Welcome to the Post-Gates Era

• By John K. Waters
• June 19, 2006

After the news broke late last week that Bill Gates would definitely be giving up his day-to-day responsibilities at Microsoft (though not for two years) to focus on the activities of the $29 billion Bill & Melinda Gates Foundation, I asked around to get some opinions on what this decision might mean for the company he co-founded and the industry he has come to symbolize.

Rob Enderle, president and principal analyst at the Enderle Group, believes that Gates' decision will ultimately result in a more effective Microsoft—and a more effective Gates.

''So much of what Gate’s was—good and bad—became part of Microsoft’s culture that it's often hard to separate the man from the company,'' Enderle says. ''Doing so will probably be very painful for both, but it's also critical for the growth of both.''

The fact of Gates' personal wealth has become something of a liability for Microsoft, Enderle says. Gates himself has said that he and his money get far too much attention. But once he turns to philanthropic work, Gates' staggering financial wherewithal will probably be good for company again, though the impact of ''the largest charitable trust that has ever existed'' will ''clearly go well beyond the technology industry,'' Enderle says.

In the company announcement of Gates' second role shift, the emphasis was on the strong management team that will, more or less, replace him. Gates gave up the CEO spot to Steve Ballmer six years ago. He will be handing his chief-software-architect responsibilities to current CTO Ray Ozzie, who joined the company last year when Microsoft acquired his company, peer-to-peer software maker Groove Networks. Ozzie is probably best-known as the creator of Lotus Notes. Ozzie's job will pass to Craig Mundie, a 14-year Microsoft veteran.

Tom Snyder, president and founder of iNetOffice, a provider of browser-based office applications, believes that Ray Ozzie is the ideal man to lead Microsoft through a transition to online and service oriented systems. ''He invented the category with Lotus Notes,'' Snyder says, ''broadened if further with Groove Networks, and has the vision to carry Microsoft to its next level.''

Snyder, who worked as a developer at Microsoft for 10 years before striking out on his own, feels ''encouraged'' by Ozzie's work at the company. ''Being a small business person myself, I think Ray's recent stint at his own, medium-sized company will give him a more down-to-earth focus on people friendly solutions,'' he says. ''I've seen first hand how people, when working insulated in the tech-heavy Microsoft, can occasionally drift away from 'easy' during the pursuit of 'powerful.'''

IT advisory and analysis firm ZapThink's Jason Bloomberg agrees: ''I feel that Ozzie is a good person to take Microsoft to the next level,'' he says. ''He understands the role of software-as-a-service, and even more than that, understands the fundamental architectural and business shift that the movement toward service orientation represents.''

The handover of Gates' responsibilities to Ozzie is well-timed, says analyst Neil Macehiter of specialist IT advisory firm Macehiter Ward-Dutton, and is emblematic of the shift from the age of client-server to an era of what Ozzie has called ''client-server-services.'' It allows Microsoft to ''present a new face for the new era: a face, moreover, which is well-respected.''

''Ultimately, in a company of Microsoft's size and complexity, the departure of Gates can only have a limited material impact,'' Macehiter says. ''And some of the quotes I have seen since the announcement suggest that he will still be looking out for the 'big things.' I'm sure he'll still be making suggestions.''

In fact, observes Yankee Group analyst Laura DiDio, Gates is not retiring (though about half of last week's headlines proclaimed as much). He's stepping back from the day-to-day in Redmond, but he'll still be chairman of the company—not to mention its largest shareholder, with just under a million shares, or about a 10 percent stake.

''There will be no perceptible, immediate or intermediate term impact to Microsoft customers, the day-to-day company functions or its long-term strategic direction,'' DiDio writes in her latest ''Research Analysis'' piece. ''His will be a protracted, orderly transition. Gates is an extremely focused, deliberate individual. It was clear from his statements that he has planned his withdrawal with the same precision and prescience that he used to plot his assault on IBM in the late 1970s, and other rivals throughout the 80s and 90s.''

''In truth,'' DiDio adds, ''it would have been a much bigger deal if Ballmer had announced his departure. Ballmer runs the sales force and charts the company’s tactical and strategic direction. It was Ballmer and not Gates who gave his approval for the controversial 2001 licensing plan that alienated many customers, and it was Ballmer who overruled himself, scrapping it and building a new plan more favorable to users. It is Ballmer who has taken the public and private role of negotiating and often sparring with the European Commission which is locked in an ongoing antitrust action against Microsoft. In recent years it is Ballmer who has made war and peace with competitors and rivals like IBM, Sun, Oracle and the open source community.''

But Gates is turning his primary focus to other things, and that strips Microsoft of something elemental, say industry watchers at Forrester Research. I sneaked a peak at a Forrester 'Quick Take' on the news (penned by John R. Rymer, Ted Schadler, and Erica Driver, with input from Mike Gilpin, Frank E. Gillet, Chris Charron, and Sally M. Cohen), in which the analysts waxed poetic: ''Gates—his encyclopedic mind, steely, will, and passion for software technology—is the essence of Microsoft.... It will take a village to replace him.''

They also offered a couple of worrying predictions: First that Gates' departure will make it more difficult for the company to attract and maintain talent. Gates was a 'magnet for elite computer-science talent;' without him, Google becomes the company with the gravity to pull in the best and brightest. Second, that Gates' departure will, in the short term at least, cause Microsoft to harden its historical ''our way or the highway'' position.

Still, as IDC's positively sanguine ''designated Microsoft watcher'' John Gantz writes, ''Tomorrow the sun will rise in Redmond, the challenges will be the same, and so will the passion to address them, for Microsoft is a very large company with many smart and capable people. If managed properly, in the long term this could be a pivotal point—one where the company begins the process of proving that it can innovate and deliver in the post-Gates era.''

The post-Gates era. Boy, does that sound weird.

Personally, I believe that Gates' most enduring contribution will be social: Simply put, he made it cool to be a geek—which is to say, smart. Some people like to give credit here to Steve Jobs, but Jobs is too mystical and artsy, which are qualities with inherent coolness. It is Gates—the four-eyes with the bad posture, reedy voice, and storied pit stains, who, at 50, has more money than God—who has emerged as the industrial icon of the triumph of brains—and will—over brawn.

I can't wait to see what he does next.