Microsoft News Tracker

Robert A. Guth has the story at the Wall Street Journal:

Microsoft Corp. Chairman Bill Gates has endorsed a radical reshaping of how his company develops software and services, citing an internal memo that says much about the challenges Microsoft faces, and underscores the rise of an emerging technical leader at the company.

That memo, in turn, is from Ray Ozzie:

The core of Mr. Gates’s email, which was examined by The Wall Street Journal, is a memo from Ray Ozzie, Microsoft’s chief technology officer, who describes some of Microsoft’s missed opportunities and also tips a hat to companies such as Google Inc., Salesforce.com Inc., Skype Technologies SA and other start-ups that have pioneered Internet services.

The memo by Mr. Ozzie is a window to the announcement in September that Microsoft would reorganize into three major business divisions, each tasked with adding new online services to the company’s existing product lines.

It also confirms the role that Mr. Ozzie is playing in pushing the newly formed groups to create online services that can be paid for by subscription or through advertising. Last week, Messrs. Gates and Ozzie announced a step toward that goal — new online services coupled with Microsoft’s Windows operating system and Office suite of software.

In his memo, Mr. Ozzie directs each of Microsoft’s three business units to start mapping out a strategy for developing their own services — two of which were announced last week. He also describes a plan to appoint by Dec. 15 top executives at each of the three business groups.

By January, those executives will work to map the changes needed to better tap into the Internet’s advertising boom and online services in general, Mr. Ozzie said.

More by following the link and Dave Winer has posted the full text of the two memos, received from an anonymous source.

Update: Some pundit reaction:

Michael Gartenberg - The Gates and Ozzie Memos - deja vu all over again:

Interesting reading but no real surprises here. In fact, to some extent we’ve seen it before. Gates more than anyone understands the importance of being proactive and not reactive. He understands that while these new service offerings aren’t a direct threat today, they well could be over time.

Paul Thurrott:

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?

Joe Wilcox:

Intentional leak of the memos wouldn’t be far fetched. Microsoft is embarking on a major, new strategy with almost no products to show. Meanwhile, hype increases around Web 2.0 and vendors like Google, Salesforce.com or Yahoo! offer sophisticated Web-based products or services. The memos signal Microsoft’s intention to shift course and that the other boats had better get out of the way. Similarly, the strategy leak is meant to tell passengers of competitor boats that they might want to wait for Microsoft’s ship to sail. If intentional, the leak is a classic vaporware maneuver.

Mary Jo Foley provides a Cliffs Notes version of the Ozzie memo and observes:

Tech evangelist Robert Scoble’s interpretation of CTO Ray Ozzie’s and Chairman Bill Gates’ services memos: “Yes, the guys at top are now yelling ‘turn, turn, turn.’” We say: Watch out for those Web 2.0 rocks, guys.