Ozzie Is Key to Microsoft's Success Against Google

The departure of Microsoft's founder and iconic leader Bill Gates comes at a pivotal time in the company's history as it struggles to compete with Google, the architect of the new Web economy and perhaps the company's most formidable foe ever.

With Gates giving up his full-time duties, two very different leaders -- CEO Steve Ballmer and Chief Software Architect Ray Ozzie -- are burdened with the task of transforming Microsoft into a leader in an industry where the Web, not the PC, is driving how people use technology.

As Gates' heir apparent, Ozzie in particular is under an enormous amount of pressure to rise to the occasion. How he performs as chief software architect once Gates leaves the fold is key to Microsoft's ability to take the same dominance it enjoyed in the PC industry for the past 20-some years to the world of Internet advertising and hosted services.

Ozzie has been chief software architect for only two years, and during that time has worked with Gates in preparation for June 27, Gates' last full-time day at Microsoft. While Ballmer has been running Microsoft alongside Gates since he took over as CEO in 2000, Ozzie's ability to be a long-term leader is unproven.

Though Ozzie will have help from the rest of Microsoft's relatively new team of top brass -- Chief Research Officer Chief Mundie and Chief Operating Officer (COO) Kevin Turner among them -- it's his relationship with Ballmer and his ability to steer Microsoft's technology direction in the next five to 10 years that will determine whether the company can beat Google at its own game.

A skillful salesman, Ballmer's style and his way of attacking Microsoft's problem on the Web is by now fairly well-known -- and so far has not really worked.

Microsoft under Ballmer's reign has grown by acquiring technology -- think of the spate of small virtualization vendors the company subsumed in the past several years to bolster that strategy. However, the nature of those acquisitions has started to change, which shows Ballmer is tweaking his own strategy to adapt to an industry that has outgrown Gates' vision for the company, noted Stewart Alsop, cofounder and partner of venture-capital firm Alsop Louie Partners and a longtime industry watcher.

To compete with Google on advertising and the Web, Microsoft is gauging future purchases by how much value they can bring to the company immediately, said Alsop.

"The idea behind Yahoo was to buy revenue -- revenue and traffic," Alsop said. Given the recent breakdown of that deal, this change in strategy -- and Ballmer's ability to execute it -- is still a work in progress, he added.

As technology visionary and Gates' successor, Ozzie must serve as a thoughtful counterbalance to Ballmer's trademark bluster.

As a public figure, he appears more reserved and soft-spoken than Ballmer, and even seems to take himself a bit more seriously than Gates, who was not afraid to poke fun at himself in spoofy company videos.

Ozzie has put forth a more professional demeanor than his predecessor, making keynote presentations in dark suits and button-down, collared shirts as opposed to the more comfortable attire Gates wore on stage. It's likely Ozzie knew he had to present himself seriously from the beginning in order to be taken that way.

As Gates' successor, Ozzie is responsible for Microsoft's technical direction and how it touches all areas of the business, particularly when it comes to the company's Web-based services vision.

His first major presentation, at Microsoft's TechEd conference in Boston in 2006 during the same month he became chief software architect, also marked the first time Microsoft outlined its "software plus services" strategy. The plan, which Microsoft is in the midst of executing, laid out how the company will gradually transition from a packaged software vendor to one that offers both software and hosted services.

Being a techie himself, Ozzie likely will continue Gates' tradition -- which has served Microsoft remarkably well -- to woo developers as a way to make an end run around companies like Google that already lead a market Microsoft wants to conquer.

In this role, Ozzie will likely excel; in a recent interview published in the Financial Times, he himself said he is "closer to the technology and products" than even Gates was.

But Ozzie may not have the business edge that Gates has -- that relentlessness to fight for an idea or a business until he is successful, no matter what collateral damage is done.

Yet this relentless streak also hurt Gates, especially once Windows became the de facto OS for the PC market and a popular developer platform for businesses, said Shane Greenstein, a professor in Northwestern University's Kellogg School of Management.

"Gates draws on an almost unique mix of drive, persistence and patience when pursuing his goals," Greenstein wrote in a two-part essay, "The Long Arc Behind Bill Gates' Wealth." "For example, he furiously drives himself to learn the things he believes he needs to know, and he will negotiate incessantly until he wins on the points he wants, but he will wait eons for results from investments."

It's unclear whether Ozzie has this same drive, Greenstein said in an interview. But a lack of obsession with one goal could actually be a strength for Ozzie, whereas it was Gates' Achilles heel.

Gates was so concerned with Windows maintaining its place in a PC-centric technology industry that he did not foresee the new advertising-based business model of the Web until it was upon him, Greenstein said.

"Bill's vision for how to exploit an opportunity -- the Internet in particular -- was rooted in his historical experience in the PC market," he said. "He was so good at that that he was unable to understand how you might develop a Web-based business model even as early as '97, '98. He didn't have the vision that a lot of the younger, newer firms had about how the Web could be used."

Greenstein suggested that Gates may even have recognized that his own flaw rendered him unable to lead Microsoft through its transformation to services and the Web, and thus decided to pass the torch to Ozzie for the good of his company.

Unlike Gates, Ozzie has already proven he knows when to walk away from a pet project to embrace technology innovation. He abandoned Lotus a few years after selling it to IBM to form Groove Networks, so he could experiment with his vision for peer-to-peer networking, which was then an emerging technology.

Groove's technology for enabling people to collaborate both online and offline has now found its way into Microsoft's Office suite; Ozzie is applying these same ideas to Microsoft's Web strategy with services like Live Mesh.

Still it remains to be seen whether Ozzie can successfully navigate Microsoft's post-Gates culture, which is sure to undergo a major shift, observers said.

A big question mark for the future of Microsoft is whether Ozzie, without the benefit of being as chummy with Ballmer as Gates was, will have the management power to execute on his technology vision.

"It's not an issue of talent," Alsop said. "The issue is who is going to make the decisions? It depends on Steve more than it depends on Ray."

Indeed, Forrester Research CEO George Colony said that Ballmer remains connected to Gates' legacy and "the long shadow he casts" on the company, which will have an enormous impact on how people within the company feel about it once he is no longer there full time.

"Not having the richest guy in the world working for the company changes how you view coming to work every day," he said. "You're not coming to work with this extraordinary person anymore. It lessens the impact of being there."

Whether Ballmer can overcome this legacy to "go beyond how Gates saw the world and to truly change the company" is one thing, Colony said. Whether that culture will "allow Ray Ozzie to take the place of Bill Gates" is still another.

The answer to the latter could lie in Ozzie's ability to inspire his own staff of developers, as well as Microsoft's larger developer community, to get behind his vision for both the company and the future of the Web, Greenstein said.

Known less for his ability to innovate than for his genius to execute in the mainstream business-technology market, Gates was able to inspire developers to go against their very free-thinking nature, he said.

"Bill has been able to persuade thousands of programmers to mute their independence for the good of an organizational goal that sometimes wasn't on the technical frontier," Greenstein said. "That runs counter to the instincts of most programmers. That is extraordinary."

As chief creator of Microsoft's future Web strategy, Ozzie must balance the needs of the company with the needs of a larger industry moving away from Microsoft's historical proprietary nature to promote an open, standards-based Web -- and hope developers will come along for the ride.

Of course, there is always the possibility that Ozzie will only have a few years to sink or swim as Gates' successor. Alsop said he would not be surprised and actually expects Microsoft's cofounder and chairman to follow the "really well-established pattern" of a founding CEO returning to lead the company again if things don't go well after his departure.

"I believe that three to five years from now, Bill Gates is going to come back and be CEO of the company," he said.