News

Gates waxes visionary in Redmond sessions

• By Jack Vaughan
• August 6, 2004

Microsoft Chairman Bill Gates has rarely taken on the “visionary” role since he gave over his CEO hat to Steve Ballmer and took on the job of Chief Software Architect in January 2000. But he has focused on the big view of late in a meeting last week with financial analysts and at a session earlier this week for the Microsoft Research Faculty.

Gates, in addressing financial analysts, re-committed to innovation and the importance of software. In business software, he said, the economic impact of efficient information workers can be startling. “We’re talking about simply a few hundred dollars for a corporation to have the very latest productivity software for someone,” he said.

The tempo of releases of business software may slow a bit as Microsoft grapples with the core needs of enterprises. “When you look at our investment in product groups, you’ll find that a very large percentage of that is the testing work that goes on to say that we can give you new capabilities, the existing binaries will run and they’ll run in a very hardcore fashion. That’s a big challenge,” said Gates. “But it’s something customers demand, and something they expect.

“That means that the pace that you can put new things in is not quite as rapid,” he added. “The variety of applications that corporations have and the way they need to test them against new things, acts as somewhat of a brake on adopting new versions,” Gates told analysts gathered for a full-day session at Microsoft’s corporate headquarters in Redmond, Wash.

As in prior speeches, Gates pointed to business modeling, Web services and hardware advances as factors in the progress of business software environments.

While admitting that competitors kept Microsoft “on our toes,” he suggested that many competitors “are not quite as focused on software as we are.” And, noted Gates, “many of them that are in software are not quite as long-term focused on software as we are.”

Research is key. He pointed to Microsoft’s R&D spending as a differentiator. For fiscal year 2004, R&D spending at Microsoft represented about 17.8% of revenue. Gates noted that, according to some measures (for example, “current impact”), its patent portfolio outpaces those of Oracle, Sun, Apple and IBM. The company is on something of a patent tear, filing for 2,135 patents in fiscal year 2004 vs. 519 in fiscal year 1998.

“You’d think, given that R&D has this big payoff, that you’d see increased investment in it. But, surprisingly, we’re not seeing that in such a dramatic way in terms of other U.S. software companies in particular,” Gates said.

He said the Microsoft Research Group tries to link its work to product groups. He viewed the famous Xerox Parc operation as a cautionary example of how research and product developments sometimes are not successfully linked.

In remarks this week at the Microsoft Research Faculty Summit, also held in Redmond, Gates said that in his meetings with educators this year he discovered that their interests and Microsoft’s interests “really jibed. I was very gratified. Really, the goal for me in doing this was to have a chance to sit down with the faculty and understand what kind of problems they’re going after, and to see how that connects with the opportunities we’re seeing.”

Gates expressed some concern about the reported worldwide decline in Computer Science degree candidates. “It’s ironic,” he said, “because when I think about different areas of activity, to me, other than some neat stuff in biology, it’s hard to think of a domain that’s going to change the world one-one-hundredth as much as advanced software will in the decades ahead.”