Look for change at Microsoft after Gates

With last Thursday's announcement that Microsoft Chairman and Chief Software Architect Bill Gates plans to move away from his day-to-day duties by July 2008, analysts said change is in the air for the company.

That's because Gates has for so long played such a major role at the company he founded in 1975 that any transformation in his role is bound to have an effect, said Rob Enderle, principal analyst at Enderle Group in San Jose.

"Microsoft is so much Bill Gates in terms of corporate personality," Enderle said. "You will see that starting to change [because] he represented such a big footprint. ...You can't help but see some level of change. I don't think there is anyone who can replace Gates. He is larger than life."

Microsoft announced that Chief Technical Officer Ray Ozzie will immediately assume the title of chief software architect and start working with Gates on all technical architecture and product-oversight responsibilities.

Enderle noted that Ozzie was hired with the intent that he eventually would step into Gates' role as chief architect. Gates likely judged that Ozzie had performed to his satisfaction and "it was a matter of pulling the trigger and letting it happen," he said.

Enderle also pointed to recent concerns about delays for Microsoft's upcoming Windows Vista operating system, which may have prompted Gates to "think it was time to make the transition."

The Vista delays "reflected as much on the chief architect as it did the division president," Enderle said. "Bill was a bit more distracted from the chief architect role than he should have been."

In addition to Ozzie, Craig Mundie, Microsoft's chief technical officer for advanced strategies and policy, will also take on new duties during the transition. He gets the new title of chief research and strategy officer and will work with Gates to assume responsibility for the company's research efforts. Mundie also will be working with general counsel Brad Smith on Microsoft's intellectual property and technology policy efforts.

Dwight Davis, a software industry analyst at Summit Strategies, said he wasn't surprised by Thursday's announcement, since "Bill has obviously had a range of interests embodied in his activities with the Bill and Melinda Gates Foundation for a number of years."

"He obviously made a partial step to distance himself from the day-to-day" work when he moved to the chief architect's position, Davis said. "The company has continued to do well in that current arrangement," he added.

"Microsoft is really at a point where you could argue that nobody is indispensable because of its industry position, installed base, ecosystem of partners and developers -- and what is fairly significant momentum," Davis said. "There are various challenges, internal and external, but I don't think the departure of the founder and the guy who is most associated with the company will severely disrupt its prospects [or] its near-term success."

He noted that Microsoft had already been changing its strategy, in part, with the arrival of Ozzie.

"If you could point to one thing Ozzie influenced, it is to become more aggressive and face up to this trend toward online services -- software as a service," he said. "Microsoft had, prior to Ozzie's arrival, certainly tracked that trend and flirted with it [on] different levels. But its general stance to software as a service and online services had been very measured and cautious -- in part because it has to worry about a new model such as that disrupting its traditional packaged software business model and its existing channel relationships.

"So Ozzie came in and, in short order, he was the driving force in getting Microsoft to come to terms [with] that software-as-a-service trend and to help fashion a strategy to pursue it in a way that won't be, at least in the near term, damaging or hurtful to the company," Davis said.

Michael Silver, an analyst at Gartner, praised the choice of Ozzie to move into Gates' role. "We think Ray Ozzie is a good choice to reinvent the company to deal with competitive threats like Google," he said.

Laura DiDio, an analyst at Yankee Group Research, said users likely won't see any near-term changes. But longer-term shifts at the company likely will be positive.

"[Gates] was a very strong figure who ruled with an iron fist, and he didn't have the velvet glove either," she said. "They have to focus more on integration and interoperability and issues with open-source. It will be interesting to see who else they will bring in and can they attract really edgy, young talent who can help them more successfully penetrate new and emerging markets."

Gates is "a brilliant strategic thinker [who] revolutionized the industry," said John Halamka, CIO at both CareGroup HealthCare System and Harvard Medical School. "However, it's clear that Microsoft has not competed well with market innovations from Google, Linux and the next generation of thin Web-based applications."

"Microsoft needs to transform itself, and new leaders in day-to-day operations may create opportunities for radical change," Halamka added.

"Its an end of an era," said Dan Agronow, chief technology officer at The Weather Channel Interactive in Atlanta. "When have we ever used PCs and not had Bill Gates involved in some aspect of their creation or future promise? I think it signifies a tipping point for Microsoft.

"He's the individual that's the embodiment of Microsoft. When you think of Microsoft, you think of Bill," Agronow said. "I think now Microsoft will be viewed more as a corporate, faceless, entity similar to IBM. I don't see it as good or bad; it's more sad."

Agronow said he doesn't see Microsoft "having the single strong personality that could turn the ship when needed, like when they finally recognized the threat of Netscape. It will probably make them even slower to responding to competitive threats."

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