“Once the dream workplace of tech’s highest achievers, it is suffering key defections to Google and elsewhere… These days it’s Google, not Microsoft, that seems to have the most momentum… For most of its three decades, Microsoft has faced intense criticism. But in the past it came from the outside world. Rivals complained about its heavy-handed tactics. PC makers griped that it was hogging the industry’s profits,” Jay Greene reports for BusinessWeek. “Now much of the sharpest criticism comes from within. Dozens of current and former employees are criticizing — in BusinessWeek interviews, court testimony, and personal blogs — the way the company operates internally.”

Greene reports, “More than 100 former Microsofties now work for Google, and dozens of others have scattered elsewhere. It’s not a mass exodus. Microsoft has 60,000 employees, and many of them are undoubtedly happy with their jobs and the company’s culture… Still, there’s no doubt that Microsoft is losing some of its most creative managers, marketers, and software developers… Mark Lucovsky, who had been named one of Microsoft’s 16 Distinguished Engineers, defected to Google last November. He blogged that Microsoft’s size is getting in its way. ‘I am not sure I believe anymore that Microsoft knows how to ship software,’ he wrote.

“Employees’ complaints are rooted in a number of factors. They resent cuts in compensation and benefits as profits soar. They’re disappointed with the stock price, which has barely budged for three years, rendering many of their stock options out of the money. They’re frustrated with what they see as swelling bureaucracy, including the many procedures and meetings Chief Executive Steven A. Ballmer has put in place to motivate them. And they’re feeling trapped in an organization whose past successes seem to stifle current creativity. ‘There’s a distinct lack of passion,’ says one engineer, who would talk only on condition of anonymity,” Greene reports.

Greene reports, “To many employees, Vista, the Windows update, exemplifies the company’s struggles. When the project was conceived half a decade ago, it was envisioned as a breakthrough: an operating system that would transform the way users store and retrieve information. But the more revolutionary features have been dropped, and Vista will arrive three years after researcher Gartner Inc. originally predicted that it would ship. Worse yet, they say, nobody has been held accountable. ‘People look around and say: ‘What are those clowns doing?” says Adam Barr, a program manager in the Windows group.”

“To succeed, Microsoft needs motivated workers camping out in their offices at all hours to compete with tenacious rivals such as Google, Yahoo!, Salesforce.com, and a reborn Apple Computer. Yet current and former employees say there are many demoralized workers who are content to punch the clock and zoom out of the parking lot,” Greene reports. “Some employees say Microsoft isn’t innovating enough: It’s too busy upgrading Windows. With some of its key breakthrough features gone, Vista’s improvements include better handling of peripheral devices, such as printers and scanners, and cutting in half the time it takes to start up. Those are needed improvements, and there’s no doubt that hundreds of millions of copies will be sold as people upgrade to new PCs. But the changes are hardly the stuff of cutting-edge software engineering.”

“With revenue growth slowing, Ballmer has tried to squeeze more down to the bottom line to make the company more appealing to investors,” Greene reports. “Even the cuts that seem trivial have dampened morale. Just whisper the word ‘towels’ to any Microsoft employee, and eyes roll. Last year, Microsoft stopped providing a towel service for workers who used company locker rooms after bike rides or workouts. Employees who helped the company build its huge cash stockpile were furious. And don’t even mention stock options. Employees long counted on them to bolster their salaries. Microsoft minted thousands of employee millionaires as the stock climbed 61,000% from its 1986 public offering to its peak in 2001. Now shares are trading exactly were they were seven years ago. Microsoft has doubled its payroll in that time, adding more than 30,000 new employees, not including attrition. That means more than half of Microsoft’s employees have received virtually no benefit from their stock holdings.”

Full article, with Ballmer f bombs, and much, much more here.

BusinessWeek also has a podcast (that’s “podcast,” not “blogcast,” Microsofties) about Microsoft’s problems. More info here.

Additionally, BusinessWeek has an interview with Microsoft CEO Steve Ballmer here.

MacDailyNews Take: Hey, Microsoft employees, “Towels!” We found a nice one for you guys and gals, but, alas, it’s sold out.

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