Information Sharing--And Groove Founder Ray Ozzie--At The Center Of Microsoft's Strategy

When Ray Ozzie steps in as Microsoft's newest chief technical officer this spring, part of a select group of executives who report to chairman Bill Gates, one of his biggest jobs will be weaving Groove Networks Inc.'s team-friendly technology into Microsoft's PC software to make sure those products keep pace with the times.

Ozzie will be Gates' point man for making Microsoft's ubiquitous but slow-growing Office products better able to handle the demands of the 21st century workplace. Work has become more project-based, teaming people across company boundaries. PC users employ the same tools in their personal lives and work lives as workdays get longer and aren't limited to the office. And Internet connections in airports and coffee shops are supplementing corporate IT networks. In an interview Friday, a day after Microsoft said it would acquire Groove and its 200 employees for an undisclosed sum, Ozzie said PC software needs to change to reflect those trends.

"Right now, most IT systems, Windows included, have been built with the IT administrator in mind," Ozzie says. PC networks wrap machines in "organizational shells," and IT departments' user directories--like those built into Windows--can get in the way of decentralized work. Furthermore, "the design of security, which means you have to turn on a Windows firewall at home or in the office, is necessary to prevent all these attacks. But it sometimes makes it hard to share information," he says. "That doesn't really reflect the way we work with one another."

Information sharing is at the center of Microsoft's plans to inject growth into its lumbering Office business, worth $10.8 billion last year. During Microsoft's second quarter ended Dec. 31, Office and other "information worker" software brought in nearly $2.8 billion in revenue, but grew just 2.9% versus the same quarter a year earlier. Microsoft's SharePoint products allow teams to share documents and trade messages, but they don't work well for offline scenarios and don't span companies' IT boundaries as well as Groove's technology does, analysts say.

Groove also makes communications secure enough to attract business from government agencies such as the departments of Defense and Homeland Security. Any security boost can only help Microsoft, which has struggled to contain attacks on Windows networks. Groove's Virtual Office software provides "a security model that reflects the way people actually work," Ozzie says.

Microsoft is counting on Ozzie and his team to bring Groove's advantages to Office, and eventually Windows. "Ray's always assembled teams that do an amazing job of thinking through what it is that workers need," Gates said during a Thursday conference call to discuss the acquisition. "That's something that's very important to us." In an interview, Microsoft group VP Jeff Raikes calls Ozzie "one of the renowned leaders in our industry on security technology."

Ozzie, 49, arose from the University of Illinois' computer-science program and was a member of the influential Plato online education project there. He was involved in minicomputer software design at Data General and worked at early PC software companies such as Software Arts, which commercialized the pioneering VisiCalc spreadsheet. "That showed what an interactive tool could do in computing," VisiCalc creator Dan Bricklin, now president of Software Garden, said in an interview last month. In the 1980s, Ozzie formed Iris Associates and developed Lotus Notes, which helped expand PC networks. It has more than 100 million users today.

Microsoft has always had close ties with Groove, a privately held company founded by Ozzie in 1997. It didn't disclose terms of the acquisition, but Microsoft invested $51 million in Groove in 2001 and contributed to a $38 million investment round in 2003 that also included Intel and Accel Partners. Most of Groove's 200 employees in Beverly, Mass., will remain there, and Microsoft plans to expand the facility as a way to recruit more talent from the university-rich Boston area.

Ozzie says he'll split his time between Massachusetts and Redmond, Wash., and isn't concerned about working in Gates' or Microsoft CEO Steve Ballmer's shadow, a problem for other outsize minds in years past. Ozzie says he first demonstrated Groove's software for Gates five years ago and has "a longstanding relationship with a number of people on the senior team there." A bigger challenge, he says, will be getting to know enough people across Microsoft's sprawling organization to be quickly effective. "That's going to take some time." If he can, his user-centric point of view could be an asset.

"From Microsoft's perspective, communications and collaboration have really begun to take the forefront in their offerings," Ozzie says. "Personal productivity has taken a back seat to joint productivity."