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What's in store for Microsoft?

The impact on Microsoft may not be enormous, although the extent of Gates’ influence can’t be underestimated.

The news came out of the blue. If Microsoft watchers expected any resignation during the hastily-announced press conference, it was Steve Ballmer’s over the software maker’s moribund stock price. But it was Bill Gates who announced that over the next two years he would step away from day-to-day operations in order to focus his attentions on philanthropy.

But after the surprise settled, the news actually began to make sense. Gates had already removed himself as chief executive six years ago – and subsequently announced that he was having the best time of his life at Microsoft.  And while Gates is no Martha Stewart, a clear succession plan for a company so identified with a single person is a corporate responsibility with a stock as widely held as Microsoft.  Even so, it seemed to happen sooner than anyone expected, leaving two questions: what does it mean for Microsoft – and what does it mean for Bill Gates?

( is a joint venture of Microsoft and NBC Universal News.)

The impact on Microsoft may not be enormous, although the extent of Gates’ influence can’t be underestimated. While some analysts have suggested that Microsoft has become such a huge company that no single person could reach into all the corners of the organization, that’s not quite true for Gates. When he had a new cause, he was unrelenting. A couple of years ago, some Microsoft engineers I know were working on new tweaks to the Tablet PC – one  of Gates’ pet projects – and showed up for their 20 minutes of quarterly review with the  chief software architect.

But instead of Tablet talk they spent exactly five minutes on software and then another twenty on security issues – the topic that Bill was then “hardcore” about.  During that period, in similar meetings, day after day, he pushed security through the entire organization, managing in the course of it to significantly delay just about every project then underway. It’s hard to imagine that anyone other than the founder will ever have that much influence at Microsoft again. 

The classic example of that influence was the Microsoft reaction to the emergence of the Internet in the mid ’90s. Back then – in what remains one of the remarkable business stories of the late 20th century – Gates turned the massive Microsoft ship 180 degrees in a matter of months, from an entrenched proprietary network strategy to a voracious grab for the Internet. And it worked very well. Now, of course, Microsoft is facing another tectonic shift, this time moving from packaged software to Web-based applications, and competing with open-source software where the code is free and the profit lies in services.

Can Microsoft make this transition if Gates is no longer at the helm?  For starters keep in mind that a company like Microsoft has product plans that extend more than a decade into the future, and that the next five years of products – the key milestones for making the shift into software as a service – already have Bill Gate’s fingerprints all over them.  And it’s not as if he’s disappearing – for another two years he’ll be working closely with Ray Ozzie and thereafter the folks in Redmond will certainly return the chairman’s phone calls.

And Ozzie, who came to Microsoft with their purchase of his Groove Networks, may be a shrewd choice to take over the visionary role.  He doesn’t exactly represent a new generation – he’s only about a month younger than Gates. But for more than a decade his work, first with Lotus Notes and then Groove Networks, has been far more network-centric than Gates’ roots, and he is widely liked and admired within the company.  He may indeed be a better architect for the new world in which Microsoft needs to play.

What about the second question: Gate’s personal motivations, behind the business maneuvering? I can still recall when, years ago, a far less mellow Bill stared down at me after a question and then disdainfully replied: “Michael, I thought you were smart.”  It was a put-down, of course. But it also was a reflection of a man who wanted to show that he was the smartest kid in class. And for the past thirty years, that’s pretty much what he’s been.  There were probably a few hundred guys (yes, mostly guys) hanging around Silicon Valley and Cambridge, Massachusetts in the late Seventies who were in a position similar to Bill Gates. Only one, though, became the richest man in the world. 

Gates has hinted before that he didn’t see himself playing the software game for life; a few years ago during a casual moment at the European Technology Roundtable in Berlin, he acknowledged the young entrepreneurs in the audience – some almost young enough to be his kids – and suggested that one of them, someday, might well beat him in the marketplace. So perhaps Bill Gates is moving on to another level of competition by devoting his time to the Bill & Melinda Gates Foundation. In the realm of philanthropy, it may well turn out that once again, Bill Gates can be the smartest kid in class. And this time, it could do us all a world of good.