For most people, Bill Gates and Microsoft are one and the same. Gates has led Microsoft to global dominance in the 33 years since its founding, combining a strong opportunism -- getting the code for DOS to sell to IBM for the first PC and aping Apple's visual interface for the first Windows are the two best examples of Gates' moving where the wind was soon to blow -- with a steady vision of desktop computers being as powerful as the mainframes that captured techies' imaginations in the 1970s.
June 30 is Gates' last day as a Microsoft employee, though no doubt he'll continue to advise the company. Taking Gates' place is his longtime buddy and aggressive salesman, Steve Ballmer. In its 33 years, Microsoft has extended its quest to turn every PC into a mainframe and to make Windows the center of the information and technology worlds. It's come close, but there are strong signs that the Microsoft era, at least in the Gates mold, may be ending. And it's far from clear that there is a leader to take Gates' place at this critical time.
The Gates legacy
Calling Gates a visionary is misleading. His success has come from determination and identifying the right time to jump into already-brewing big ideas. Remember that Microsoft ignored the graphical user interface of Apple and then GEM for nearly a decade. It disregarded the Internet for several years. In both cases, Microsoft's adoption came just as the technologies became massively popular. In both cases, there was some degree of chicken-and-egg going on: Microsoft's adoption made it safe for users, but had Microsoft delayed any further, those same users may have gone elsewhere.
In the cases of the GUI and Internet, Gates was criticized for waiting too long. Yet it was Gates who pushed the first version of Excel -- on a Mac -- and several years before Windows previewed what the broader business computing world would look like. So it's clear that the idea of the GUI had been on his mind long before Windows 3.
Microsoft gets teased as being a Borg-like entity, after the Star Trek villains that assimilate other cultures and turn them into mindless drones. That's unfair, but Microsoft is good at appropriating technologies when they start passing the point of nascency and are ready for broad exploitation. Gates' strength has been to push, push, push into these areas.
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It's no joke that the third version of a Microsoft product is the one you should actually adopt, given that taking those "at the cusp" technologies and making them work for the masses is no mean trick. Apple's Steve Jobs can usually pull it off (but not always -- he's had some spectacular failures along the way, as has Apple itself), but he's the exception that proves the rule. And besides, Apple is very good at pushing niche technologies, carefully controlling their scope so that they don't have an unlimited universe of possibilities to handle. Microsoft, by contrast, tries to do everything for everybody -- an impossible effort -- and so falls short for at least some.
Does Microsoft have a grand plan?
So what does that all mean for Microsoft after Gates? Plenty. Whether you think Gates is a technology leader or simply a fast-exploiting follower, he'll be gone very soon. And there's no clear driver at Microsoft. Ballmer is no technology guy; analysts and longtime technologists privately say he's just a salesman, hawking whatever there is to sell. Microsoft's official visionary, Ray Ozzie, is long on imagination but short on execution. Years of poetic memos on collaboration and Web 2.0 haven't amounted to anything substantive.
Even in Gates' waning years, Microsoft seems to have lost a cohesive outline for its future, allowing the debacle that is Windows and the bizarre interface changes in Office and Internet Explorer to come to market. Yet this same company has produced a great server operating system (Windows Server 2008) and sharing server (SharePoint 2007), and shows promising work in its touch-interface technology (Microsoft Surface), in addition to well-regarded midmarket business apps (Microsoft Dynamics) with a world-class user interface. It's clear that there are actually multiple Microsofts with their own visions and execution strengths.
[ Read the latest news and analysis on the post-Gates future in InfoWorld's special report. ]
This lack of forward focus is critical because of Microsoft's business realities. While Microsoft has its fingers in many pies, only two slices really matter: Windows and Office. Together, they account for 80 percent ($6.2 billion) of the company's profits and 61 percent of revenues ($8.8 billion) in the last fiscal quarter -- meaning that they subsidize most of the rest of the business. Yet a variety of factors -- poor execution on Vista and Office 2007, the rise of the browser, the resurrection of the Macintosh, and the emerging tidal wave of cloud computing -- all threaten this pair of lifeblood businesses. For comparison, all of Apple earned $7.5 billion and had a profit of $1.1 billion in the same quarter.
The next biggest contributor to the bottom line is the Windows Server unit, which provided 23 percent of revenues ($3.3 billion) and 14 percent of profits ($1.1 billion) in the latest quarter. The Xbox unit provided 11 percent of revenues ($1.6 billion) but just 1 percent of profits ($80 million). The online business provided 0.6 percent of revenues (843 million) but lost 0.2 percent of profit ($228 million). The rest of Microsoft -- the app dev tools, the midmarket business apps, and miscellaneous devices -- together accounted for 5 percent of revenues ($720 million) and 3 percent of profits ($186 million).
What these numbers mean is that if Microsoft's core Windows/Office business slows down or even fails, the rest of the company -- excepting the server division -- may not survive. Microsoft needs a strong Windows and Office business to execute the Microsoft-everywhere strategy. Migrating or adapting these assets to an on-demand future is an option, though the financial hit for such a transition is huge, risky, and thus, a hard sell to investors, at least today.
Five futures, from terrible to great
Given the state of Microsoft and the clear trends emerging, InfoWorld has envisioned five futures for Microsoft, from worst to best, from the vantage point of 2018. See which you agree with:
1. The "Borvell" scenario
2. The "slow decline" scenario
3. The "streaming" scenario
4. The "Oort services" scenario
5. The "Gates was right" scenario