Microsoft: Yes, we were late

newsmaker For over two years, Chris Capossela, corporate vice president at Microsoft's business division product management group, was the speech writer for chairman Bill Gates, crafting material for more than 350 speeches and presentations.

Working closely with Gates has taught him to think big and to never miss an opportunity. He sings praises of Microsoft's founder, and recalls how Gates rallied employees to stay focused as the software giant tries to keep pace with the Internet wave.

During an interview with ZDNet Asia, Capossela acknowledges that Microsoft was late in understanding the importance of the Internet but stresses that the company has done well in catching up--thanks to Gates' strong guidance.

Capossela manages the Microsoft Office System portfolio, which includes desktop applications and server products. The Harvard computer science and economics graduate talks about Microsoft's successes with integrating senior employees with its strong corporate culture, the company's bets on Internet services and unified communications, as well as upcoming end-November launch of Office 2007 for business customers.

Q: Why should people care about Office 2007?
We often have people telling us that they use only 10 to 15 percent of the features in Excel or Word, and question why they would move to a new version when they have 85 percent of the product to learn, from the one they already own.

A: What we realized was that the Office user interface (UI) had become very cluttered over the years with many menus and toolbars. The first version of Excel had one toolbar and over a hundred commands in the whole product. But Excel 2003 has 1,500 commands and about 37 toolbars. The product just got too rich for the traditional menu and toolbar interface.

The team set out to solve the problem by dramatically simplifying the user interface and moving to a model where the power of the product is exposed as you change what you are doing with the product. It's a much easier way to work because it allows you to focus on what you want to do.

What took Microsoft so long to realize that people were having problems accessing the features they wanted to use in Office?
It's a big bet for us, and a risky thing for us to do. We have 450 million people who use the product every single day, and when you change anything about the product, you are impacting them. So, we need to be careful when we make the user interface a priority in this release.

We spent a tremendous amount of time in the lab watching people use the new UI and getting feedback from them. We did lots of focus groups and usability tests, so it's not something you can do lightly. You have to invest a lot of resources.

How does Office 2007 tie in with other Microsoft products, such as Exchange and SharePoint Server?
We renamed our business from the Office business, to the Information Worker business. There was a realization seven years ago that we wanted to move beyond the white-collar worker who was only using Word and Excel, to a broader group of people who deal with information.

We wanted to expand the concept of Office as a desktop productivity suite to a system that combines servers, desktop applications and services on the Internet. We teamed up with a much bigger set of technology to try to build specific solutions. Server-based products like Exchange Server, Office SharePoint Server and Office Communication Server are all part of the Office System. So, we don't think of Office as one thing and the servers as something else. We think of it as one holistic set of technologies that come together.

And SharePoint is probably the heart of soul of the Office business now. It has been the fastest growing product in the history of the company, with 75 million people who have licensed SharePoint. We see a lot of grassroots adoption of the collaboration capabilities that SharePoint provides.

Microsoft is reportedly interested in offering Microsoft Works as a free, online ad-supported product. How is that working out?
We're looking at a lot of different options in what we do in the next round of technology. We haven't announced that we're doing an online version of Microsoft Works. I did tell BusinessWeek that we're looking at advertising, hosted things on the Internet, and different kinds of business models. We'll be crazy if we didn't because there are a lot of interesting things happening in the consumer space right now. We certainly want to be the productivity tool of choice in that space.

Works is a wonderful asset for us. It's a very affordable productivity suite that's very task-based and focused on very consumer-oriented scenarios such as building a family calendar. We love having that product.

We don't have any product announcements to make regarding Works at this time. Office 2007 is where all our sales and marketing energy is in right now. We think we're doing pretty well in the business, but we need to look at new things.

Microsoft has admitted that it has missed out on the Internet wave. How is the company facing up to the competition from Google, both in consumer and enterprise search?
In the consumer space, there's been a huge amount of energy in the Live strategy. The Windows Live team has done a fantastic job in a very short time, getting a lot of services

The Windows Live Search team went from using someone else's search technology to building our own in just 18 months. And they're super focused on continuing to make that better by adding local search and all kinds of interesting services. The company's really rallying behind the Live strategy.

On the enterprise search side, SharePoint is a very important technology for us. With Office SharePoint 2007, the search capabilities get really rich. You can not only search unstructured data, you can also search for people and expertise inside your company, which makes enterprise search an interesting space. Finding Word documents and PDF files on your network is moderately interesting, but it's not as interesting as finding people in the company who are the experts on the topics you want to learn about. You can also find all the data about your customer on your SAP system that might have sales data.

Microsoft has also been making a push into unified communications through its partnership with Nortel. Can you elaborate on what Microsoft hopes to achieve in that space?
We're excited to have a set of technologies that will bring us into the unified communications space. It's not a space that we were in three to four years ago, but we see the emergence of software as a critical technology to simplify the communications infrastructure.

We're moving to a stage where software will play an important role in unifying the desk phone, mobile phone, voice mail, instant messaging and e-mail systems. The strengths we have in Exchange and Outlook when it comes to e-mail, calendaring and tasks, makes unified communications a natural business for us to get in.

Nortel is essentially betting on our technology and building on top of our unified communications stack. They have many technologies that will do the integration work, so our unified communications technology will work really well with Nortel phones and switches for example. The Nortel deal is an indication that a big player is actually confident that we can bring a great set of solutions to the unified communications space. It's a big bet for us in the company for sure. Although it's still a relatively small business today, we expect it to be a fairly big one in future.

There have been several changes in the senior management, starting with Bill Gates and Martin Taylor. Is there a management shakeup going on?
The team is very deep. We've got a great set of people in the company who can really do a great job of running the organization. Personally, I was proud to see how Bill handled his transition. For someone who has been the life of the company to announce what he is going to do two years from now is a wonderful testament to how he has run the company.

Five or six years ago, it would be hard to imagine him not being at the helm of the company. And now, having him say two years from now, he will be part-time at Microsoft and full-time at the Bill & Melinda Gates Foundation, while announcing Ray Ozzie as the chief software architect and bringing Steve Ballmer as the CEO is incredibly well-planned.

Nothing's changed from my perspective. Bill is as engaged as he always is. I get a lot of e-mail messages from him about his ideas, telling me what he thinks we should do with the business. I do think the company's getting far better at bringing in senior talent. We've had a long history of struggling to bring in senior talent and have them understand the culture while integrating them into the organization.

But if you look at Kevin Turner, he has done a wonderful job in just a single year. We brought him in for an amazingly important job. He's the chief operating officer of the company who's got all the sales and marketing of all every single subsidiary around the world. No one's ever run that team without being a long-time Microsoft veteran.

Ray Ozzie is the other amazing example. When we did the Groove acquisition, we were super excited about Groove's technology but we weren't quite sure how well Ray will work with Microsoft. He was going to spend 50 percent of his time in Boston and 50 percent of his time in Seattle, and some people thought he'll stay in Boston longer than that because he has been at Groove for a long time. The reality is, he spends 90 percent of his time in Seattle and 10 percent in Boston. He doesn't spend any time on Groove--maybe a little bit every now and then--but he's just incredibly integrated very quickly.

I think that's a healthy maturation of the company because the culture is very strong. It's not easy to come in at a senior level, and I think we are getting better at it.

There have been suggestions that Bill Gates was much to be blamed for missing the Internet wave. Do you have any thoughts on that?
Well, if he missed it, I think he did a great job catching up. He always talks about being incredibly rare for a business to catch one wave, ride on it and become successful. They almost never survive the next wave. What company can you point to that has been at the top and then survive the next major fundamental shift in the business model?

It's common knowledge that we were late to understand how important the Internet wave was going to be. But it was incredible the way Bill rallied the company with the tidal wave memo, that just got everybody focused on making the Internet the center of everything we did.

But Windows is one of the most successful businesses the world has ever seen. The second one is Office. To have them both at the same company is amazing.

When we moved to servers, people told us we will never win in the server space because we were only a desktop company. But today, Windows Server is the top server and Exchange is the top e-mail server. The company has done a great job transitioning from just being about desktops, to being about desktops and servers. Now, we're trying to also be about the Internet and services.

The company is usually quite paranoid and humble. We could get wiped out any day--that's the reality of this business. We've been pretty good about not letting that happen, but there's always tomorrow. We're just going to keep going at it.