One year later, Microsoft feels subtle effects of Gates' transition |
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Nearly a year has passed since Bill Gates vacated his corner office at Microsoft, and little has changed -- on the surface -- as a result of the tech icon’s shift from daily life at the company to his philanthropic foundation.
But even in the midst of the smooth transition, there are subtle signs of Gates’ absence from day-to-day decision-making -- particularly as the economy forces Microsoft to cut costs.
The company, legendary for its far-flung technology initiatives, has been rethinking some of Gates’ favorite projects as part of its broader effort to shave expenses in the face of the recession. Examples include “smart personal objects” and other technologies that Gates continued to champion even as they struggled in the market.
Gates’ shift away from day-to-day duties has also changed the mix of personalities at the top of the company. Ray Ozzie, his successor as chief software architect, doesn’t have anything close to the confrontational approach that the Microsoft co-founder used to shape the company.
“It’s as though you’ve been running Italy using the Mafia for the last 20 years and you bring in a priest,” said Mark Anderson, publisher of the Strategic News Service technology newsletter. “I love Ray Ozzie, and I think he’s a wonderful person, but I’m just saying that culturally that’s a tough fit.”

Gates hasn’t fully left the scene. Despite ending his full-time role in June 2008 to focus on the Bill & Melinda Gates Foundation, he is still Microsoft chairman, and he works there part time.
“His presence is still at the company,” Ozzie said during a recent Technology Alliance event in Seattle. “At many companies, particularly in the tech realm, the founder sets the tone for the culture of the company. They set the rhythm of things, they set the processes, the belief system, how the leadership structures are and so on. So Bill’s presence is still there -- and there really is only one Bill Gates."
Overall, as the first year of Microsoft’s Post-Gates Era draws to a close, the company appears to have pulled off a landmark leadership transition with a minimal amount of disruption.
“So far, so good,” said Bob Herbold, the former Microsoft chief operating officer, noting that there haven’t been any major hiccups at the company as a result of Gates’ transition.
It’s difficult to know if Microsoft’s cutbacks would be playing out differently if Gates were still there every day. Gates was known for keeping a close eye on Microsoft’s budget, Herbold pointed out.
In contrast with Gates’ transition, followers of Apple Inc. are wringing their hands as they wait to see if Chief Executive Steve Jobs returns from his extended medical leave, as promised, at the end of June. Jobs’ health problems have raised widespread concerns about his future at the company, and Apple’s prospects without him.
[Related content: At Cambridge, Bill Gates makes bold statement against neckties]
Microsoft benefited from a gradual transition, starting with Steve Ballmer taking over as CEO in 2000. In many ways, that was the bigger turning point, said Michael Cusumano, a professor at MIT’s Sloan School of Management and the author of several books on Microsoft and the software industry.
Gates has “been in this mode of turning over responsibilities to Ballmer and others over the last several years,” Cusumano said. “And I guess that’s what they really wanted -- a smooth transition.”
Still, there have been some noticeable changes during the past year.
Gates, for example, was a supporter of “smart personal objects technology,” which uses FM radio signals to deliver information to Dick Tracy-style watches, GPS devices and other gadgets. The project, dubbed SPOT, never caught on in the market, but Microsoft had been forging ahead nonetheless.
That changed with Microsoft’s most recent round of layoffs, which cut jobs in product groups related to the SPOT initiative — leaving the technology with an uncertain future in the long run.
“SPOT was really one of Bill Gates’ personal projects. It lasted as long as it did largely because he was interested,” said Matt Rosoff, an analyst at Kirkland-based research firm Directions on Microsoft. With Gates not around as much, he added, there was a smaller barrier to scaling back the project.
Of course, Microsoft wasn’t exactly pinning its future on watches, and CEO Steve Ballmer has repeatedly stressed the importance of maintaining the company’s $9 billion R&D budget even in tough times. The company has been focusing on major projects including the upcoming Windows 7 operating system, the Xbox Live online gaming network, and the recently released Bing search engine.
But with the economy nipping at its heels, Microsoft appears to have a noticeably smaller appetite for projects not poised to pay off in the short run. In April, for example, the company cut its Live Labs online research unit in half, moving many of its members into product-development groups. Live Labs was created in 2006 to bridge Microsoft’s Internet research and product groups.
Investors might welcome the narrower focus, and lower costs, but the company also risks missing out on opportunities if it makes the wrong decisions about what to cut.
In an interview last fall, Ozzie also differed from Gates when he described Tablet PCs as “truly niche.” Gates at one point had viewed the pen-based computers playing a central role in the computer industry, but they, too, have struggled to catch on. Ozzie’s remarks frustrated Tablet PC fans.
At the recent Technology Alliance event in Seattle, Ozzie suggested that the real transition at Microsoft took place years ago, when the company grew too big for any one person to run everything.
“In the early years, I think the mythology of Bill having it all in his head — and Bill leading everything and everyone following — was absolutely true,” Ozzie said. “But as everybody must fully be aware, that’s not scalable. And it didn’t scale. ... Things start to change as the company gets bigger.”
Follow me on Twitter: @toddbishop
Todd Bishop is co-founder and managing editor of TechFlash. He has covered Microsoft and the technology industry for more than five years, most recently as a daily newspaper reporter and blogger based in Seattle.
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