Over its 40 years of doing business, some of the best views of Microsoft came from its workers’ ground-level perspective of the company.
For August Hill, the job offer from Microsoft was a dream come true.
The soft-spoken developer started his career deep in the guts of software programming for a telephone company in St. Louis, working to make it easier for developers to build programs out of standardized chunks of data.
“This was a chance to see software development at a huge level,” Hill said. “Microsoft, was, golly jeepers. Who was bigger? Who was doing as much?”
Hill arrived in Redmond in 1998, the year that Microsoft, by Wall Street’s gauge, hurdled above General Electric to become the world’s largest company. He was one of the 4,800 employees Microsoft added that year, many to do things the company hadn’t envisioned when it was born as a builder of programming languages in Albuquerque, N.M.
Microsoft didn’t invent word-processing software, server tools, video-game consoles or even the original operating system that it used to power the first IBM PCs. But the company grew into a giant by evolving to tackle new markets with concerted catchup efforts piloted by generations of tech’s best and brightest (and a few well-timed acquisitions).
As Microsoft quietly celebrated its 40th birthday last month, Satya Nadella, the company’s third chief executive, is piloting an effort to keep the company relevant in its fifth decade, even as consumers grow less willing to pay for programs, such as Windows, that make computers tick. Microsoft, in a fierce competition for eyeballs with rivals in Silicon Valley, is increasingly offering some of its core products free and banking that its customers will pay for other services.
In the words of one analyst, the current shift to mobile and Web-based devices is the biggest challenge Microsoft has ever faced. The Seattle Times asked two-dozen current and former employees and observers about their lessons from Microsoft’s past efforts to tap new markets, offering a ground level view of the company’s ups and downs over four decades.
“It was an adventure,” said Rob Short, who was among a group of defectors from a button-down East Coast computer builder who joined Microsoft in 1988, when the company was growing at a startuplike pace at its new Redmond campus.
“The budgeting process was you talk to Steve [Ballmer], and he’d say, ‘You can hire up to 200 people. If you want more than that, come talk to me,’ ” Short said. “We’d spend months poring over little details in budgets at our old place.”
For all of Microsoft’s ubiquity in modern offices, the company then was a relative unknown to big business.
Susan Hauser, now a vice president in charge of Microsoft’s corporate sales and partnerships group, joined the company’s New York City outpost in 1989.
The team’s task was to try to persuade companies to adopt the company’s operating systems and office-productivity products. During her first years at Microsoft, the island of Manhattan — the heart of American big business — was divided in two. Hauser was responsible for courting potential customers south of 42nd Street. A colleague handled the northern half.
Hauser found that Wall Street’s exacting standards meant Microsoft would have to increase its sales and customer-support organization.
“We’re going to need better response time,” Hauser said of the feedback she received then. “We’re going to need people on site.”
Microsoft evolved to meet the challenge. Hauser and her team, selling the sturdier operating system built by Short’s group, relentlessly courted chief information officers, making clients out of the likes of media conglomerate Time Warner and big Wall Street broker Merrill Lynch.
A company that had grown in its early days by anticipating the needs of PC manufacturers, microchip makers and home programmers had added another important constituency: people who buy technology to power the workplace.
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Microsoft along the way built a network of thousands of software resellers and partners. Hardware builders were brought along with early glimpses at the company’s software and other partnerships.
Ballmer, the company’s sales chief before he was CEO, used to say “you have to convince the other guy he’s going to get rich working with you,” Short said. “You hear all these stories about Microsoft as a monster coming around and killing everybody in sight, but the actual partnership strategy was very, very clever.”
In Redmond, Yusuf Mehdi was helping to guide Microsoft’s efforts to keep the attention of technology consumers.
Mehdi grew up in Newport Shores, a few miles away from Microsoft’s first offices in the state. He was on the team that shepherded the launch of Windows 95, the operating system that helped the company close in on its long-held goal of putting a computer on every desktop. Mehdi later oversaw the marketing of Internet Explorer as Microsoft threw its weight behind a bid to catch up with the companies that were defining the growing Web.
“I’m a little bit the Forrest Gump of Microsoft,” Mehdi jokes, comparing his winding path through the company to the way Tom Hanks’ character in that film seemed to stumble into important moments in American history.
Microsoft, with the aid of Windows and a relentless pursuit of the Internet, in the 1990s grew to become the world’s primary portal to computing.
“Microsoft has this ability to focus in,” said Ryan Hamlin, who helped build the MSN Web platform in the 1990s. “When we did that, Microsoft was very good at it.”
Mehdi spurned job offers from Silicon Valley.
“People here talk in these aspirational tones, but they mean it,” Mehdi said. “‘We’re on a mission. We’re going to do X.’”
Along the way to X, Microsoft missed a few.
After years spent working on database crunching software, August Hill, the St. Louis import, was assigned to the developers chasing Apple’s first smash hit of the 21st century: the iPod.
Microsoft’s Zune music player eventually boasted more powerful hardware than Apple’s product, but it wasn’t quick enough. Apple had moved again, striking gold with the iPhone.
“We were just a little late,” Hill said. “If we’d been there a year prior, two years prior, it could have been a different thing.”
How did Microsoft, which pours billions of dollars each year into wide-ranging technology research, fail to capitalize on some of the seismic consumer-technology shifts of the 2000s?
“All successful companies get somewhat complacent,” said Michael Cusumano, a professor with MIT’s Sloan School of Business who has followed the company closely for decades.
Cusumano said the company was hampered by its focus on the PC. It also was distracted as its executives battled U.S. government antitrust charges in the late 1990s and early 2000s.
“When you grow so big, the material changes,” Hamlin said. “Innovation gets squeezed because you have so many people working to solve the same thing. It creates an internal frustration: Who is going to lead? Why are you leading? Why can’t my team lead?”
There were other cultural shifts.
“Cautiousness took over,” said Patti Brooke, who did stints at Microsoft in the 1990s and 2000s in a range of strategy and product-development roles. “A lot of the strategy for the company became protecting the franchise.”
While that approach may have contributed to Microsoft’s misses in consumer technology, it paid dividends for Microsoft’s relationship with big business. Backwaters that produced database software, business-collaboration tools and developer-focused server software grew into billion-dollar businesses.
“People wonder when Facebook comes, and the iPhone hits, and Google grows up, ‘Hey, are you still on the front foot of innovation?’ ” said Mehdi, now an executive at Xbox. “At the same time, we were hitting these other trends. We built a game-console business out of nothing. We built a server business out of nothing.”
The company set up shop in Washington in 1979, ending that year with about $2 million in sales and 30 employees. In its most recent fiscal year, Microsoft pulled in $86 billion. The company employs 118,000 people.
Microsoft is deep in the trenches of its latest reboot.
Smartphones and tablets powered by rivals’ software have dethroned Windows as the dominant gateway between humans and computers. Microsoft is trying to navigate a transition to software sold and accessed on the Web without losing its giant customer base.
“This is probably a bigger challenge than any they’ve encountered so far,” said Rick Sherlund, a Wall Street analyst who’s covered the company since it first sold stock to the public in 1986.
Nadella, the 47-year-old who took the helm of Microsoft in February 2014, redoubled the company’s efforts to expand its presence on mobile devices — even if those devices aren’t made by Microsoft. He is also continuing the “all in” bet his predecessor Ballmer made on building the infrastructure to power modern Web-accessed programs and data storage.
He’s tried to make Microsoft more nimble, and has overseen a move to make a company known for insularity more open to the technology and ideas of others.
“Every team across Microsoft must find ways to simplify and move faster, more efficiently,” Nadella said in a June memo last year outlining his strategy.
A month later, Nadella announced the biggest restructuring in Microsoft history, an effort to streamline the company’s new mobile phone hardware business and build a more efficient company. Microsoft would also lay off 18,000 people.
Hill, who had worked on the development of Xbox since Microsoft pulled the plug on Zune, was told he was among those being let go.
“My wife and I were looking at the book of our life, and we turned the page and said, ‘Hey, there’s a new chapter here,’ ” Hill said. “We didn’t expect that.”
Hill, who has since started a Bothell franchise of small-business information technology company CMIT, is among those optimistic about Microsoft’s future under Nadella.
“I like the ideals and I like the direction,” Hill said. “I’m happy to see where Microsoft ends up going.”
Where will the company be in another 40 years? For some, that hinges on the ability of Nadella and company to make the place an appealing stop for technology’s most talented minds.
“It isn’t the technology. It isn’t the products or services. They all come and go,” Mehdi said. “What won’t change is we’ll still get the best and brightest. If we keep that, this place is going to be around for a long, long time.”