InformationWeek

August 30, 1999

Microsoft In Transition:
Evidence Point

Microsoft is trying to address a new set of business needs with a new set of technologies. Does the company have the right mix?

By John Foley with Alorie Gilbert and Aaron Ricadela

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n a cramped and hot conference room in building 18 on the Microsoft campus, senior VP Jim Allchin has just given a presentation on the major technology initiatives under way in Microsoft's Business and Enterprise Division. Simplicity, serviceability, manageability--it's a pitch the executive knows by heart. But Allchin, whose team is responsible for delivering Windows 2000 within the next 120 days, is uncomfortable--and not just because of the tight quarters. Why, he wants to know, do IT managers think Microsoft is arrogant?

It's a tough question--and not the only one on the minds at Microsoft. Across the company, executives and product managers are asking their own hard questions: Are the company's enterprise products packaged correctly? Is its marketing message clear? Is the software powerhouse tuned in to the needs of its customers? What does Microsoft have to do to stay relevant in a business environment where a constantly shifting landscape results in new demands from its customers, and unexpected competitors, virtually every day?

Microsoft's answer, to a large extent, is Windows 2000, the widely anticipated upgrade to Windows NT, its flagship enterprise operating system. Windows 2000 embodies--for better or worse--many of the themes Microsoft has been sounding for the last several years, such as reliability and scalability. It's also the base platform for many of Microsoft's most important initiatives going forward, including E-commerce and knowledge management. Says Deborah Willingham, VP of marketing for Microsoft's Business and Enterprise Division, "Windows 2000 is the evidence point."

Jim Allchin Photo by Ellen Banner Microsoft's strength has always been software development--an aspect chairman Bill Gates continues to oversee and champion. According to InformationWeek Research, more than half of 300 IT managers surveyed think Microsoft has "mostly great" products.

But as the company's influence grows among its business customers, Microsoft is being forced to re-evaluate the product-oriented mindset that got it this far. "We have to continue to remake ourselves to be relevant," says Microsoft president Steve Ballmer, who runs the company day-to-day. "If we don't remake ourselves, even the popularity of the PC won't keep us relevant." (See interview, "Software Leader Braces For Change.")

Ballmer shook things up last spring with a reorganization that led to an overhaul of Microsoft's major divisions. The move was intended to make those product groups more responsive to customers, a goal being pursued aggressively across the company. Microsoft's customers say it's clearly needed, or as Ballmer puts it, there's "opportunity for improvement."

What's the problem? One in every three IT managers says Microsoft doesn't understand their company's business needs, according to the survey. And when IT managers were asked about Microsoft's responsiveness to their business needs in the 12 months prior to the survey, three-fourths said they had noticed no change. "We've never developed a relationship with Microsoft," says Larry Hazen, director of IS with Granite Construction Inc., a $1.2 billion construction company in Watsonville, Calif. "When you have a problem, you have to find the right people."

The survey, titled Microsoft Perceptions, also included the finding that piqued senior VP Allchin: 54% of respondents described the company's attitude as arrogant.

Microsoft wants to change some minds. The March reorganization resulted in business units serving four constituencies: developers, other IT professionals, business users, and consumers. Customer-satisfaction surveys are under way to gauge their progress, and Microsoft is taking action to fix the problems it identifies. For example, Ballmer says Microsoft is hiring hundreds of new account representatives to address a support problem within its large "named" business accounts. And it's taking steps to help businesses help themselves--including possibly allowing access to Microsoft's crown jewels, the Windows source code. Doing so could help business developers troubleshoot problems or write better applications because they would have a clearer understanding of the underlying platform.

This all gets back to the company's product orientation--and no product is more important to Microsoft right now than Windows 2000.Company officials say the operating system upgrade is on track to ship by year's end. Microsoft developers are putting the finishing touches on the second release candidate of Win2000, which should ship to Microsoft's software and hardware partners within the next couple of weeks. After that comes a final bug-fix before Win2000 is released to manufacturing, possibly in November. "We're working hard on it, and we're going to do it," says Iain McDonald, Windows 2000 project manager.