Gates Memo Rocks Microsoft

Redmond chairman predicts a 'sea change' in the software giant's approach.
By Priya Ganapati
November 9, 2005

Bill Gates wants to overhaul the way Microsoft approaches the software market, shifting toward online services and the ad-supported model championed by rivals, according to an internal email that was broadly circulated on Wednesday.

In the email dated October 30, Mr. Gates urged the company he founded to better leverage web-based software and services to make up for missed revenue opportunities realized by competitors such as Google, Salesforce.com and Skype Technologies, which was recently acquired by eBay.

Over the next few months, analysts said the various business divisions inside Microsoft are likely to incorporate the services idea into their products. It could lead to some confusion, but by early next year, a clearer plan is likely to emerge.

“When Gates sent out the Internet memo [in 1995], every single group started putting Net-related features in their products, a lot which aren’t used today because they were not well thought of,” said Rob Helm, an analyst at Directions on Microsoft, an independent Microsoft-focused consultancy firm.

Analysts said the memo showed Microsoft’s realization that it has to move faster on product development to respond credibly to competitors.

In the last four years, Microsoft has faced severe criticism over its delayed software development cycles. For instance, updates to SQL Server 2005 came nearly five years after the release of the previous version. Similarly, a trial version of Windows Vista, formerly known as Longhorn, was released in July after missing multiple deadlines.

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