TELECOM Digest OnLine - Sorted: Gates Warns of 'Sea Change' in Memo

Gates Warns of 'Sea Change' in Memo

Allison Linn (
Wed, 9 Nov 2005 10:33:06 -0600

By ALLISON LINN, AP Business Writer

The technology industry shift's to Internet-based software and
services represents a massive and disruptive "sea change," Microsoft
Chairman Bill Gates wrote to top-level executives in a memo aimed at
rallying his troops against the new competitive threats the company

In an e-mail to top executives, dated Oct. 30 and obtained late
Tuesday by The Associated Press, Gates urged company leaders to "act
quickly and decisively" to move further into the field of offering
such services, in order to best formidable competitors. But he also
warned that the company must be thoughtful in building the right
technology to serve the right audience.

"This coming 'services wave' will be very disruptive," Gates
wrote. "We have competitors who will seize on these approaches and
challenge us - still, the opportunity to lead is very clear."

Gates compares the push toward such services -- which range from
online business software offerings to free Web-based e-mail -- to the
changes he saw nearly a decade ago. Then, he wrote a now-famous memo,
called "The Internet Tidal Wave," the prompted a massive shift at
Microsoft toward Internet-based technology.

"The next sea change is upon us," Gates wrote to executives.

Gates included a memo from Ray Ozzie, one of Microsoft's three chief
technical officers, which outlined ideas for broad companywide changes
that can address the growing competitive threat.

In the memo, dated Oct. 28, Ozzie concedes that Microsoft has not led
the pack on Internet-based software and services, and now faces
intense competition from companies like Google Inc. Ozzie said
Microsoft needs to focus on key tenets of the new model, including a
shift toward offering free, advertising-supported offerings and more
sophisticated, Internet-based methods of delivering products.

"I believe at this juncture it's generally very clear to each of us
why we need to transform -- the competitors, the challenges, and the
opportunities," Ozzie wrote.

Last week, Microsoft announced plans for Windows Live and Office Live,
two Web-based offerings that aim to help the company compete with
Google, Yahoo Inc. and other companies that are already
seeing success with such Web-based offerings.

Microsoft Corp. has recently faced criticism that its model, which
still relies mostly on delivering software in traditional packaging,
could grow antiquated. The concern is that, as more companies offer
online services for everything from word processing to storing photos,
there will be less of a need for Microsoft's lucrative Windows
operating system and Office business software.

Microsoft's nascent Windows Live and Office Live efforts aim to
complement its valuable software franchises with online products that
build on what people find on their desktop computers.

Copyright 2005 The Associated Press.

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