Original URL: http://www.theregister.co.uk/2009/01/16/ballmer_patience_internet/

Ballmer's big regret at 10: Losing the interwebs

Wrong patience, lost talent

By Gavin Clarke

Posted in Software, 16th January 2009 23:12 GMT

Steve Ballmer's biggest regret of the past ten years? Impatience.

Ten years after taking over as Microsoft president - and eight years after replacing Bill Gates as chief exec - Ballmer has told The Wall St Journal that impatience prevented Microsoft from pursuing a Google-like paid search business back in 1999.

According to the WSJ, Microsoft started a paid search project that year - before killing it after only two months.

"The biggest mistakes I claim I've been involved with is where I was impatient - because we didn't have a business yet in something, we should have stayed patient," Ballmer said.

"If we'd kept consistent with some of the ideas" that Microsoft had in-house in 1999, he continued, "we might have been in paid search".

But Steve is spinning here. Microsoft's track record shows it has no problem pushing into markets where it doesn't have a business. With the foundations of Windows and Office laid, Microsoft went on to tackle business applications, gaming consoles, and mobile. How we scoffed at Microsoft for going up against SAP, Sony, and Palm.

Ballmer has even gone on record as saying Microsoft's secret is its "tenacity, persistence, patience". While Microsoft is rarely the first to market, it can always leverage its size when battling market incumbents.

Truth be told, patience is Microsoft's strongest asset. After more than eight years in the mobile and gaming console markets, the picture is mixed: Windows Mobile's market share is declining, while the Xbox has grown against the mighty Sony's Playstation. Microsoft's entertainment and devices unit - home to Mobile and Xbox - has yet to turn a profit.

Business applications - including its enterprise resource planning and customer relationship management - have a strong presence. But the journey has been difficult - bedeviled by product slips and missed revenue targets. Today it's difficult to accurately measure biz app revenue. In 2006, Microsoft merged its business application unit with the infinitely-more lucrative Office unit.

Here lies the explanation of why Microsoft is where it is today - number three in internet searches - and where Microsoft really was back in 1999. And lack of patience isn't the problem.

At the turn of the millennium, Microsoft made the decision that the PC remained its destiny and that the internet was a threat to Microsoft's hard-won desktop business.

That decision had damaging consequences. It lead to an exodus of the brains that could - and likely would - have built the platform that could have taken Microsoft online and made it a serious contender. These were the brains who'd put the building blocks of Microsoft's internet platform in place in the 1990s and were ready to go to the next level.

More than any missed corporate acquisitions like Yahoo! or Overture, it was the brain drain that hurt Microsoft. The engineering talent and executive expertise that built out Windows on desktops and servers - and that began looking to the web and could have engineered and integrated an organic system - was no longer part of the company's product DNA.

Key Exits

The late 1990s and early 2000s saw the exit of Adam Bosworth, the man who'd managed Microsoft's XML program and who was looking at offline browser caching, as well as Tod Nielsen, vice president of Microsoft's platform group.

It was a telling indication of what could have been for Microsoft that they joined forces at a start up called Crossgain, to build online development tools. It was telling, too, that Microsoft threatened Crossgain with legal action claiming both were subject to non-compete agreements.

Then there was the Internet Explorer and internet team implosion. IE came from nowhere, introducing many ordinary PC users to the early internet using their PCs. How it got on so many PCs is not the question here. What's relevant is that its sheer presence on the PC and its relative ease of use introduced so many to the web. The IE programming environment gave application and web developers a platform too.

What did Microsoft do to retain and reward such talent? Very little.

The man who created the IE team and saw it through three successful iterations, Ben Slivka, was allowed to leave for the then up-and-coming online book retailer Amazon in 1999. Also leaving in the late 1990s was IE's senior vice president and product manager Brad Silverberg. He didn't just help take IE from nothing to market leader, though. He also oversaw the acquisition of Hotmail, which became one of Microsoft's prized online assets and is today at the center of Live Services, thanks to its critical mass of users.

Again, it was a telling indication of where Silverberg's interests lay and where he could have taken Microsoft as he went on to jointly create an investment company specializing in network and wireless companies.

Also out in 1999 was the energetic general manager of the MSN dial-up business, Eric Engstrom. MSN as a whole, meanwhile, was left under the somnolent leadership of Rick Belluzzo, a former chief executive of workstation outfit company SGI.

At the time, the official reason for the departures was either "personal reasons" or to "pursue other interests." For some, Microsoft had simply become too big and too bureaucratic for their entrepreneurial spirit.

The case of Silverberg, though, is telling. He left having clashed with eventual co-president of Microsoft's platform and services division Jim Allchin, who felt that the web would threaten Microsoft's desktop dominance. Silverberg, like some of the others, disagreed with the direction the company was going in.

Several years later, and minus Silverberg, Microsoft declared the browser had gone as far was humanly possible, so there'd be no more development on IE. Allchin took over leadership of the fantastically intricate and ambitious Windows Vista, billed as Microsoft's biggest version of Windows since Windows 95. History will record that Microsoft U-turned on IE development, resuming it in the face of security treats and vigorous competition from open source, while Windows Vista proved a turkey.

Ballmer is wrong to say he, or Microsoft, have lacked patience. Let's call this for what it was: In the late 1990s, Microsoft took a strategic gamble.

That bet was that the internet threatened Windows on the desktop and that Microsoft - through its sheer might and force of will - could bend history around to its way, with people remaining loyal to the desktop and the internet remaining a colorful adjunct.

That bet proved wrong. It cost Microsoft market share online, and saw a brain drain that's hurting Microsoft to this day. ®