.Net, .Everything: Microsoft wants a piece of every conceivable pie

The sleek bombardier global express jet lands in Mumbai a little after 2.10 in the afternoon of 13, November. TV crews are waiting to catch a glimpse of the man and the aircraft at the Sahar international airport but the landing actually happens at the Santa Cruz domestic airport. A convoy of cars-an Ambassador or two, klaxon and all, bearing some Maharashtra Government bigwigs, two Mercedes vehicles, a van in which Bill Gates will travel with India head Rajiv Kaul, Region Head, Sanjay Mirchandani, his head of security, and a Business Today journalist, a car for his aides, and a couple of Police jeeps vested with the responsibility of cutting a swathe through Mumbai's erratic traffic- is waiting on the tarmac, engines idling. By 2.20, our man has been bundled into the van-the move is effected when it makes a planned stop at a police checkpoint-and the show is on the road. Over the next thirty-five minutes Microsoft's 47-year-old Chairman and Chief Software Architect fields questions on a range of topics from India's relevance to the Redmond giant to the recent ruling by Judge Colleen Kollar-Kotelly in the Anti-trust case (it requires the company to offer uniform licencing terms to pc makers, create a board-level compliance committee, and disclose communications protocols for interoperability between Windows and server software) to the Linux-threat to devices of the future. His tone ranging from the matter-of-fact (when he is discussing the anti-trust issue) to the excited (Tablet pc) to the impassioned (Linux), Gates answers them all pausing, every now and then, to look out the window at Mumbai's urban landscape or to proffer his there-isn't-that-obvious smile. Excerpts:

Q. Purely in term of revenues India cannot be all that important a market for Microsoft. So, what explains a four-day trip?

A. Our seriousness about India reflects two things. One is the potential growth in revenues here over the long term. The second is India's role in the world market; (our) partners like Infosys and Wipro are providing software development and services to the world at large. Those two things explain why our investment level ($400 million over three years) is out of proportion to the current (revenues).

How would you rate India against China as a resource centre, a source of expertise?

That depends on knowledge about what. If it is manufacturing, China is the world leader in that in a wide range of respects. If it is software development, India is the only country other than the US that is a net exporter of it skills. This is built on an excellent university education system that India has-a very merit based system. In that respect, India is well ahead of any other country, including China.

In the next five-to-ten years, China is going to be trying to do some of the same things. But realistically, scaling up their education and getting companies with world-class reputation- Infosys and Wipro spent a lot of years in developing (this)-can't happen overnight. Also, this is a game where there is not one winner. There will be high-paying jobs from all around the world that come to India and China. In the software sector right now, India gets most of those. In the manufacturing sector, which is even bigger job-wise, it looks like China will get most of those.

Technology has always had this Utopian notion of making democracies perfect. Based on Microsoft's e-governance initiatives in association with several Indian state governments, how close is India as a country to realising that objective?

In the next decade, technology will improve the government's efficiency, transparency, and awareness of what the constituents want to see done better. I think we're just at the beginning of that. Two years ago, there was incredible interest; now there are a lot of pilot projects that have been successful; but getting those to full deployment is a challenge. Over the next seven-to-eight years you'll see quite a dramatic change in the impact on people understanding how money is spent, open bidding, or what government resources can help them.

In your opinion, what is the road ahead for the Indian software services industry, for companies like Wipro and Infosys?

Every year, their reputation grows and their strengths grow. The biggest company in that space is IBM. It is 14-15 times larger than either of them in (terms of) people. Because its price is higher, it may be 30 times bigger, may be 40 times bigger in (terms of) revenues. That's just one company; so, there's a lot of growth potential for Infosys and Wipro. They're world-class companies. I was at both their campuses this morning, talking to their developers. They're doing state of the art work with state of the art facilities. You wouldn't find that much difference between what their developers are doing and what developers at the best facilities in the world are doing.

WILLIAM H. GATES A bio-pic of the man who founded Microsoft

Born: October 28, 1955, to William H. Gates II, an attorney, and Mary Gates, a school teacher. Nicknamed Trey within the family (he is William H. Gates III) At 13: Gates starts programming computers At 18: Gates enrolls in Harvard (he lives down the hall from Steve Ballmer). While at Harvard, he develops a version of the programming language BASIC for the first microcomputer-the MITS Altair 1975: Gates founds Microsoft along with childhood buddy Paul Allen. While in his junior year, he drops out of Harvard 1994: Gates marries Melinda French on New Year's Day 1995: Gates' first book The Road Ahead is published and holds the #1 spot in the New York Times' bestseller list for seven weeks Interests: Gates and his wife have endowed a foundation (corpus: $24 billion) to support initiatives in the area of health and education. Gates is co-founder of Corbis, a library of visual information, and plays golf and bridge

During your last visit to India, you must have formed some impressions, some expectations of what India and Indian companies can do. In the two years since, has the country, and have the companies lived up to that?

In the industry I know, India has done more in the last two years than what anyone could have expected of it. It has been a good two years. (The Indian software) industry has improved even as there has been a cutback in it spending. Companies have grown their sales; they've maintained their profitability; they've taken on more complex projects. Their reputation has grown because they've done a quality job.

If they had messed up one or two projects and that had been visible it would have set them back. That has not happened and that's really to their credit. That's a sector you should be proud of; it can generate a lot of jobs. But not nearly the number of jobs that India needs to generate. People do need to think about the other sectors and the competitiveness of India in those.

The anti-trust case seems to have been resolved in the US. Do you see any problems with the European Union in its anti-trust investigations against Microsoft?

We have been in constant dialogue with the EU. I don't want to judge what is going on, but there is nothing unusual in the dialogue; there's nothing that can change our role, or how we do business in some drastic fashion.

In the past few years have you got the feeling that Microsoft is a company everyone loves to hate; that people are excessively paranoid about anything it does?

If you go to any country and ask (anyone) "Who has been the most innovative company in the last 20 years?" or "Who has brought computing down to the individual level?" we get positive recognition-as being the best or among the best. In terms of how we have managed the company financially, people have made more money investing in Microsoft than in any other company. We have more users-people have chosen to buy our products and tell other people to buy our products-than any other company in our industry.

Our competitors find us daunting. Competing with Microsoft hasn't been an easy thing because once we get serious about applying our engineering talent to an area, we tend to do very well. Mostly, the negative things I hear are from competitors. That's what you'd expect. If we didn't have competitors you wouldn't hear those negative things. But we do.

In the middle of 2001 you said, "There's a wave of products coming that will show we are at the beginning of a new era." We have seen a few of those products lately, the Tablet PC, the SmartPhone. You personally appear very excited about the Tablet PC. Do you see this as a rule-changer-something that could put the fizz back in the PC business?

Well, in its first year, the Tablet pc will sell to a core group of people, less than a million. In the second or third year, people who have seen those million people get so much value of it (will buy it); then it jumps up to big numbers. Over a five-year period, virtually every portable (sold) will be a tablet and that will be a much higher percentage of overall PCs than it is today. There is a shift from desktop to portables, and an almost total shift from portables to tablets.

Tablets are convenient. If you want to show someone a digital photo, the fact is you can hold the tablet between two people. It is so much better than having to go to your desk where you just have one chair. It's more natural to just have the device in your hand and have a wireless network.

Mobile phone companies aren't exactly falling over themselves to adopt Microsoft's OS. Pocket PC still trails Palm. The company's enterprise software gambit is still recent. How does it feel to be a minnow in a market for a change?

I don't know why you say "for a change". We've always had a mix of situations where we were the inventor of a category and cases where we entered the category and had to gain a strong position. Once upon a time, we were small in word processing, we were small in spreadsheets and we were small in databases.

(Our approach is to) apply serious R&D and learning. Just look at the trend line for Pocket pc. We went from 2 per cent to 8 per cent to 13 per cent. We are introducing new units at lower prices. We haven't been in the under-$400 category and that's where the volumes are. Our share is actually pretty good in the over-$400 market. So, we feel very good about where we are in that space. We expect to keep gaining share. We just shipped our phone. The carriers have been clamouring for it. Orange just kicked it off. It is the manufacturing volume right now that is the limiting factor on that. Our percentage of phones shipped is very small. But hey, we think we make better software for the phone than anyone else- Nokia or Ericcson, whoever there is.

The things about us is, we stick through to the long term. It's hard to pick something we've been serious about that we haven't over time made a success out of. We're used to both situations: creating a category and entering a category and having to earn our position-that usually takes five-to-six years if you are not the first person in. Only Microsoft has got a track record of entering a category someone else is strong in and taking a leadership role; it's very hard to do. It takes brilliant engineering and innovation.

Take databases. If you take overall databases, we have something like a 18 per cent share; we've been doing great work for a lot of years and we gain share every year. And we're patient. There are things that only Microsoft can do.

What do you think it is going to take to make your mobile operating system the industry standard?

There will always be multiple operating systems. There is no such thing as a real standard. Phones are moving to be more functional. They are moving to do more data display. And they are moving to share more things with your pc-your schedule, information that you think is important.

All of the trends play to our strengths as well as advances we have in things like ink recognition, speech recognition, and setting up collaborative communication.

There will be a number of years before we get to a 25 per cent (market) share but we will. And then we will get to a higher share. We are not carrying the overhead of manufacturing. All we are doing is pure software development. The model of Nokia is like Apple where it does both the software and the hardware. Our model is like what we have done with the pc.

It has become pretty evident that Unix has lost out to Windows and Linux. It also looks like Linux may edge out Windows in the long term...

(Last year), the Windows server share on Intel machines was 53 per cent; Linux share was 20-21 per cent. Linux is there, but we hold the majority share.

The big shift is away from overpriced Unix servers. Sun's stuff, IBM's proprietary Unix, hp. When companies shift from Unix on the expensive stuff, do they switch to Windows on Intel, or to Linux on Intel? There's been some of both.

So, it has effectively become a two-horse race?

There are 1,000 forms of Linux. Their horse isn't a horse; it's a horde. The versions are not compatible with each other. There is no uniformity. There are more incompatible versions of Linux than all the operating systems that have ever been there in the history of the world.

What you get with Linux is a kernel. What you get with Windows is a directory system, an application server-about a hundred things for which you would have to pay extra (in Linux). You take Websphere, IBM's product on top of Linux, it costs a lot more than Windows. You put Oracle on top of Linux, it costs a lot more than Windows on SQL server. Linux is basically what Unix was in the 1970s.

A lot of the new innovations we have done-security, software distribution-either don't exist on Linux or you would have to pay extra for them.

Are you happy with the speed of progress of your .Net initiative?

We shipped development tools for .Net in January of this year and already, in every country, I can point to pioneering applications that were done on modest budgets and created quite a bit of difference. There are quite a few in India. We are ahead of where we expected to be.

Things have changed dramatically in the past year. The direction of the industry is web-services. The standards organisation, WSI got created. IBM and Microsoft have shown we can work together to create standards. The industry's agenda is set around web services and .Net is merely our implementation of that agenda.

The future is going to be. Everything isn't it? All your products will be based on the .Net architecture...

That's right. We will build into the Windows pc, the Windows Server, the Windows-powered phone, the Auto pc, the TV set-top.

What devices do you see in our future?

Devices will be based on their size. So, you have a pocket device that will be more than today's PDAs. You'll have the ability to tour your music and play games; it will be a digital wallet in terms of transactions. It goes beyond what SmartPhones or PDAs do today. Then you have the tablet, which will do reading, note-taking.

Then you will have your Desktop LCD display. The living room will have a room-sized LCD display optimised for video viewing. In the car, you will have a nice little LCD but you will also have voice interaction so you don't have driver-distraction. Basically, everything you want to do will be on one of those devices. They'll all connect to the internet. They will all use web services. Hopefully, some significant percentage will run on our platforms.

1 2