Programming Windows: Riders on the Storm (Premium)

Microsoft should have ended the year 2000 on a triumphant note: after preparing its customers for a future of software services, it shipped its first .NET deliverables—beta versions of the .NET Framework and Visual Studio—and its first beta of Whistler, a coming major release of Windows. Instead, Microsoft entered the holidays on a dour note by announcing that its original financial guidelines for the quarter ending December 31, 2000 were off by 5 to 6 percent.

“We believe, like many other technology companies, that the current weakness in worldwide economic conditions is resulting in a slowdown in PC sales, corporate IT spending, and consumer online services and advertising,” Microsoft CFO John Connors said in a press release. “While our short-term results will continue to be affected by the current economic environment, our long-term outlook on the information technology market and the PC industry remains positive. We have a lineup of new products and technologies that are receiving rave reviews from customers, and we continue to be very excited about the progress we are making across all our businesses.”

The reaction to this downturn was decidedly more negative internally. And it must have been a shock to Microsoft’s employees when they all received an emotional email message from CEO Steve Ballmer on December 14, just as they were heading off on their annual holiday break. He was tired of all the complaining about .NET and needed everyone on board and focused.

“Since we announced our .NET strategy, a number of [Microsoft employees] have remarked that our business seems a lot more complex than it used to be,” he wrote. “Is there just one thing people need to do well? Is it just .NET and transforming software into services? Or are we a conglomerate of many largely independent businesses?”

“The strategy we are on is actually pretty straightforward. Everybody in the company has two priorities. The first priority is for people to stay focused on what they’re doing to serve customers well in our key businesses. The second priority is for people to help deliver on the broader platform efforts of the company. Our company is ultimately bigger than the sum of the parts because we bet strongly on a common platform. We make our products work better together—where it makes sense—and this offers customers more than they could hope for from products and services from multiple companies. This ‘whole-is-bigger-than-the-sum-of-the-parts’ approach has characterized our success for years (MS-DOS and languages, Windows, and Office). This is the way we are approaching .NET. All our businesses have goals that depend on .NET, but they also have goals independent of .NET. We will drive forward around .NET, but not, for example, instead of making Windows PCs simpler or MSN broader and more capable.”

.NET, Ballmer argued, had the capacity to transform the computer industry and to benefit Microsoft’s customers in the same way that Basic, Windows, and Office had previously transformed the computer industry. Microsoft would branch beyond PC to “other smart devices,” he said, and to servers and “the Internet cloud itself.” The platform behind all that, .NET, must be built on Internet standards, he argued, “and have great interoperability.”

Then he lowered the boom. Microsoft was a big company, and quite profitable, sure, but it did not “have the financial resources, the people, or the interest in doing things that are not consistent with [its] priorities.” And so he asked his direct reports to significantly reduce Microsoft’s resource investments and to walk away from projects that were not a priority. He demanded that all employees reduce “unnecessary expenses,” including “discretionary expenditures like travel and entertainment.” He said that Microsoft would review the compensation received by all employees below a certain level and that only the strongest performers would get pay increases.

As for Microsoft’s products and services, “we are going to continue being a lot more decisive about NOT doing certain things,” Mr. Ballmer explained. “Decisions to spin-off Expedia, sell our interest in Sidewalk, create new joint ventures for our CarPoint and HomeAdvisor properties, and close down our efforts around TaxSaver and Microsoft Learning Technologies are examples of where we have gotten crisper about our priorities. We also recently made the decision to not ship the Local Web Storage system with Office 10 in order to focus all of our energies across the company on Yukon, the next release of SQL Server … that will be key to our next-generation storage, database, file system, email, and user interface work. This technology is two years or so off, but [it] is a core .NET and Windows technology.”

“Calendar 2001 will be a very big year for Microsoft. Building on the successful launch this year of Windows 2000 and our .NET Enterprise Servers, we must invest in the success of two of the most important products in the company’s history.” Those two products were Whistler and Office 10.

Whistler, Ballmer said, would “be the most significant Windows release since Windows 95. It will deliver the rock-solid stability and reliability of Windows 2000 and much of the compatibility that users have come to expect from our Windows 9x line. From digital media to home networking to a richer online experience, Whistler is a critical opportunity to reinvigorate the PC and get millions of consumers even more excited about the power of personal computing and galvanize the industry around a single code base.”

Whistler would also be the first Microsoft platform to launch in 2001, but it would ship with just two .NET features: “.NET authentication and notification services.” I believe this is the first time that Microsoft communicated how limited the .NET functionality in Whistler would be, no doubt because of the aggressive schedule.

Microsoft Office would also be “very exciting and important,” and it would include “rich Internet-style collaboration” through technologies like “Smart Tags, task panes, and a new, web-based server technology called Microsoft SharePoint that integrates with Office. MSN HotMail and Web communities’ integration extends those new capabilities.”

“We have a tremendous amount of work ahead of us,” Ballmer’s email concludes. “But day in and day out I am truly impressed with the effort and progress people across our company are making creating new technologies that are dramatically increasing business productivity, fundamentally transforming the way people work and live, and helping invent and build an amazing new e-commerce industry. I am truly proud to be working with such an incredible group of people. With our experience, knowledge, and successes building great software, we are extremely well-positioned to continue to lead the technology revolution and truly deliver on the promise of the Internet.”

This was likely unsettling to many of Microsoft’s employees. But 2001 would indeed be a better year, despite the events of 9/11 in September. It would begin with a bang at COMDEX in Las Vegas, where Microsoft would surprise the world with its announcement of the Xbox video game console. And the software giant would enjoy a positive, if temporary, reversal of its antitrust fortunes. But 2001 would be dominated largely by the lightning-fast development and launch of Whistler, which would go on to be the most successful and long-lived release of Windows yet.