A Messy CourtshipA key player in the new Microsoft is Stephen Elop, an outsider from Silicon Valley brought in last year by Ballmer to overhaul the business division. Elop, a veteran of Adobe Systems (ADBE) and Juniper Networks (JNPR), has been pushing the makeover aggressively. A native Canadian, the 45-year-old father of five is known for his buzz cut and workaholic tendencies. He commuted to Silicon Valley from Toronto for six years and still pulls the occasional all-nighter. While well-regarded for his operations and sales expertise, Elop was a controversial choice. Before arriving in Redmond, the biggest company he had run was Internet software maker Macromedia, whose $440 million in sales at the time was less than 3% of the size of Microsoft's business division. Elop's messy courtship raised more doubts. In late 2007, Elop held the No.2 post at router maker Juniper, having joined the company less than a year earlier with a personal assurance from then-CEO Scott Kriens that he was next in line for the CEO job. As the year drew to a close, Ballmer flew to Toronto and spent hours at Elop's home discussing the Office job with him and singing Seattle's praises to Elop's wife, Nancy. With the press release announcing Elop as Juniper's new CEO already written, Elop told Kriens a few days after Christmas that he was going to Microsoft instead. Elop says the 10-minute phone call was "very tough" and that the move was "unquestionably the hardest decision I've ever had to make." (Kriens ended up recruiting Microsoft's Internet chief, Kevin Johnson, as CEO and says in an e-mail, "It all worked out for the best.") Elop joined Microsoft in January 2008 with a mandate to overhaul the business group. Tops on the priority list: to use the Internet more aggressively as a way to deliver and improve Office's capabilities.
A "Looking-Glass Wall"Ballmer had started the process in 2004 after returning from a sales trip in which customers complained about the overhead and headaches associated with running Microsoft's software. He asked Ron Markezich, the vice-president responsible for Microsoft's own tech systems, to see if Markezich could figure out how to run Microsoft's Exchange e-mail software and SharePoint collaboration program for a few trial customers to use over the Net. Markezich found that Microsoft could do so—and save customers money. Elop's job is to put that and other big ideas into action. Shortly after he arrived in Redmond, he began showing off a flashy video with futuristic visions of how Office could enhance people's productivity. One idea: a "looking-glass wall" that lets people on different continents communicate as though they were together—with real-time translation if they speak different languages and a display of the full history of e-mails and related documents. Elop also doubled the size of the staff at Office Labs, the team that made the video and is charged with dreaming up new ideas for the group. This was a huge change for a division that had a reputation as Microsoft's no-nonsense boy scouts—never missing deadlines or releasing bug-filled code like their brethren in the Windows group. Rather than lavish global bashes featuring big-name rock stars, the team's idea of celebration after a product release is a 10-minute romp in a fountain outside Building 36 on the Redmond campus. Beer is available, but in moderation. "We're not the most colorful group," admits Jeff Teper, founder of SharePoint. "We'd rather let the results speak for themselves." Elop is also changing the way the division prioritizes its investments. "We're going to make fewer, bigger bets," he says. One example: He more than doubled Microsoft's investment in SharePoint, which companies use to let employees share documents and collaborate on "wikis." Elop says he made the call after visiting customers around the world. "When something is hot, you pour gasoline on it," he says. The nine-year-old SharePoint business is one of Microsoft's fastest-growing, with sales climbing by double digits even in the weak economy. Perhaps most important, Elop has championed the move to the "cloud," meaning customers can get Microsoft software from its giant data centers rather than from their own servers. He sped up the rollout of the Exchange and SharePoint subscription services and other online programs, which are now available in 19 countries. Hundreds of companies, from Westcon and GlaxoSmithKline (GSK) to Coca-Cola Enterprises (CCE), have signed up for what Microsoft calls the Business Productivity Online Standard Suite. Ingo Elfering, vice-president for IT strategy at drugmaker GlaxoSmithKline, says his tech staff can now focus on more important projects than computer maintenance. "[Maintenance] has no more value to our business than paying the electric bill or serving food in the cafeteria," he says. "I really don't need to be buying groceries for my employees. I'm not very good at it." But while Microsoft is tinkering with delivery mechanisms, what matters most is whether customers are willing to pay up for its wares in the era of cheap Web alternatives. Its hope is that Office 2010 will persuade customers to dig deep into their wallets. On July 13, Elop is expected to reveal the details of the program, which was designed very much with the Twitter generation in mind. One major change is something called "co-authoring." Rather than have one person create a document or PowerPoint presentation and then e-mail it around to others, teams will be able to work on the project simultaneously. One group member could grab a particular paragraph or slide and fiddle with it. Once they save the changes, others can see and weigh in on that bit of content.
Arriving Via the WebAnother feature of Office 2010 is called "unified communications." When a user moves the cursor over the name of a colleague, up pops a box that shows whether that person is online—and offers the option of e-mailing, calling, or setting up a meeting. The program will also offer new social networking capabilities and ways to track down co-workers with specific skills. Some corporate customers see big potential in blending Microsoft's software with the reach of the Internet. Elfering of GlaxoSmithKline says he wants Microsoft to make the paid version of Office 2010 available as a Web service now. He envisions a day when millions of companies share access to some of their knowledge. "If there were a collaboration platform out there with 60 million people, imagine the insights one could glean," says Elfering. But first things first. Before Microsoft can roll out the Office subscription service, it needs to learn how to deliver Exchange and SharePoint profitably. It'll have to beef up its call centers, reduce the number of bugs in its programs, and in all ways bend over backward to keep customers happy. After all, if the software doesn't work, Microsoft won't get paid. At least not for long. Such radical moves haven't come naturally. Given the company's enormous success over the years, Ballmer concedes it took him a while to get comfortable with Microsoft's new path. Now, though, he says he is convinced the shift will pay off down the road. "It's not that I'm in love with the past," Ballmer explains. "But we needed to think really hard before we embraced the future."
Business Exchange: Read, save, and add content on BW's new Web 2.0 topic networkWarming Up to Microsoft
For years investors have fumed at Microsoft's mediocre products and profligate spending. Now comes a sudden warming trend. As BloggingStocks points out, the Bing search engine is winning good reviews, and the new Windows 7 software should spark a wave of PC upgrades next year. Throw in the most ardent belt-tightening in company history, and it's no wonder Microsoft shares have risen 55% since March.
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