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Former exec and start-ups criticize 'Byzantine' Microsoft

Beware the next IBM

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An ex-Microsoft executive turned venture capitalist has joined start-ups in warning about the Byzantine nature of doing business with the Microsoft empire.

Sam Jadallah, Mohr Davidow Ventures general manager, told an audience of Silicon Valley entrepreneurs they should "stay focused" when dealing with Microsoft which, he said, has become the new IBM.

Jadallah, who left Microsoft in 1999 after 12 years to become a VC, said: "From the outside it's Byzantine to figure out 'how do I work with Microsoft?' It's much like Microsoft working with IBM. We'd show up with one employee... and meet 12 from IBM, and think 'what do they do all day?' Microsoft is now in that same position."

Microsoft has been criticized for becoming increasingly bureaucratized during the five years since Steve Ballmer took over as chief executive, and moving away from the chaos of early years that produced Microsoft's first, landmark technologies.

The defection of Microsoft's China Labs chief Kai Fu Lee to Google recently highlighted growing inefficiencies in Microsoft's structure, with Lee claiming the increasingly unwieldy corporate structure amused even China's Communist Party. Conscious of its growing middle-age spread, Microsoft re-organized in September, collapsing seven business units into three for greater efficiency and to drive increased integration across Microsoft's products and services.

At stake is a lucrative partner-based business. Microsoft said Tuesday that partners stand to make between $7 and $8 in revenue for every $1 made by Microsoft, while 96 per cent of Microsoft's revenue comes from partners.

Start-ups attending an insider's guide partnering with Microsoft at the company's Mountain View, California, campus on Tuesday though were critical, pointing to a split between Microsoft's product and field operations as a major structural problem in their ability to connect with Microsoft and go to market.

Guy Maisnik, president and chief executive of AtHoc, said: "The number-one challenge was to penetrate the field groups. It took relentless patience."

Start-ups also complained about frequent corporate restructuring making it harder to keep up with field contacts. IIan Shmargad, vice president of strategic alliances for Identify Software, said, "After you have developed a relationship and hope and think that you have some coaches there, they are gone."

Shmargad cautioned it took "a lot of time and effort to invest on multiple fronts" to ensure you always have "other angles". He called this a time consuming process, which is not always "scalable" for start-ups whose time is stretched.

Other complaints centered on the difficulty start-ups faced getting to work with account-level sales staff and hurdles encountered by competitive Microsoft staffers who believe Microsoft is developing its own "similar" technology.

John Powers, Digipede president and CEO, suggested dangling the competitive carrot, saying one-way to get Microsoft's attention is to demonstrate products that help Microsoft compete with IBM or Linux. "When you can lay things out like that, the light bulbs go on very quickly," Powers said.

Jadallah called on partners to understand Microsoft's top priorities, as outlined by Ballmer each August at the company's worldwide sales meeting. "If you understand those and get in front of [the priorities], if you can get in front of the parade, you can feel the attention and get corporate attention," he said. ®

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