Gates memo to top Microsoft execs warns of ‘very disruptive’ changes coming with ‘services wave’

“Aiming to stir up the same kind of momentum as his Internet Tidal Wave memo of a decade earlier, Microsoft Chairman Bill Gates has penned a memo outlining the challenges Microsoft faces from a host of online competitors,” Ina Fried reports for CNET News. ‘This coming ‘services wave’ will be very disruptive,’ Gates said in an Oct. 30 e-mail to top Microsoft employees, which was seen by CNET ‘We have competitors who will seize on these approaches and challenge us.'”

Fried reports, “In the memo, Gates cites an earlier missive from Ray Ozzie, outlining the importance of tapping online advertising and services as new revenue sources. ‘It’s clear that if we fail to do so, our business as we know it is at risk,’ Ozzie wrote. ‘We must respond quickly and decisively.’ In the memo, Ozzie talks about Google as Microsoft’s most prominent of the emerging competitors, but also makes reference to Apple Computer… ‘Apple [has] done an enviable job integrating hardware, software and services into a seamless experience with dotMac, iPod and iTunes, but seems less focused on enabling developers to build substantial products and businesses,’ wrote Ozzie.”

Full article here.

Paul Thurrott, over on his Internet Nexus blog asks, “So what are we to make of all this? Microsoft’s reaction to the Google threat is both predictable and suspiciously similar to past ‘turn the ship around’ incidents. Gates seems to have latched on to the notion that he must lead his company on a new crusade every five years in order to keep employees motivated. And Microsoft’s self-critical stance is as manipulative now as it was ten years ago. Increasingly, companies such as Google, Skype, and Yahoo are determining the direction of communications and computing. That Microsoft needs to move more quickly and begin innovating should be obvious. What I want to know is why there is such a regular failure of leadership and direction at this company. Does Microsoft really need to be rebooted every five years to keep the company competitive?”

Full article here.

Advertisement: Learn more about all the things you can do with .Mac and sign up for a free 60-day trial.

Related MacDailyNews articles:
Microsoft announces, er, Web-based services – November 02, 2005
Microsoft threatens to boost South Korean productivity by withdrawing Windows – October 29, 2005
U.S. federal judge scolds Microsoft over abandoned exclusive music demand – October 26, 2005
Can Microsoft do anything original? Redmond behemoth issues ‘mysterious’ invite to reporters – October 25, 2005
BusinessWeek: Microsoft fumbles while Apple turns the needlessly complex into the beautifully simple – October 13, 2005
Mafiasoft? Microsoft to ‘offer’ new subscription security protection racket – October 07, 2005
Chair hurling Microsoft CEO Ballmer: ‘I’m going to f—ing kill Google’ – September 03, 2005


  1. Translation;

    Apple isn’t into monetizing every square inch of desktop space with their offerings. If we ran the iTunes/iTMS/iPod universe we could double the revenue by plastering adverts everywhere.

  2. If Apple seems less focused as the puts it…wait until the Intel powered macs show up. bye bye Gateway…
    If you could buy a computer that could run Vista OR Leopard or one that could run BOTH…which would you buy? I can see Vista running SIMULTANEOUSLY…you click in a window and it’s there…avoid email and the internet and a couple of other areas and I’m sure Vista will be perfectly usable on a new MacTel…

  3. Apple knows that these services will be built on open source tech. so they don’t have to build the back end, like .net or ASP. or SQL all they have to do is learn what the world wants to use and use it, like XML, Webdav, MySQL. ACC, SAMBA, It’s really simple when you don’t want to own and control the whole thing just make a good product that works!

  4. Ray Ozzie is right about services, on a number of levels. If one of the background services in Leopard allows Rosetta to run applications authored for the Windows operating system, disruptive won’t be the first word past Ballmer’s lips, nor those of many in the marketplace.

  5. Poor Emporer Bill. NOT!

    Google is innovating, being creative and TRYING. I’m trying to think of something (anything) of real merit that was born and raised in Redmond.

    If desktop office apps can really migrate to become network apps and work fast, seamlessly and reliably then that’s a huge problem for MS and one of their biggest cash cows, especially if the online “service” is free.

    The Google CEO is a former Novell alum and took his lumps from MS over Windows NT and networking (Novell is still breathing thru a snorkle after the 800 pound Gorilla finished with them). It would be great to see Google sucker punch MS. After all, free Software is one of the ways MS drove out competitors… it’s tough for commercial stuff to compete with free. PowerPoint (free) finally drove out all the competitors and look what it’s become (lumbering bloatware). Internet Explorer (free) slowly chipped away almost all comers to take the leading browser market share position. Proprietary file formats have kept MS Office selling.

    Ma, Pa and the kids don’t need Office to write letters. If a Free office suite was available on the web and it worked as good as my five year old Yahoo mail account has then Redmond, we have a problem.

    If corporations had an online Office suite available that used VPN and provided high security plus a dirt cheap price ($10/month per user or $60/year or less) this could be a huge cash flow for (Google?) and big implicit loss for MS (oh yea baby, payback is a mutha fuka). No yearly maintenance contract, no per user fees, limited licensing, no special servers or maintenance, fewer IT maintenance employees, fewer inhouse servers to maintain, no software to buy or inventory, these things would really appeal to (at least) small and medium business. Big corps might choose to keep info more inhouse but at what cost? Time will tell.

    MS has not built much goodwill with customers. Even those users who don’t mind using Pea Seas would welcome a reliable alternative to bugs, virus, and spy bots. Vista has a lot of features that will appeal to highend users but doesn’t offer much in the way of a compelling upgrade for regular users.

    There’s a dark cloud on the horizon for MS… storms a brew’n… It’s a great time to be a Mac user.

  6. Schools and Colleges could certainly benefit from a free online Office suite. It would eliminate a ton of hardware, software and maintenance expense. All High School kids could have access to Office for writing papers and homework. College students (for the most part) got no money! Free is appealing.

  7. google are big and have money, im sure they can produce a viable web based product shortly although it may not be in the way people are thinking. i think its going to be a similar thing to a .mac account. you guys might have seen the article about google registering the name gDrive. sounds like the name of an online account to me.
    theyve already got email and search covered, what next? perhaps applications like office etc, but for free, and if it was online they could create a online world with there own interface that ran over the top of windows (and a mac os) im just not sure people would want to do that. but the good news is that people are still going to need computers (:-) 4 apple). but theyre not neccassarily going to need windows. bye bye microsoft.

  8. Emil: to answer your question: yes.

    Google is also offering GMail (GoogleMail in the UK), Google Talk (IM chat), language tools, shopping tools, discussion groups, e-books, blogging tools…and now they are positioning themselves to offer a full, open source Office suite that runs over the Web and would potentially offer you storage space for your OpenOffice documents.

    this is why Microsoft sees Google as such a threat. besides being more popular than MSN Search, they’re going to offer competition with M$ Office bloatware.

    MDN: “planning,” as in “Microsoft is planning to beat Google. and i hope they fail.”

  9. Schools and Colleges could certainly benefit from a free online Office suite

    hey.. duh!.. remember Triumph of the Nerds?

    Cisco has been saying this for years…

    Now the bandwidth is good enough?

    honestly, I still don’t think the bandwidth is good enough, but this is the beginning.. we know where this is going. Everybody’s shit on some one elses HD, and you just log in from a thin client anywhere to get your shit.

    What could go wrong?

    Tee hee.


Reader Feedback

This site uses Akismet to reduce spam. Learn how your comment data is processed.