Ballmer focusing on next big thing for Microsoft

In a corporate world where changes at the top can spiral into tumultuous power struggles, Bill Gates' gradual exit has been a case study in deliberate succession planning.

Though the 52-year-old Microsoft chairman was publicly contemplating the end of his Microsoft career in 1997, the change started in earnest in 2000 when he handed off the chief-executive title to longtime friend and colleague Steve Ballmer. Then on June 16, 2006, Gates announced a two-year transition that culminated with his last day as a full-time blue badge Friday.

In the interim, Ballmer, Ray Ozzie and Craig Mundie have assumed more of Gates' responsibilities for spurring innovation and overseeing Microsoft's expansive sweep to coordinate the company's efforts.

One task is pushing the idea that "the whole of our technology is bigger than the sum of the parts, particularly around Windows and the Windows experience," Ballmer said in an exclusive interview with The Seattle Times. "It's an area that Bill's been doing for so long and has been so core."

Ballmer and Ozzie, who assumed the title of chief software architect from Gates, have jumped in, "but there's more work to be done," he said.

"It's not that we expect radical disruption, but it takes a very different approach with the kind of departure of a charismatic founder," Ballmer said.

The leadership transition is perhaps the least of the challenges Microsoft is facing.

With 91,200 employees, the company is undeniably more bureaucratic. Despite the rapid growth of its already large work force, Microsoft will have $661,242 in sales per employee in the current fiscal year, the highest level in its history. Total revenue for the fiscal year ending Monday is on track to hit $60.3 billion, up 18 percent.

As the rate of growth in mature markets slows, Microsoft has turned its attention to the "next billion" customers. Already, close to two-thirds of its sales come from outside the U.S. But in many emerging markets, software piracy remains rampant, highlighting the battle Microsoft has fought since its inception to get people to pay for its products.

Microsoft's dominant market share has kept it in the cross hairs of antitrust authorities in capitals around the world.

And the fundamental landscape of computing is shifting beneath the company's feet, with more software functions being performed in remote data centers, not on the local desktop. The model makes Microsoft's most profitable franchises — desktop operating systems and applications — less relevant.

Internet search

Microsoft's battle with Google over Internet search, advertising and future computing has grabbed much of the company's and industry's attention of late. Microsoft, by bidding for Yahoo in an attempt to accelerate its pursuit of Google, brought much of that attention on itself.

Ballmer, 52, said the company's position in search is one of the top areas of concern he hears from employees.

"The most obvious question is, 'How are we getting our act together in search?' " Ballmer said. "That question comes up all the time, not, 'Oh my gosh, are we going to be OK without Bill?' "

Some observers wonder whether the search question is the right one.

The company faces a particular challenge righting the Windows ship after the underwhelming and delayed release of Vista, its most recent operating system, in early 2007.

"The question isn't, 'How do we beat Google?' " said Mark Anderson, a Friday Harbor technology analyst. "The question would be, 'Why did we do so bad on Vista? That's our business. How come we can't do that?' That will reveal some deep problems in how they program as a team, which they desperately need to fix."

Meeting customers

Ballmer is spending about 20 percent of his time on the road meeting with customers, down from about 30 percent two years ago. He is more focused on product strategy. He held 25 meetings, roughly three hours each, in the past two years with the company's senior development people to immerse himself in that aspect of the company.

When Ballmer is on the road, he's splitting his time between commercial customers, the bread and butter of Microsoft's existing businesses, and consumer constituencies — reflecting the company's attempts to expand in consumer Internet and devices businesses.

Gates, as senior technical adviser, will spend two to six days a month on Microsoft projects, including Internet search and whatever else Ballmer and Ozzie ask him to tackle. He will also continue as chairman of the board.

While the transition has positioned top executives to replace Gates' functions at Microsoft, Ballmer acknowledges that there is not another individual who could replace Bill, the company founder, the globally recognized rock star, the one that people line up hours in advance to hear speak.

You can't just place an ad that reads "Wanted: Founder of a $250-billion-market-cap company, who is also incredibly rich and deep and steeped in history," Ballmer said.

But people don't buy Microsoft's products because of Gates. "At the end of the day, people are going to want to continue to do business with us based upon the quality and innovation of our output," he said.

Gates' presence

Internally, too, Gates played an inestimable role as spiritual leader to the thousands of Microsoft programmers and developers responsible for that output, as well as the managers, marketers and strategists who plan and sell it.

Despite Gates' outsize presence, many inside the company view his departure as a nonevent.

"It's kind of a foregone conclusion," said Chris Capossela, a senior vice president in the company's business division who was Gates' speech assistant in the mid-1990s. "There's very little chatter about it in the hallways."

Some employees wondered privately whether Ozzie — who joined Microsoft in 2005 — will be able to see and coordinate the breadth of Microsoft's efforts as effectively as Gates and his comprehensive institutional memory.

And newer employees, in particular, expressed regret at never having experienced a "Bill Review," famous for the intense barrage of questions Gates would fire at product teams.

"Those are sort of legendary for teams to get a big morale boost from how that product review went," Capossela said. "[They] got a lot of mileage out of the feedback that he would provide."

Strong opportunities

Earlier this month, Capossela's team was in for its annual business-plan review with Gates. There was a "moment of realization that this will be the last one we do with him, and there's a bittersweet element to that," Capossela said. "But by and large people are excited for what he's going to do in the next stage of his life."

Gates, asked if he worries about whether Microsoft is ready to go on without him, was flip.

"Well, when I worked here full time, I worried that Microsoft was not ready to go on with me," he said.

Taking a more serious view, he said the company has always had strong competitors and a host of challenges.

"There's no guaranteed future for any company," Gates said. "But Microsoft is more strongly positioned, in terms of its research, and the position of its products, and the quality of the people today than ever, and the opportunities of what software can do in the next decade are probably as strong as ever."

Benjamin J. Romano: 206-464-2149 or bromano@seattletimes.com