Google is a company, which has done a small number of things well, particularly in search and advertising"

Craig Mundie, 56, chief Research and Strategy Officer of Microsoft is a part of the troika (the other two being Steve Ballmer, CEO and Ray Ozzie, Chief Software Architect) that will run the company when Bill Gates retires from day-to-day management in July 2008. Already, in his new role (he used to be the CTO till June), Mundie will be responsible for almost all products rolled out by Microsoft including the much-awaited successor to Windows XP, Vista. Mundie, who has been with Microsoft since 1992 (his first task was to build the company's non-pc business) was in Bangalore recently to review the progress made by the Microsoft research team. Business Today's Associate Editor Venkatesha Babu met with him there and discussed a range of issues, from Google to the threat from open source software to a pre-paid card for software usage. Excerpts:

You kick started Microsoft's non-PC computing activities. How far has Microsoft evolved from being a pure PC player to a much broader technology and media company?

I think the company has been evolving in three different dimensions. We continue to expand what people can do with their personal computer and personal productivity type of tools. It has really expanded dramatically from office to home. Today more people buy PCs as consumers than they do as business. (But) A lot of content that people use today is not delivered through the pc. So we have products for phones, cars, televisions and game consoles. Microsoft is the only company (which) has a relevant position in almost every one of these categories.

The third dimension is services. As we move to a world where people are connected all the time, we recognised that we wanted to do two things. One, in the model of ...well we have always been a platform supplier. We wanted to create a set of platform services that people could use. The recent rollout of wise platform (Windows Interface Source Environment) is a factoring of the traditional service model into a part that is content related and a forum for giving people access to things. It not only allows Microsoft to build these properties but many others also to do so.

What is the latest on the much anticipated Vista? Are you on schedule?

There is no real change to our stated position. (Editor's note: Microsoft expects to roll out Vista for enterprises by November 2006 and for consumers in January 2007). We recently released RC 1 (Release Candidate 1) to a very broad test audience. Generally the feedback is good. So I think we are optimistic that we will be able to hold to the schedule.

In terms of our aspiration for Vista on a global basis, it comes in two ways. One we want to make sure that in a highly connected environment, even for things that people historically always did, they would be able to do it in a secure and reliable way. A huge amount of engineering in Vista really moves in that direction to minimse the problems. Many things are dramatically safer or simplified. That in itself should allow an expansion of the community of people benefiting from computing.

Microsoft took over from IBM and defined the computing experience for close to two decades. Have you lost that leadership to Google? You are a distant third to Google and Yahoo in search. Will Live (Microsoft's latest search offering) help you close the gap?

Well, if you look at the world broadly, I don't think that people look to Google for leadership in computing. Google is a company, which has done a small number of things well, particularly in search and advertising. We stated publicly that we waited too long to eventually chase them down relative to some of those capabilities. But we don't think they have an unassailable lead. Just yesterday we announced going live with our own search capability. By all analytic measures the distance between the quality of search results between our product and Google is becoming very small. We launched our own advertising capability. We think we have done a pretty good job. That said, there is going to be a continuous footrace with them in those key areas.

It is hard to know what the broad public thinks is cool at any given point. I think particularly the younger demographic thinks iPod more cool than Google. For them Google is utility function whereas their phone and other devices are stylistically more a part of their life. It is interesting in the gaming industry, people think Microsoft's Xbox is cool. As we move forward to integrate phones, games, television capabilities into an evolved set of physical devices and services that relate to them, those devices might become cool. I don't think anybody has a persistent franchise on that. Google, within the financial community, (has been) accorded a significant value in the last few years; that like many other things is fairly fragile.

Security has been a prime area of concern both for enterprises and consumers. How do you plan to address this?

It is actually five years ago that Bill Gates and I started the trustworthy computing initiative. Five years later, we think that was a very important thing that we did. It allowed us to change in a very fundamental way the process the company used to engineer all its software products and services. It is notable that Vista would be the first product in the world, which would have been completely designed with the security life cycle methodology that was developed with trustworthy computing initiative. We think Vista represents a quantum change in the security of systems we provide to people. We made substantial progress even with the traditional system. If you look at the global press, it is interesting to see that Microsoft has moved from being the brunt of jokes and criticism about security; people now broadly acknowledge that this initiative has made real progress and the company is in a leadership position today.

The last step from consumers point of view is that both in Windows XP and now in Windows Vista, there is our 'One care service' where they will be able to have essentially Microsoft as their it department. (This will help them) deal with many of the administrative and updating mechanisms associated with the overall security use of their computers for their small businesses at home. That is another step forward.

It is interesting to see that Microsoft has moved from being the brunt of jokes and criticism about security"

How much does Microsoft spend on research? What has the India research team been working on?

I don't think we quote a specific number for research alone. It is well known what we spend in the aggregate on Research & Development. ($7 billion). Clearly we are working on pure research for computing science related capabilities here. Anandan (P. Anandan, the company's India research head) and his team have been expanding and (have) chosen five, six areas they want to focus on. He should comment on it. The progress here looks good.

Anandan: We have a little more than 40 people. Most of them are Ph.Ds, some of them have returned from abroad. We work in six areas including technology for emerging markets. It is not limited to but inspired by India. The Multimouse (technology that makes it possible to use multiple mice on a single computer; a great educational aid especially in countries such as India where schools cannot afford to have a computer for every student) project was done here. Rigorous software development is another area. We have a group working on multi-lingual system and machine translation. Then there is work on cryptography, security, algorithms, hardware communication, geographical information systems, advanced development and prototyping, and systems works on wireless networking, sensor networks. There is also some work being done on landslide detection (software) with IIT Mumbai.

The governments of a few states (including Kerala; see The Bi-polar State, Page 180) have been backing Open source. They have said No to Microsoft and No to Windows. What is your position on this?

First, even in the Kerala case, the somewhat inflammatory statement that was originally made was a bit of overstatement. They softened it considerably once people began to question it. Our view is that, government policy should be neutral relative to procurement and choice. Governments should be creating an environment where people have the freedom to choose what they want to use. They would be better advised spending some of that energy addressing future issues of inter-operability.

Microsoft has deeply thought about this relationship with the evolving open source or free software environment. In fact, just yesterday, with respect to all web services standards, we have gone open with the specifications unilaterally.

We are not against one or the other (of opensource or GPL, as the gnu general Public Licence is known). Each has a different implication. Take shared source. In a university environment, sharing of knowledge is a fine thing. If you move this into commercial (space) that too is a fine thing. We have been concerned about certain of the licensing leading to elimination of intellectual property. The GPL model of Richard Stallman has been developed because he is opposed to the concept of IP. We don't agree with that.

Most people are moving towards supporting IP leading to innovation. We are careful to distinguish about what we are troubled about when we comment on this thing. Our own shared source imitative is one way of making available free licences for technology, academic and student purposes.

We recognise that people in India don't have access to credit. So it is a problem of credit not affordability"

What about affordability and piracy issues? What is this new pre-paid card (for software usage) Microsoft is talking about? How will it work?

Piracy has been high in many countries and it has nothing to do with affordability. The reason we say that is because the money people spend on hardware is higher than the variable amount that they claim they can't afford for software. It is a specious argument to say that software piracy is an affordability issue. It is more a cultural issue in an environment, which does not value intangible assets enough.

Partly, it is a government and policy issue too. If there is no education or enforcement to create a deterrent value, there is a problem. That said, in countries like India, in a larger sense, there could be an affordability issue not just from the software view but from the aggregate cost of computing. It is pretty interesting that (in the case of) several people who say they have an affordability problem, their monthly cellphone bill is higher than what they say they cannot afford to pay for software. So clearly it is more a question of what do they value and the manner in which they are accustomed to buying it.

Learning from the cell phone industry, the software and hardware industries have come together to make usage on a 'pay as you use' basis as opposed to upfront licensing. Since the computer is sold independently of the service, there is no on-going service revenue. So for affordability's sake why don't people buy on credit? We recognise that people in India don't have access to credit. So it is a problem of credit not affordability.

We engineered a new technology, which will be brought to the market in conjunction with hardware players called Flexco. Utilisation can be metered just like in cellphones. Here the computer disables itself if it is not fed. So people can pay for software on usage basis. It is a machine system solution. It is on the ground and operational already in Brazil, we will make arrangements for OEMs in India also to follow the same path.

Finally, about Microsoft in India. Is the country still more a resource base than a market?

We have between 3,000-4,000 people working here in sales, software development, technical support, research and other activities. India is a very important market and resource base for us and I expect it will grow in the years to come.