it was his marriage) “One step forward, two steps back”.

Good Night and Good Luck

Hans Hoffmann May 6th 2010

I know an odd title for many who read my blog but please stay with me on this one as I try to bring the future to the present and hopefully you will understand where I am going with this one.  I do not think there is anyone out there who has not seen some of the first Unified Communications Software first released.  It was released in Star Trek, the original series, on September 8, 1966.  They had communicators, video chat etcetera. It was really cutting edge stuff.  Of course this was before the advent of the software industry.  This type of technology would persevere in film for many years to come.  It was a standard in science fiction.  For those who our not familiar with what unified communications is, it is essentially the “unification” of all the forms of electronic communications.  That would mean video conferencing, voice, email, web meetings, instant messaging and whatever new forms of communications we develop.  Today many companies are working on these type of capabilities including many of the big industry players, which includes Microsoft, Cisco and Google.

My first experience with Unified Communications goes back to 1999 when I was still in telesales working with Internet Service Providers.  In particular I was working with an ISP in Green Bay, Wisconsin.  I had heard about VOIP and video was now also starting to surface (keep in mind the term Unified Communications was not yet around).  I decided what the hell and built a case to my then manager Linda Griffin to allow me to get a head set, a little video camera so that I could effectively stop using the standard voice service provided by Qwest and just do everything over our existing 1omb network (for you nontechnical folks 10mb is not a lot).  This would lead the way in showing Microsoft how it could use technology to save millions of dollars. In short I was a genius.

Linda signed off on my idea and within two weeks I had everything I needed.  I let my client in Green Bay know we were ready to go.  The initial thrill of connecting gave way fairly quick as we established our link.  Using voice was working but it was of very low quality and you never knew when things would cut out.  When we added video a whole new dynamic happened.  The VoIP was reduced to one way communication and I quickly learned that the video was not studio quality and the windows behind me turned me into a shadow (kind of like those people  they interview on TV whose identity they want to protect).  I can’t say it was a humbling experience, I actually believe we learn more through our failures than our successes.  However it was dissapointing in terms of the glorious visions of success I had in my mind.  Most new technologies are not new  but a result of something already tried and in many instances failed.  Well I had achieved the latter.

Which brings us to the second component of the title, oil.  Oil is an industry that has been with us since the latter part of the 1800’s.  Though the techniques to find and extract oil have greatly benefitted from technology after that not a lot has changed in terms of getting oil out of the ground to the market.  No industry had a greater impact on world economics or world politics in the 20th century.  It also stands to have a significant impact on global affairs in the first half of the 21st century. One of the most significant things to happen in the oil industry in et new century occurred in July 2008, this is when the price of a barrel of oil peaked at $147.30.  There are many reasons things like this happen.  The rise of emerging markets has certainly created a “new” demand for oil.  The supply of oil is also changing.  Though there is an estimated trillion barrels of oil still left in the ground (“A thousand barrels a second” by Peter Tertzakian), the ability to get to that oil, process and refine is very expensive.  Though there is a strong movement to look at alternative fuels there is no silver bullet to replace oil and even if there was it would take time to put in place the infrastructure to replace our dependence on oil.  So for the short term (the next 20 years) we will still be heavily dependent on oil.

At this point you may start to wonder where Hans Hoffmann is going with this or maybe you have already guessed, but please bear with me just a little while longer.  Here is the good news.  The down economy we are currently in will end and things will start to return to normal.  We will get back to our desired style of luxury and life will be good, but there is going to be a cost.  The rest of the world is coming with the United States on this recovery and in some instances if not many will ge there before us (India, China and Brazil in particular).  This will put pressure on the basics of supply and demand in oil.  It will put pressure on governments to ease up on oil exploration and drill for more oil.  In short the price of oil will start to drastically increase again.  I will agree with those who forecast the coming of $200 a barrel, to me it seems obvious.  The growth in wind and solar will not be able to stop it.  The cost of pleasure and business travel will increase.  All the while Wall St will continue to ask for better margins on the cost of doing business.

This brings us back to Unified communications and the role it will play in the pending energy crisis.  The technology is nearly there and we will start to bring the future forward.  How we interact with one another is about to change as well.  In the past things like Video teleconferencing were neat but a little stiff in terms of interaction.  A part of that was due to poor quality and expensive costs.  However with the new economic realities and much improved technologies I believe things are about to change.  An example will be my old customer Cisco Systems.  When I would visit some buildings at their offices in Milpitas some buildings had no receptionist.  They simply had a monitor that would sence you enter the door and a receptionist in a central location would handle your request.  What was impressive and what got me to thinking was the great quality of the service and how personal the interaction was.  One of the reasons I have spent so much of a career on a plane is the ability to meet customers in person and establish the account executive to client relationship.  It is not hard to envision that in the near future face to face relationships will be dealt with via Unified Communications with a monitor and a VoIP connection.  The software today is enabling this and with the coming charge towards higher oil prices this will only accelerate the adoption of Unified Communication solutions in global business. As is always the case this change of technology force will upset some industries, but it will spur new ones.  That is nothing new to business and there will be those who profit greatly and those who miss the bus completely.

Hopefully I tied the pieces together nicely for everyone who read this title and wondered out loud, “What the hell is Hans talking about?”.  I thought I would conclude this article with some investment advice, but having seen others do this I thought better of it.  It seems like a gamble geared towards failure.  Not to mention losing a lot of people I consider friends.  Tonight I am going home to watch the Montreal Canadians versus Washington Capitols play an exciting game 7 in the NHL playoffs.  It’s in Washington, but in Montreal’s favor they can claim as one of their favorite sons William Shatner.  We of course love Mr. Shatner for what he brought to television in the role James T. Kirk.  As I began with in this blog the future laid out in Star Trek is upon us (the communications piece not the Enterprise), but it is being driven by an industry rich in history in driving the growth of the 20th century.  So let’s boldly go….

Good Night and Good Luck

Hans H Hoffmann April 28, 2010

When the market went in the tank it was a dark day for everyone. It was one of those things that when you talked to people prior to the collapse most people could tell things were not right. It was a typical conversation at the dinner table or while you were at the bar with friends or strangers.   How do you explain all the silly ads you saw on MSNBC.com or other websites, things to the tune of “Get a $500,000 loan today, no money down and no interest payments for 6 months”. Not to mention anyone could get these loans.  

When it hit it hit fast and hard and every CEO of every major company became an expert, including Microsoft’s Steve Ballmer.  Steve really got into reading about the Panic of 1873 and the economic collapse that started with the bankruptcy of a Philadelphia a banking firm, Jay Cooke and Company.  I can understand the correlation (Lehman Brothers?), but in my view all the collapses (junk bonds, dotcom, housing market’s etc..) I have witnessed are due to a failure to follow basic business principles.  The number one priority being your cash inflows must exceed your cash outflows.  However in the United States we have a gold rush mentality that stems back to the San Francisco gold rush of 1849.  We all believe we can be rich, we all believe we can be famous.  Whenever a rush presents itself Americans will run towards the light at the end of the tunnel, even if they do not know where they are going.

When the economy tanked I am sure everyone can attest that business. basically came to a halt.  In the world of information technology budgets were frozen and any grand plans of expansion were put on the  back burner.  Since I was selling into IT any chance of a large deal being done went to nil.  At Microsoft the reaction of senior leadership was not confusing to say the least.  I remember our COO Kevin Turner quoting his idol Sam Walton. Kevin (KT) came from Wal-Mart.  Sam told Kevin early on in his career, “Kevin, during an economic downturn there are those who participate and those who do not.  The latter always gain market share”.  I really liked that quote.  I thought at the time Microsoft was going to use its cash to keep business moving forward, to be aggressive when others were pulling back, to grow our share.   By the next morning Microsoft began contracting it’s business.

Following KT’s motivational speech everything was being cut across the organization.  Now KT’s method of leadership is old school and driven by fear.  Those beneath him are treated like line managers.  The word at the top is followed not challenged.  Over the next several months he would travel the globe and visit the field offices, sit in executive meetings and always say ” we are not participating in this economy”.  Every manager above me would say “Hans you need to grow share, now is our time to win”.  These were the echo’s of KT filtering down to the field reps.  Do not challenge, just do.

The reality at Microsoft was everything went into cost cutting mode.  Any travel all of a sudden needed manger approval.   There was no entertainment budget to take clients to dinner.  The idea of taking share was being supported by spreadsheets, and a lot marketing that stretched the bounds of reality.  How Vista can save you money?  We had a bunch of supporting marketing material for that scenario, if you can call it that.  We had internal Sharepoint Portals with a bunch of how Microsoft can save you money type scenarios.  In alignment with what KT was hearing and what we in the field were hearing – every CIO, Director, Manager, Developer in IT were all saying the same thing, “Help us save money immediately”.  I read through the scenarios and never used one of them because I did not believe I would be able to defend any of them in front of a customer.  Signing a Microsoft Enterprise Agreement was not fitting the request.  Some of our competitors were able to excel in this environment.  In the enterprise space VMWare certainly had the right message at the right time.  With their virtualization technology they could tell CIO’s maximize the utilization of the hardware you have rather than increase data center space and increase energy costs.  It also fit in nicely with many of the “green IT” initiatives that have become so popular in the industry.  Another company I think made a lot of headway during this time was SalesForce.com, outsourced hosting of your CRM environment.  Saves you money and it’s useful.  Microsoft is now offering hosted Microsoft CRM.  Better late to the party than never.

Not everything was bad I do think that the crisis gave Microsoft a lot of opportunities to look internally at business practices and see where money was being spent and where could we be more efficient in how we spent our money.  I know Wall Street was thoroughly impressed with how much we were able to cut.  I don’t think Wall Street saw how crippled we were internally.

In my opinion what Microsoft should have done here was go after Oracle and say “Buy SQL Server and we will help fund the migration”.  It would have cost a lot in the short run but in the long run I think would have increased not only SQL Server sales, but Windows Server, Sharepoint Server, Dynamics  etc..To do that type of initiative at would have taken courage at the top.  It would have hit the companies share price, but in the long run I believe the company would have won more business and helped the overall health of the organization.  In today’s world those type of leaders are hard to come by.   We could have looked at other competitors the same way.

I doubt what I have laid out here is much different from any other company at the time.  I am sure every sales rep in America could sit down with me over a beer and commiserate over the challenges one of the greatest economic collapses in American history.  I guess the shear historian in me will remember the fear and panic that came  over every company in America.  At a time when corporate America needed strong leadership it seemed sorely lacking.  To be clear in my opinion this was not the fault of a few companies facing bankruptcy, but a potential complete meltdown of the US financial system.  A friend recently told me that George Bush and John McCain had warned about this scenario before it happened.   So did I.  As I said leaders show courage in the face of public opinion.   Politics aside the best quote out of the financial disaster came from a Wall Street lackey who when asked by a reporter “Didn’t you all see this coming ?” replied “Sure, but when you are at a party having a good time..”  Don’t worry there will be more parties in America, more gold rushes, it’s like leading a horse to water. The question at my old company is will the leaders rise up and see the challenge before them and the opportunity it presents or will they do what the shareholders tell them.

Good Night and Good Luck,

Hans Hoffmann April 21, 2010

During the last decade at Microsoft things changed dramatically at the company.  Like any big change some good and some bad.  One of the interesting success stories was and remains to this day the development of the xBox.

When you read what is on the internet a lot of credit was given to the developer Seamus Blackley, but having been at Microsoft at the time I think the biggest credit yet again goes to J Allard.  I think most importantly what he identified was a problem in the gaming industry. At the time the big thing in the gaming industry was Sony with the Playstation.  Nintendo seemed to be fading and after that there was no alternative.  The problem was the gaming developer.  Sony was basically dictating to game developers the terms of development for the Playstation.  Microsoft (J Allard) figured that the opportunity was to make a cheaper entry point into game development and allow developers to have a platform that made it easy to take games developed for the console and port to the PC – thus creating a bigger market.

The challenge internally was going to be to sell the executives that this was a good opportunity and more importantly to make it really work Microsoft would have to build and own the gaming console, in short get into the hardware business.  The one thing I will say about Billg is as much as he loves software he is not a “gamer”.  However J Allard is an old school guy who has great opinions and has the ear of the senior execs.  He was the guy who sold Billg on the internet,  he is a guy with a lot of clout at Microsoft (check out this expose in Wired) .  In the end he got everyone on board to take the plunge.

Early on at Microsoft it was clear that the xBox was something different.  I do not mean this from a technical level but as a whole organization within Microsoft.  They seemed to be marching to the same beat over in xBox land.  They had a start-up allure that at the time was dormant at Microsoft and was being reinvigorated.  Out of the gate I thought they had the name right and I thought owning the game console was the right thing to do.   In hind site we were owning the experience.  THere were several things xBox did and they did right:

1. Brand marketing
2. Understand the “gamer” and the “gamer” experience
3. Look to te future and the role the internet would play in gaming

To the first point at Microsoft then and today the number one brand is Windows and the Windows Logo.  Had corporate marketing been allowed to participate in having influence in the game experience I can only imagine what they would have come up with, but I am sure it would have included the Windows “Start” button.  But to the good of the company and the community, xBox built its own brand.  I think that was very important as it essentially separated the xBox team from the rest of the company.  They were not beholden to what was already at Microsoft they were their own business.  It allowed the team to start with a clean slate.  That being said they would never admit to this.  I was attending an internal Microsoft tech conference and one of the agenda items was “xBox keys to organizational success”.  they had a GM talk and what amazed me was how he evaded questions and gave us insulting answers.  THings like, “we come to work passionate and ready to work hard”.  the whole time I kept thinking the answer was obvious, ” you are not the WIndows team, you have no history, no historical politics, legacy code, OEM agreements, etc..”  I guess he did not want to hurt anyones feelings.  Gutless.

Second it was apparent they had spent the time to understand what the “gamer” was doing when they were playing.  In many instances they had music going via a iPod or other MP3 player. so they made sure to incorporate that into the experience of playing a xBox game.  For the console they allowed 3rd parties to create “cool” or “funky” panels to put on the face of the console.  The xBox team took time to focus on the experience.  Microsoft in my view sometimes falls into the trap that they believe technology is the experience, but in reality technology enables the experience but IS NOT the experience.  It’s a subtle difference in thinking but it’s very important.  I think the xBox team understood this and it is a large reason for their success

Finally they did what I viewed as a very simple thing which was support online gaming.  Sony was slow to pick this up, but then again that seems to be a trend with them.  Remember whan talking about music players with hard drives, they felt “hard drives were interesting technology”…hello Apple.  As I often say “seeing the future is easy, timing it is hard and missing it is unforgivable”.  Driving traffic over a network utilizing the internet seems very obvious as it takes an “individual” experience and makes it a “community” experience.  As a parent video games are best when played as a group activity and not having one kid play while 3 watch.

There would be some misses along the way as Nintendo came back from the dead by altering the playing field with the Wii.  Microsoft is working hard on something that will alter the playing field once again, which is code-named “Project Natal”.  Sony, well they are being Sony and falling further behind.  They just do not realize it yet.  My thinking all along with these new controllers is that it will extend the gaming console into new markets, namely health and fitness.  It seems apparent that the game console will become the media hub for all your content.  As we see technologies like IPTV (now that we have moved to Digital Cable) the carriers; telecommunications, satellite, and Cable will want partnerships with the major game console vendors (Microsoft, Nintendo and Sony)

 Today xBox is a ort of nearly every ones vocabulary.  It has really been one of the brightest if not the brightest success story Microsoft has had this past decade.  It stated very simply as a problem was identified, but it was a problem that played to a Microsoft core strength the developer.  To many of the other big initiatives at Microsoft like Bing or Zune did not start because a problem was identified and needed to be addressed, they were born more out of panic and a realization we had fallen behind.  It does go to show that even in a company as big as Microsoft we could still teach a hungry start-up a thing or two.  We just needed to return to our roots.

Good Night and Good Luck,

Hans Henrik Hoffmann April 15th , 2010