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Can Microsoft become more like Google? If it wants to remain a dominant force in the next phase of the software and internet industries, it will have to -- at least according to Ray Ozzie, the Microsoft chief technical officer who has been charged by founder Bill Gates with pulling off what could turn out to be the biggest transformation in the software company's history.
The shift in approach will depend on big cultural and organisational changes. Software development as practised by Google and the new internet companies that have sprung up since the dotcom bust bears little resemblance to that undertaken at Microsoft. Products are produced and released quickly, then refined. They are made available as services delivered over the internet rather than software loaded on to a user's personal computer.
That is a far cry from Windows Vista, the next version of Microsoft's operating system due out late next year. The hugely complex Vista is "a 60m-lines-of-code mess of spaghetti", according to Michael Cusumano, a professor at the Massachusetts Institute of Technology's Sloan School of Management.
Mr Ozzie, whose software start-up, Groove, was acquired by Microsoft this year, seems temperamentally closer to the Google approach. "We got a lot done with a small amount of people in a relatively short space of time," he said in an interview soon after joining Microsoft.
He now wants to unleash the same small-company mentality inside Microsoft. In an internal memo last month, Mr Ozzie called for a different approach to development that looks far more like that of Google -- while warning that, without action, "our business as we know it is at risk". That is likely to draw an instant response from Microsoft's army of software developers, according to observers and former executives. "The developers will be doing cartwheels," says Mr Cusumano. "No one wants to develop in these massive codebases."
Microsoft certainly has plenty of talent to set free. The $6.0bn it spent on research and development in the last 12 months dwarfed the $350m or so spent by Google and was greater than all the venture capital invested in the software industry in the same period. A handful of high-profile defections to Google has done little to weaken its overall development base. "They have more talent than anyone else in the world," says one former Microsoft developer. "They could lose people for 10 years and still have more talent."
Microsoft is already a master of many of the technologies reshaping the web. That is one frustration expressed by Mr Ozzie: that while it has been a pioneer or early proponent of web-based technologies such as Ajax and RSS, other companies have been more successful in harnessing them to create successful internet services.
This early lost ground may not matter. Often, new technologies only gain widespread support when they are adopted by big companies, says Michael Gartenberg, an analyst at Jupiter Research. "This isn't as big a threat as the web initially was [to Microsoft]," he adds. "It has shown it knows how to weather these storms."
Indeed, Microsoft's record suggests it should adapt. "Their history is based on seeing these emerging mass markets and throwing masses and masses of resources at them before the trend peaks," says Mr Cusumano.
Microsoft is likely to face two big obstacles as it tries to compete with Google on Google's terms. One is organisational. Divided into large product groups, Microsoft has been forced to develop a more bureaucratic approach to creating new products or services that cross divisional lines.
To overcome such shortcomings, Microsoft in September announced an overhaul that gave more power to three senior executives to make decisions across a wider range of technologies. Mr Ozzie has proposed a refinement of this, creating a cadre of executives charged with pushing though new services that draw on more than one division.
The second obstacle is commercial. The Windows and Office desktop software businesses produce the bulk of Microsoft's income. To the extent that new web-based services offer an alternative to these products, they are less likely to receive enthusiastic backing at Microsoft than at other companies. "They have to get out of the mindset of defending the empire," says the former Microsoft developer.
In the short term, the desktop software businesses seem unthreatened: new versions of Windows and Office next year are expected to trigger renewed growth at the software giant. Even an online alternative to Office might represent little real threat, says Rick Sherlund, software analyst at Goldman Sachs, as it would probably only appeal to home users.
That means that, for now at least, internet services may represent more of an opportunity than a threat for Microsoft. "It's a parallel universe they're investing in, a hedge," says Mr Cusumano. "Revolutions take time to happen."
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Under syndication arrangement with FE
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