Programming Windows: The Wow Stops Now (Premium)

There is an incredible moment in the September 2005 Microsoft reorg that bears scrutiny given the events that unfolded afterward. In the post-announcement Q & A session, many of the questions for the group on stage—Steve Ballmer, Bill Gates, Kevin Johnson, Jim Allchin, Jeff Raikes, and Robbie Bach—regarded surging new competitors like Apple and Google, and what Microsoft was going to do to counter their success and all the bad PR that Microsoft was getting, mostly because of Vista’s never-ending delays.

After the last question, Steve Ballmer delivered a lengthy and impassioned defense of Microsoft and its abilities, as always, and though he had invited the others on stage to chime in, there seemed to be little point: Ballmer had said it all.

Except that he hadn’t.

Arching backward in his chair to enjoy a long, slow, cat-like stretch, Bill Gated delivered a chestnut for the ages that was constantly interrupted by laughter and applause.

“Just to add to that,” he said, stretching, “I always kind of get a kick out of the periods where people underestimate us. And I would definitely say that this is one of those periods. Partly because they haven’t seen the pipeline, and partly because other companies [Apple, Google] are in what I call the ‘honeymoon period’ where their me-too products are considered more innovative. And that’s OK. We’re going to have lots of people who are viewed as being perfect [Steve Jobs?], and we just have to simply come up with something that is better. Maybe I’m jaded. The tough PR, that was 1999, 2000. [This is] nothing. I’ve got thick skin. It will be interesting to see what they write over these next 18 months as they see what comes out of the work we’re doing.”

In case it wasn’t patently obvious what Gates was referring to, Ballmer quickly summarized the mid-1990s, when Netscape and the Internet were going to “completely wipe out” Microsoft and Windows and usher in a new era in personal computing. “Two years later, we had a lawsuit because we were so successful on the Internet,” he bragged, completely missing the point of the U.S. antitrust case. “Stop and think about that. These next 12 months are going to be fantastic.”

The next 12 months would not be fantastic.

Not for Bach’s Entertainment & Devices Division, which would lose over $1 billion fixing the Xbox 360’s “red ring of death” and launch the doomed Zune music player, never once gaining even an inch on the Apple iPod. And not for Microsoft’s Platform Products & Services Division, which would finally release the disastrous Windows Vista in late 2006 (for businesses) and early 2007 (for consumers).

Yes, there were two launch events, both quite subdued. The business launch, called “A New Day for Business,” was held at NASDAQ in New York City on November 30, 2006, and included the awkwardly-named 2007 Microsoft Office System and Exchange Server 2007 in addition to Vista. Microsoft argued that “the quality was there,” and that businesses would not have to “wait for a service pack,” as they always had. Of course, businesses would wait as they always had, and Microsoft understood this: the Vista business launch was basically just ceremonial.

The consumer event was humorously titled “The Wow Starts Now” and would be held on January 29, 2007 in Times Square, also in New York City.

“On January 29th, Microsoft will celebrate the launch of two amazing products that represent the culmination of a tremendous team effort,” the Microsoft invite read. “Millions of people—Microsoft employees, developers, valued customers, bloggers, families, media, the entire industry—have come together like never before and added their own individual imprints to help make Windows Vista and 2007 Microsoft Office system the most tested products in Microsoft history. Our celebration is dedicated to the millions of people who helped transform the operating system into a rich experience that’s more exciting and more powerful than ever before.”

But before that could happen, Gates would provide a keynote address at CES in Las Vegas yet again, and this time, the focus would be on Windows Vista and some of the other products from that pipeline that Gates and Ballmer had crowed about at the reorg event in 2005. These included a new version of the Xbox 360 with no red ring issues, the first Zune media player, and a new Windows Home Server platform.

On the Vista front, Gates showed off new Windows Vista-inspired PCs, including a Hewlett-Packard (HP) TouchSmart all-in-one Media Center PC with a bulky but iMac-like design and a gorgeous widescreen display with touchscreen capabilities, a new Portege Tablet PC model with a nifty and bright LCD-based auxiliary display that utilized Vista’s new SideShow feature, a Sony VAIO TP-1 living room PC that mimicked Vista’s Aero glass effect by ringing its widescreen display with a bezel of clear glass, and a Medion second-generation Ultra-Mobile PC (UMPC). (Microsoft jokingly referred to that machine as “Vistagami” since the first-gen systems were codenamed Origami.)

Gates would also tout the doomed Windows Vista Ultimate Extras, which would consist of DreamScene (formerly “Motion Desktop”) and Hold ‘Em, a version of the popular Texas Hold ‘Em variant of poker, a couple of system utilities, and not much else. And there were demos of Games for Windows titles like Crysis, Shadowrun, Age of Conan: Hiberian Adventures, and, yes, Halo 2. Nothing highlighted the second-rate nature of Game for Windows like bringing a previous-generation Halo title to the PC in the same year in which it would release its successor, Halo 3, on the Xbox 360 only.

Ahead of the consumer launch, Microsoft also formally unveiled Windows Anytime Upgrade, a new option that would allow individuals to “conveniently upgrade their existing edition of Windows Vista to a higher-grade edition through an online transaction.” That is, if your PC came with Windows Vista Home Basic, you could upgrade to Windows Vista Home Premium (or Windows Vista Ultimate) at a discount when compared to buying the more expensive Upgrade product versions on physical media.

And then Vista limped to the finish line with its Time Square consumer launch, which was held at the Cipriani—featuring Bellini cocktail variations named after Vista—and the Nikon Theater. Even the “Bad Vista” protesters outside couldn’t drum up any drama. Granted, there were only three of them.

Inside and outside of Microsoft, everyone was ready to move on.

Reviews of Windows Vista were, at best, middling, with the core complaints centered on performance, the hardware graphics requirement—which Microsoft had telegraphed years earlier and PC makers largely ignored—and compatibility. It is perhaps telling that a vague report about Windows “Vienna”—originally conceived as Windows Vista R2 (“Release 2”) but since renamed to Windows 7 or Windows Seven internally, immediately garnered so much interest that Microsoft felt compelled to issue a public statement.

“The launch of Windows Vista was an incredibly exciting moment for our customers and partners around the world, and the company is focused on the value Windows Vista will bring to people today,” a statement attributed to Windows director Kevin Kutz read. “We are not giving official guidance to the public yet about the next version of Windows, other than that we’re working on it. When we are ready, we will provide updates.”

That statement provided two important details: Yes, Microsoft was working feverishly to wash Vista from everyone’s collective memories. And the era of transparency that Jim Allchin had delivered was officially over: the next version of Windows would be developed in secret.

That was OK with me, however, as my sources continued to ply me with information. Key among that information was that Windows “Vienna” would be a minor update that would fix all of Vista’s problems but retain the same basic user experience. The branding change away from Vista R2 was seen as part of a collective desire to move past the failed brand at the time, but we later understood it to be part of the “not invented here” culture of Steven Sinofsky’s new Windows team.

“Microsoft hasn’t publicly committed about any features for Vienna,” I wrote in mid-February 2007. “We do know a few things about Vienna, however: It will include a new version of Windows Explorer that is being built by the same team that designed the Ribbon user interface in Office 2007. It will likely include some form of the Hypervisor (Windows Virtualization) technologies that will ship shortly after Windows Server Longhorn. And it will likely include the WinFS (Windows Future Storage) technologies, though they won’t be packaged or branded as WinFS.” (That was all accurate, though Microsoft would later kill WinFS.)

Microsoft would eventually solve Windows Vista’s problems over two service packs. And its coming successor, Windows 7, would arrive just two years later and is correctly seen as a third service pack though the firm would, of course, market it as a major new version. But Vista’s worst problems were perception, not reality. The platform was dramatically more secure than Windows XP, and it suffered from just one-third the number of security issues in its first 100 days compared to XP. It sold well, with Microsoft reporting over 20 million units sold in the first 30 days, double that of XP. And with hardware makers selling 230 million PCs that year, Vista was guaranteed a certain level of success. Even businesses were moving to Vista relatively quickly: IDC and Gartner said that Windows Vista would be installed on roughly 4.6 percent of business PCs by the end of the year, which is a small number, but double the rate of Windows 2000 penetration in the same time period.

But Microsoft would never win the perception battle. And the people most directly responsible for Windows Vista—Steve Ballmer and Jim Allchin—would both go on to describe it as their biggest regret.

“We made mistakes,” Mr. Allchin admitted to ZDNet reporter Mary Jo Foley. “And we learned a lot.”

Microsoft CEO Steve Ballmer had much more to say on this topic.

“The thing that I did that I regret the most, not just in my CEOship but my whole time here [at Microsoft], it’s absolutely ‘Longhorn becomes Vista’,” he told Ms. Foley as he was leaving the company several years later, in 2013. “That was the single biggest mistake I made. Why? Not only because the product wasn’t a great product, but remember it took us five or six years to ship it. Then we had to sort of fix it. That was what I might call Windows 7. And what we wound up with (was) a period of let’s say seven or eight years where we had the A-team—not all of the A-team but a bunch of our best people—tied up not driving. We did not make years pf progress in eight years, and there were other things those people could have been working on, (like) phones.”

“The mistake wasn’t just an executional mistake,” he continued. “It was a technical strategy mistake. We tried to fight it off. The big things are the important things to get right in this industry, but then you’ve got to execute with cadence. People think it’s about changing strategy every three seconds because that’s what people say. ‘Oh, the industry changes so fast’.”

“It wasn’t Bill’s thing, and it wasn’t Jim’s thing, and I didn’t get it,” Ballmer admitted. “When I look back and I say it was sort of a focus issue because we weren’t focusing on what we needed for engineering cadence, bite-size approach, what was the big bet that that represented. I’m willing to admit when I first started as CEO is probably when I made my biggest mistake. And a lot of what we’ve been doing is just the last five or six years is really catching back up from the mistake that really you could say I made with Bill and Jim Allchin earlier in my CEO days.”

When I look back on this era, I see several problems.

Microsoft should have marketed Windows XP Service Pack 2 (SP2) as Windows XP R2 and released it as a new product midstream. This is what Ballmer had wanted, but Allchin convinced him otherwise—for good reasons—but he ultimately came around to that mistake as well.

Microsoft was too focused on building complex platforms to solve simple problems, and it was repeatedly embarrassed by Apple, then a smaller and faster-moving company that solved simple problems iteratively, each year, using simple solutions. Apple’s rapid advances with Mac OS X publicly exaggerated the problems with Longhorn/Vista, directly leading to the perception issues that doomed the product.

Microsoft’s senior leadership was so distracted by antitrust problems in the U.S., Europe, South Korea, and elsewhere during this time that they became tunnel-visioned about not falling behind, not turning into the next IBM, and protecting their crown jewel, Windows. But this allowed nimbler competitors like Apple and Google to seize new markets like web/search and devices/smartphones that then seemed peripheral to desktop computing. The Microsoft of the 1990s would have defeated those adversaries as easily as they had done with Netscape, WordPerfect, Lotus, and other one-time foes. And today we’d all be using Bing and Windows phones instead of Google, iPhones, and Android handsets.

Microsoft took too long to develop Longhorn/Windows Vista because of hubris: it did not want to repeat the defeat of Cairo, an earlier attempt to modernize Windows NT with object-oriented interfaces. And so it allowed Longhorn to spin out of control, convinced that it had the leadership and engineering prowess it needed to accomplish the impossible. It is an incredible fact that the Longhorn reset in August 2004 was triggered by the growing understanding that the Windows build labs could no longer correctly assemble the many product team check-ins into a single, working version of the product. Longhorn started small but quickly grew into something even bigger than the Blackcomb project it replaced.

And no company ships a major consumer upgrade in January, right after the holidays. That’s a basic precept akin to not fighting a land war in Asia. Once Microsoft missed the holiday 2006 selling season, it should have focused on getting Vista to Service Pack 1 (SP1) quality levels and waiting until the third quarter of 2007 to ship it.

Hindsight, as they say, is 20-20. But consider, again, Bill Gates’ comments about people underestimating the company and how Microsoft’s coming product pipeline would set everything right. That never happened, and the Windows Vista debacle is now understood to be the point in time when Microsoft’s market power peaked and then began its inevitable decline. By the time Microsoft shipped Windows Vista to consumers, Apple had already announced the iPhone. And soon after, Google would outbid Microsoft to acquire DoubleClick and cement its control of the web and online advertising.

Together, these two firms would collectively drive personal computing forward. And it would be the first time in this industry’s short history that Microsoft no longer played a major, let alone dominant, role.

It was the end of an era.