If Microsoft succeeds in its conquest of Yahoo, what then? Microsoft would face the task of integrating the culture of Yahoo into its own...
SAN FRANCISCO — If Microsoft succeeds in its conquest of Yahoo, what then?
Microsoft would face the task of integrating the culture of Yahoo into its own. Merging corporate cultures is generally a major undertaking in any acquisition.
What would set this one apart, though, is where the culture clash is likely to occur — in the companies’ basic philosophies on technology.
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Silicon Valley-based Yahoo is a generation younger than Microsoft but no longer a freewheeling startup.
With almost 14,000 employees, Yahoo still has rock concerts and Ultimate Frisbee tournaments on its campus. But both Yahoo and Microsoft, with more than 84,000 employees spread around the world, are bureaucratic and rife with fiefdoms.
A smooth integration will not be a matter of simply swapping one set of software or hardware for another — though that is a daunting part of the task. It may hinge on changing deep-seated mind-sets.
When it comes to technology, Microsoft and Yahoo “are completely at odds with one another,” said Rob Solomon, a Yahoo executive in charge of shopping, auctions, travel and real estate before leaving the company in 2006.
Microsoft must figure out how to integrate the two complex and almost entirely incompatible software systems the companies use to run their vast Internet data centers.
The companies have raced to build those data centers in what has been a futile effort to catch Google.
Microsoft’s data centers run on proprietary software that is incompatible with the open-source programs and applications adopted by Yahoo. (Neither company discloses how many data centers it has or how big they are.)
Such integration challenges have in the past hampered other big technology mergers. Sprint and Nextel, for example, have struggled to combine forces after their merger three years ago.
Several investors and technologists said that because of the risks involved, Microsoft might decide to keep the Yahoo services largely separate or sell off parts that overlapped.
“Yahoo is just too big to switch over,” said Brady Forrest, “technical evangelist” for O’Reilly Media, a publisher of books and other media that focus on technology.
Forrest was part of MongoMusic.com, a small music startup acquired by Microsoft in 2000.
At that time, Forrest said, programmers spent the better part of a year rewriting MongoMusic’s technology infrastructure to make it compatible with that of Microsoft.
“It was painful,” he said.
Yahoo’s size may force Microsoft to take an unprecedented step and allow Yahoo to continue to operate its own infrastructure.
For instance, the two companies have a large customer base for their free e-mail services that combined could be as large as 500 million accounts.
Disrupting that service or forcing customers to change Internet messaging or e-mail addresses would alienate customers and decimate that base.
Synergies save money
But failing to find synergies could reduce some of the $1 billion in cost savings Microsoft has said would result from the merger.
Skeptics of Microsoft’s ability to eventually digest Yahoo’s infrastructure point to the initial embarrassing failure that occurred when Microsoft tried to absorb the Hotmail electronic mail service it acquired in 1997.
At the time, the service ran on the open-source FreeBSD and Sun Solaris versions of the Unix operating system. Microsoft tried to move the service to its Windows NT operating system but was unsuccessful.
Later, the move was accomplished with a more advanced version of Windows Server software.
But Microsoft was chagrined when open-source advocates found FreeBSD was still being used for portions of the service that required performance and stability.
Microsoft acknowledged that Hotmail’s transition took 3 ½ years, but some analysts think it took even longer.
Open versus closed
While Microsoft has built its Web services largely using its proprietary tools like the .Net programming system, Yahoo has a well-known open-source culture.
It principally uses FreeBSD, which is well regarded for its stability and security.
Yahoo also uses the Java programming language as well as the PHP scripting language, widely accepted as a tool for rapidly building and maintaining the dynamic Web pages at the heart of its many Web services.
Indeed, the creator of the PHP language, Rasmus Lerdorf, is an infrastructure-architecture engineer at Yahoo.
Finally, Yahoo relies heavily on a parallel programming tool that will take a program written for one computer and extend it to run on hundreds.
This allows Yahoo to scale up the power of a search-engine algorithm, for example. (The program was invented at Google, but Yahoo uses an open-source version called Hadoop.)
Microsoft uses its own competing system, developed in its research labs, called Dryad.
Microsoft and Yahoo have drastically opposite philosophies on open-source software. While Microsoft has used some open-source code, it has generally not contributed technology to the open-source community.
In contrast, Yahoo has been an extensive contributor and has built its internal computing platform almost entirely from open source.
Another potential conflict is the companies’ approach to the industry organizations that set protocols all companies can use in order to speed the adoption of a technology.
Yahoo has generally not participated, instead establishing its own standards. Microsoft has been an active participant, although its critics claim it has tried to subvert the standards process to its competitive advantage.
Despite these differences, both companies share a heritage of software engineering, said a Yahoo technologist, who spoke on the condition of anonymity because the company had not authorized him to speak publicly.
“I was trying to think about how different the two firms are as engineering and marketing companies,” he said. “I really don’t think at the operating level the companies are that different when it gets right down to it.”
Inside Yahoo there are roughly three camps of employees, in terms of attitudes about the takeover, he said.
One group, which he estimated was 5 to 10 percent of the employees, would not work for Microsoft under any circumstances.
A second group, he said, was taking a wait-and-see attitude and generally thought, “I wouldn’t apply to work at Microsoft but I won’t resist.”
The final group, he said, believes that Microsoft could significantly aid Yahoo with access to well-financed research labs, a higher stock price and the willingness to invest over longer time periods.
Wait and see
His own attitude is one of wait and see.
“It depends on what they are willing to agree to in terms of not interfering,” he said.
Ellen Siminoff, a former Yahoo executive, said she believed Yahoo employees would be more likely to stay and embrace the takeover if it were blessed by Yahoo’s well-loved founders: Jerry Yang, the chief executive, and David Filo, one of the company’s key technologists.
“If I were Microsoft and I could find a way to get Jerry and Filo to be supportive, that would make a big difference,” said Siminoff, now chairwoman of search-engine marketing firm Efficient Frontier.
She added: “When a country is invaded, people don’t necessarily think they want to embrace the conqueror. There will be some element of resistance.”