INTERVIEW:
Question 1
Bill, I guess congratulations are in order not only on the 20th anniversary of Microsoft
but on the launch of Windows 95. I have an article which says that a million copies of
Windows 95 sold the first 4 days on shelf. Do you expect the same result in Europe.
Answer
Well, we've seen a huge advance order from the retail channels here in Europe and that's
the first time we've seen that on a product. There's a tendency because there's not as
many software on the outlets. The adoption curve we see is a little bit smoother. In the
US there's a tiny bit more of a bulge at the beginning with those hard-core users, but I
think for the first time we're seeing that same thing here in Europe, although maybe not
in the same degree, maybe not quite as many people getting up at midnight to buy a copy.
Question 2
Many people have called Microsoft with technical issues. It said Microsoft was geared up
for 20,000 calls a day. How do you handle the support in Europe for that with multiple
countries and multiple languages?
Answer
We have a significant presence in all the countries here and we actually do support in the
country, so we've got a very large group here in France that is taking those calls. And
we've outsourced and we've found partners who can give us even more capacity beyond what
we normally have. So in France, Germany, the UK, throughout Europe, the product is now
available, and we're getting a lot of calls but actually less per unit than we expected
and we'll be working some long hours to help everybody get going.
Question 3
How about the issue of getting access to Windows 95 is one thing, being able to implement
it in a large organisation where many workstations, many of which are executing mission
critical tasks, you rely pretty much on partners for that part of the implementation plan.
Does that make you nervous at all that these people are sort of standing between you and
your customers?
Answer
Our whole strategy has always been dependent on partners. You know when we got into this
business, it was a new model where the retailers, the chip companies, the system
companies, only by helping those partners be successful could we be successful, and with
Windows 95 that's absolutely the case again. We needed the new generation of hardware with
plug and play. We needed a new round of 32 bit applications. And most importantly, we
needed the solution providers to be able to go out and do the installations. Now the way
this happens is it's like all the adoption cycles. A lot of people will wait until they
hear about pioneering customers doing it and having a great experience. And we actually
worked even before the availability date to get some major customers who saw the benefits
and wanted to be the first, worked with them to get it rolled out. And now we have those
as case studies. In every country there are a couple of major ones; on a world-wide basis
people like Ford Motor are moving very rapidly and have thousands of installations
already. And that's the kind of data we want to share that'll get the next wave after the
pioneers to come, and it will happen. The availability within the channel of expertise to
help with this is really quite impressive, because for the last 9 months people were
joining up. We had the date clearly in mind, we gave the channels huge incentives to come
and get trained. We gave the early product to them. And so for a generational change the
business is more ready than it ever has been.
Question 4
You see NT, Windows 95 and Back Office as the client-server solution of choice. I
associate the word "open" with client-server and I'm wondering if you'd consider
that an all Microsoft solution as an open solution or how do you accommodate point
products of other vendors?
Answer
We are going to operate with all the other different products. To me openness means
choice, the customer getting the best price performance and having the most flexibility.
And certainly the Windows environment provides the most choice, more than any other
system, whether it is UNIX or whatever many computers or mainframes that you can imagine
that are out there. Because of the incredible volume of Windows it has become the
connection point where Windows connects to everything. Windows connects to mainframes,
Windows connects to AS400, Windows connects to UNIX. In fact, if you want to connect two
arbitrary system together, sometimes the best way to do it is to put Windows in the middle
as sort of a universal connector.
Question 5
Let me ask you a question related to the thrust that Microsoft is making with products
like NT and Back Office, while at the same time you are doing some significant work in the
consumer market. How do you allocate your resources between these markets that are
spreading, giving more and more markets. Where do you put your money?
Answer
We are faced with incredible opportunities and so we're growing all the different groups
inside Microsoft. The fastest growing business for us is the Windows NT and the Back
Office, so our sever activity is going even faster than our consumer business is and also
Windows and Office are growing pretty healthily. And so the real constraint on Microsoft
has never been financial. I mean we have 5 billion dollars in the bank. The constraint on
us has always been how quickly can we hire in great people to both build the software and
help our customers use it. And so we increased our R&D over 40 % last year and we'll
increase it over 40 % again this year. We are able to pursue a lot of initiatives some of
which are near-term and some of which are long-term. And, you know, take an area like data
base. Recently, there's been some good articles talking about the level of expertise we've
been able to hire in from Jim Gray to Gordon Bell, to dozens of experts, who, if they've
seen the opportunity to influence the data base world working with us rather than the more
classic computer vendors, have come in and formed really a great team.
Question 6
So we can assume then that Microsoft will continue to expand in all directions.
Answer
Well, not in all directions. What we're good at is building software products. We do
define the word software to include content-oriented things like encyclopaedias. Now a lot
of people ask me nowadays if we want to be in the media, and the answer is that in the
interactive world we do see a chance to facilitate some new things and do some things
ourselves, but in the classic print world-video world we have no interest in that. You
know, we might end up with a minority interest in something that's part of a partnership
aimed at interactive, but we're a software company and you won't find us owning wires or
frequencies; we'll work in partnership there. You won't find us in chips or hardware. But
within the world of software, anything that's high volume software that works on the PC
we're probably investing in.
Question 7
You said you are software company but you're also now with the launch of Windows 95 an
electronic on-line service network company as well. Can you give us a picture of as how
much Microsoft service network will roll out in Europe, what percentage of revenues
on-line networking will be a few years in the future?
Answer
The Microsoft Network was launched with Windows 95 and it's a completely new thing for us
and we're very committed to it. It's a community on the Internet. Actually as we're
starting up some of the connections go through x25 networks but we're transitioning all of
that to TCTIP networks so that it's easy for people to get to the entire Internet as an
MNS customer. We'll also make it so that if you sign up to the Internet through some
provider, you'll just pay a subscription fee with no hourly charge to have access to the
entire Microsoft network. Our goal here is to create a community of users, to have it be
the best place for a Windows user to go or an Office user to go. In fact, we'll have
shortcuts right inside our products, where if you want to get help or you want to go up to
the bulletin board, you just click on that shortcut and it'll connect you up without your
knowing any phone numbers or having to navigate around. And so there's a lot we're
learning. Like all the businesses Microsoft gets into, there's a huge expectation and
we're going to get a lot of feedback. The great thing about Microsoft Network is we get to
release a new version very day. And so people say they want more content or if we see
something that's not working fast enough we can be improving that, so even over these
first 6 months you're going to see a lot of evolution. Our goal is to be the largest
Internet community. Although there'll be thousands and thousands out there, we think we
have a chance of doing something substantial. In terms of revenue it's hard to say. The
entire on-line service business today is tiny. And a lot of the revenue potential comes
from advertising, which will take 3 or 4 years before advertisers really see the value of
what's the demographic, does it influence my behaviour, can it be tracked properly. But
we're optimistic enough about that that we're willing to make even for us a gigantic
investment.
Question 8
I am sure there are some vendors that grin to hear you call the market tiny. Let me talk a
minute about the Internet. It's been suggested that actually the Internet is a substitute
for Microsoft. There is an idea of a 400 dollar Internet terminal, where all the
information and software is really kept on the network, the Internet, rather than a
desktop device. Maybe you could react to that. Is the Internet an opportunity ? Have you
really debunked the notion that the Internet appliance will replace the desktop computer?
Answer
The Internet is a great thing. It's low cost connectivity and that will drive demand for
software. The people will want to do creative work, people will still write documents,
they'll still create spreadsheets, they'll still want to manage their finances and look at
that data in different ways. And so you're going to see rich objects out on the Internet
that fully take advantage of the PC. When you're browsing the Internet everything on your
PC is being used. For example the graphics: there's going to be 3-D navigation that will
to be the key way to move around on the Internet, so that will push your graphics to the
limit. Your memory, the kind of caching and code that's being used to navigate around that
will be very heavily used. Your local storage to keep your personal preferences that let
you store things away for going back to look at later or anything that you want to edit or
do creation on. And so the Internet, people will think we're going to have dumb terminals
in the world of the Internet; I just disagree with that. It's the old X-terminal argument
over and over again. And how did X-terminals do ? It looks like people actually wanted to
use software, and so the Internet is super positive. Nobody controls the Internet and
nobody knows exactly what direction it's going to take. But it is a powerful and important
thing for every strategy we have at Microsoft. Windows is the best way to get at the
Internet; Windows NT the best way to publish on the Internet, that is central to what
we're working on.
Question 9
Is Microsoft Service rolling out in Europe and the US?
Answer
It is available world-wide and we have local phone numbers throughout Europe. A lot of the
content today is still in English; we're announcing every week more local content
providers and better ways to get connected in, moving over to the IT network by mid 96,
and hopefully finding a way to work with the telecommunications companies to get the
connectivity prices down because they're still quite a bit higher here in Europe than in
the United States.
Question 10
Do you have an update on the pressure by the US government to decouple the Microsoft
Service Network from the Windows 95?
Answer
No-one has ever suggested that there's any criteria for new versions of Windows, other
than our trying to keep our customers happy. If somebody suggests that, we'll try and see
how that fits in with a market-driven approach. But all we have in Windows 95 is the
access code. Access offer is easily available through any number of channels. And we won't
succeed with the Microsoft Network because our access offer is in there. We will succeed
if we have better content, better performance, a lot of things that we're working hard on;
it's a fun challenge.
Question 11
So that's really your answer to the on-line service providers who complain that you have
an unfair advantage by putting the icon right in with Windows 95.
Answer
We have an advantage: all of our products work together. And if somebody's going to tell
us our products should not work together, that'll be too bad for customers. It turns out
the Microsoft Network is the place where you can go and get Windows support, meet the
Windows developers, and it uses the Windows 95 interface. We use shortcuts. Now all the
other on-line people will be adopting that, but the way we use shortcuts is a great thing,
so it really took Windows 95 to be able to do the network there. Remember that on-line
services is hypercompetitive. With the Internet anybody can get in and publish. I mean,
there's never been anything as open as the Internet is. We just, you know, we're going to
do our best to make sure our software is what unleashes that potential.
Question 12
Maybe you can enlighten us as to as more and more people go on the Internet and get
connected as you mentioned with PC communications, how can they keep in touch with each
other? Do you have a vision for how directory services will roll out? We'll all have one
number we carry with us around the globe? How is Microsoft going to help bring this about?
Answer
The directory is a key component of Windows because that's the way people send electronic
mail, that's the way file security works. And a lot of corporations are going to want to
move away from having multiple directories, having their data base have a directory,
having their mail package, having their file share package. It's kind of a nightmare
today. And that's why we with Back Office we use the single directory and we've announced
an interface, so that you can program in a way that you don't care whose directory it is.
You just write the software once, whether it's NBS in the back end, Banyan Vines or our
thing, allocations will just work. Directories are a mess today because you go out on the
Internet and you have to use a different name on different services because they're taken
and there's no authentication. We are working with other companies to set some directory
standards there that basically use the Back Office APIs.
Question 13
Does this same concept apply inside corporations? An ACI with electronic mail connects
people up so they can communicate electronically, which often entails tying together
different types of e-mail systems. Does the same thing work here? Can you use Microsoft
products to make that happen?
Answer
Yes, the beauty of what's called the messaging API, which is part of the Windows platform,
is that how an application works with the messaging system is decoupled from what that
messaging system is. We have something called the provider interface so the front end you
use for the mail system is decoupled from the back end you use for the mail system. Then
you have gateways so you can use multiple back end systems and those can work together. So
you can evolve towards an enterprise mail system. The most important product we're doing
in this space is Microsoft Exchange. We would claim it's the first real enterprise mail
system that's designed to be a client-server system and really service the needs of mail
users. Actually it's the only product Microsoft has that I think the marketplace is
underestimating. But as people move in the new mail systems, they can evolve machine by
machine and evolve the backbone step by step and evolve the front ends likewise step by
step by step. There is mail built into Windows 95 but you don't have to use that.
Question 14
How about for mobile workers and users of the you mentioned the hand held device and the
different form factors. Where do you stand with your system for operating faxes and
printers and things like that ? How do you see Microsoft actually helping them work with
all these various form factors and intelligent appliances?
Answer
The portable computer is getting better all the time, whether it's battery life or the
screen. I carry mine with me wherever I go. I think that's more and more common. There's a
lot of features in Windows 95 that relate to that. The ability to dial in and do file
sharing built in, the ability to dial in and do mail is built in. A thing called the
Briefcase where you can take a set of files with you, that's built in. The ability to do
hot docking so you don't have to turn your machine on and off where you want to put it in
the docking station. It automatically detects that configuration. That's built in. So for
the full size form factor, I think we're in good shape. For the smaller form factor none
of the products to date have been successful. I was disappointed the Newton didn't sell
better and the General Magic didn't sell better. I still believe in the category and we
have more people working on it than every before. And within the next year or so working
with hardware partners we'll bring something out that I think may get that started, but
even if it doesn't, we're going to keep going at it. We think that's a fundamental product
category.
Question 15
We are getting 64 bit chips starting next year with P6, we're just getting into 32 bit
applications this year, and some would argue we're still half way in 16 with operating
systems. When will we go to the next step, when will you come out with a 64 bit operating
system ? Or is that just an impossible task seeing how long it took to get to the 32 bit
operating systems?
Answer
One thing that was very complicated is the original PC had a memory model which was the
8088 20-bit memory model. Then we had a segmented memory model with the 286. Now we have a
situation which is really clean where a 386, 486, 586, P6 they're the same architecture
and they're are just faster implementations of the same architecture. And that's allowed
the entire software industry to have a real focus there, and the move to 32 bits is very,
very rapid. When you're using 32 bit applications you don't execute any 16 bit
instructions. If you're using 16 bit applications for emulation or for fixing the drivers
we do, but there's no 16 bit code that's in there for any reason other than compatibility
with what's come before. In terms of 64 bit we are working on 64 bit NT. There aren't that
many people who are running into the 4 gigabyte limit. And in fact I haven't seen that
many PCs that have 4 gigabytes of memory yet. We will get that. The big place that you
want to break the 4 gigabyte limit is on the server, whereby doing really amazing caching
you can actually take a data base that people used to think of as big like an entire
airline reservation data base and have it in memory so that your access feeds to very
quickly. You have to make sure that you'll still have the fail-safe capabilities, but
there are ways to do that. So we're already at work on 64 bit NT and it isn't a big deal
at all because the 32 bit applications can co-exist and it's very clean.
Question 16
I'd like to talk about the Microsoft company and some of the directions related to where
you're going with content, for instance are you still talking with Turner Broadcasting
about a network investment?
Answer
We approached Turner like we have many media companies about doing some interactive work
helping them get CNN into an interactive form. Now with Turner and Time-Warner very likely
to merge, we'll pause till that merger takes place and then spend time talking to the new
combined entity, but there are many, many media companies that we're bringing into this
interactive space to really drive the Internet and drive the use of PCs.
Question 17
You have said that we are in the third wave of computing or putting the platform for full
connectivity and the next wave is where the connectivity is transparent and we have the
information society, which means content becomes king. How does that change the direction
of Microsoft when content is more important than the platforms that are used to deliver
it?
Answer
In a sense content has always been king. The platform is just there. It's like electricity
or water. It's just there and you can do with it what you will. You know when we made
Microsoft Word as a tool, the most important thing was how people used that tool. And we
have lots of multimedia offering tools. We will be a small part of the content space.
There's a few things like encyclopaedias and atlases we may do very well in, but because
content is so broad, no company even these media giants won't be a huge percentage of it,
because the creativity tools, even somebody without a lot of money can do special effects
and anybody can publish and so the diversity in that content space it will be
mind-blowing. We're very content. There's plenty of opportunity for us to be primarily a
platform company and only to a limited degree a content company but hopefully with some
cool things that will lead the way.
Question 18
So we don't have to worry about Microsoft buying up a lot of content companies and owning
content specifically. Do you have access to specific film libraries or data bases?
Answer
No, we don't. We're going to do content things. We're going to do content about Windows,
we're going to do content for education but we won't be a very large company. And the
industry structure of content will just have immense variety. There's one example where
we're quite large, which is in encyclopaedias. Today our CD encyclopaedia outsells the
best-selling print encyclopaedia or any other CD encyclopaedia by a factor of 5. It's 10 %
the cost of a print encyclopaedia and it's far more engaging, so that's an example where
the print world has moved to interactive and we've been able to play a role.
Question 19
Perhaps you could talk a little bit about intellectual property rights. Perhaps Microsoft
are violated as much as anyone or more than anyone particularly in the Far East. Do you
see any solution to the violation of intellectual property rights in the developing
countries or anywhere for that matter as we move forward?
Answer
The trend against intellectual property theft is very, very positive. You can go to Korea,
Taiwan, Hong Kong, places where 5 years ago nobody paid for software and today the
majority of users do pay for software. Here in Europe there was a dramatic impact in Italy
a few years ago when the financial police realised they weren't getting their value-added
tax when people weren't buying software and so within one year our sales doubled. That was
quite a singular event. In most places it's more gradual. But as people become aware of
copyright law, as they get a local software industry, it always improves. So we're going
to keep investing in that. We have over 80 full-time people and we put 20 million a year
into those education programs. There's a form of it, though, that's particularly a
concern, which is counterfeiting, that is, where you get professionals who create
something that looks like the real product. And we'll see more and more of that. That's
why you see us using holograms and all sorts of special things, but staying one step ahead
of those counterfeiters is tough.
Question 20
One more question on the Microsoft business model itself. We've talked about the computer
becoming network-centric, personal communications is improving. As the network becomes
more important, how does that change your business model, which I would assume we would
think of as company that is masterful at producing volumes of software that's
shrink-wrapped, delivery to the public with lots of fanfare and strong marketing?
Answer
The network is a great thing for delivering information. Some customers will choose to use
it to deliver software. In fact for our high end, for our corporate customers most of them
don't take physical packages anymore. Most of them have what's called the select agreement
that let's them do electronic distribution using their own network and the role of the
channel is to help them manage that software, help them do the installations, all kinds of
value-added services. Already for the top third of our customers, packaged software is a
thing of the past. Now that may move down a little bit as mid-band and broadband networks
become available pervasively, but we don't have ranches, we don't have a lot of investment
in the exact technique that we send the software out in.
Question 21
Are there any competitors that you worry about, or are all companies on earth more
potential business partners than competitors?
Answer
If you had been IBM and you'd said: Who do we worry about it is unlikely you would have
thought of Microsoft. The reason why no high technology company has any kind of guaranteed
position and why if you even take a timeframe like 10 years, say to yourself, what will
the most popular soft drink be in 10 years? I don't care, you know, how hard those guys
work or who they hire, Coke will be the most popular soft drink. And in high technology,
take any leader, is there greater than a 50 % chance I'll still be a leader ? Well it's
all based on who they hire, how hard they work, are they really smart. There's nothing
about products or size that provides any guarantee, IBM being a fine example of that. And
so competition can come from the most unexpected places, you know, speech recognition,
game machines growing up, not doing a good job on the Internet, there's many ways that
we're challenged to move things forward quite rapidly. Some of our competitors have made
missteps and so they're less prominent, say, than they have been, but it's still a very
competitive field.
Question 22
Let me ask you a specific question about the IBM buy-out of Lotus. Is that a brave move, a
misstep or do you even think about it?
Answer
A lot of the people invested a lot in systems applications architecture or they really
counted on 80 cycle, perhaps they were very dependent on office vision or maybe they're
one of the companies that today are using OS/2 and wondering what applications they're
going to be running in the future. And so it's very possible IBM will do a good job
managing Lotus and we'll just wait and see. I'm a very biased person. My view is that
software is an industry by itself. And that your people's decisions to buy software should
be independent of hardware. And the whole thrust of IBM is the integration of they make
their software work better with their hardware. That was the fundamental issue that caused
the divorce over OS/2. We insisted that it stay neutral to all the hardware suppliers and
that just isn't IBM's strategy. So IBM will do a fine job. They have lots of smart people,
but I wouldn't say that that's a source of significant concern going forward.
Question 23
What's the thing that's surprised you the most in the last 10 years of Microsoft, about
the industry?
Answer
We knew that that communications would develop strongly and, therefore, foster a rich
communication network. But was just about 18 months ago that we really started to pick up
on the Internet as the seedcorn for the communications revolution. So that was a wonderful
but I think broadly unexpected thing. 10 months ago we shipped Word that does the Internet
work and with Windows 95 our Internet browser is on all the new machines with that, and
our firewall and our high performance servers will be out early next year, so there's a
lot of things that are just emerging based on making that most important to our strategy.
That was fairly new. There's are a lot of things that take longer than I expected, like
CD-ROM software. In 1986 we said it was going to be important, well it's just this year
that that's sort of a fact. Windows NT, it is the only from scratch operating system
that's been there for a long, long time and yet it just takes a lot of time to get all the
applications and tools and things moved across. When I'm trying to push things forward,
sometimes it seems like things move very slowly, but the direction is pretty much what we
invested in having take place.
Question 24
Do you find any conflict between the idea that Microsoft and IT vendors are fast-moving,
fast-changing companies and the average customer MIS or data centre managers or consumers
are actually very conservative buyers and purchasers?
Answer
Not at all. They should be conservative; they are expected to make things work. Once you
have electronic mail in a company, having that break down is even worse than any other
system. I f you can't write checks for a few hours, you know, people won't be super upset,
but if the electronic mail goes down for a few hours, everybody's out in the hallway going
"Hey, what happened here?" You might as well turn the electricity off. And so
the kind of caution that we see is all, you know, very worthwhile and that's why we find
customers who really have a need to be early and be pioneers, work with them, and then
share those examples with other people, what was hard, you know, what was expensive, what
went better than expected? And so this is an industry where that kind of sharing is
fundamental, because we're dealing with very, very important issues.
Question 25
Does Microsoft have any particular challenges or opportunities related to Europe, either
individual countries or Europe as a region?
Answer
Everywhere that we're located we need to have a major local presence in order to build the
right partnerships, that is, working with the hardware manufacturers, netmarket, but most
importantly, the application developers and the solution providers. Particularly as NT is
being used in all these different vertical industries we've got to get the accounting
packages, the local business-oriented packages up on that. And so our evangelism has taken
on a much more local flavour than ever before. For the horizontal applications, you just
do that on a global basis and a lot of it's based in the US. For server kind of
applications, it's far broader than that. It is interesting that SAP of Germany is
probably the ISV that's been the best at pointing out the power that's there and what can
be done with specific customer scenarios. For Europe we need to make sure we're getting
our localisations done on a very timely basis, and with Windows 95 and all the products
that go with that we've done better than ever before. We need to make sure that these
European companies that span many countries that we do, you know, special things in the
network, in the electronic mail that deal with multiple languages and have great support
in every country. We've been here for a long, long time and have had incredible success
with the local people, but it's a growth situation and we're always adding to meet the
challenge.
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