How to make Bill Gates' head explode

Bill Gates didn't get where he is today by giving away software for free and making his money elsewhere. But now that's exactly what Microsoft must learn to do.
Written by Phil Wainewright, Contributor

Forrester analysts have always had a reputation for attention-grabbing images. Here's George Colony, the analyst firm's CEO, explaining in an article in this week's Economist why online and open-source business models are giving Microsoft such a hard time these days:

"Bill Gates knows how to compete with anyone who charges money for products," he says, "but his head explodes whenever he has to go up against anyone who gives away products for free."

Or more precisely, gives away software for free.His whole being screams out against having to unlearn everything and start over Because of course no one can survive in business without generating revenues somehow. The big problem for Microsoft these days is that its most dangerous competitors give away software for free and make their money elsewhere. They earn revenues either from helping customers use the software or from delivering services (including advertising) that run on top of the software. That's why Bill Gates head is exploding. He understands inside out how to make money from selling software licences. That's how he became the world's richest man. His whole being screams out against now having to unlearn everything he knows and start over.

What's more, he's spent the past thirty years or more instilling all of that knowledge into the culture of the Microsoft organization. Many hundreds of its sales people and middle managers measure their success by counting licence sales. In addition to those internal channels, Microsoft has built up a huge ecosystem numbering thousands of partners, whom it rewards based on the number of licenses they sell. This is why I singled out licensing as a major factor last week when I wrote about whether it will be mashup or meltdown for Microsoft.

Microsoft's long-term survival depends on the company working out how to turn its business model on its head — and achieve the same for the business models of its partners — without collapsing along the way. Worst of all, as the Economist concludes, there is no master plan in place for this yet:

"As one former Microsoft executive explains: the company's problems are not just technical but organisational. 'It has a vision but not a roadmap; it can see the peaks but doesn't know how to cross the foothills to get there.'"

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