Gates Explains His Game Plan

By David Coursey
MIS Week

March 6, 1989

REDMOND, wash.--Microsoft Chairman Bill Gates says his company faces "a pretty incredible set of challenges" over the next 24 to 36 months.

In that time, Gates said his company must popularize OS/2, pioneer distributed computing in the PC environment, establish a family of graphical user interface applications, and pioneer multimedia applications on personal computers.

"We're trying to make it possible for you to walk into your office and with a few clicks of the mouse see what's going on. Compare your forecasts to your actual sales, see what work has gotten done, read your mail, see how resources are being used in your company, and what the status of your network is," Gates said.

These are lofty goals, but only a series of steps in a corporate plan leading to the Microsofting of the entire world, which Gates expressed as having "a personal computer on every desk and in every home running Microsoft software."

There is a long way to go before Microsoft becomes as ubiquitous as Coca-Cola, but understanding the strategy -- and that Microsoft is really serious about it -- makes Gates' stated goal of making his company "the IBM of software" seem much more reasonable.

For users, the goal expresses itself as "information at your fingertips" through a family of products that make it easy "to go into corporate databases, extract information about the state of business, manipulate it in some fairly straightforward ways, do comparisons, and come up with visual results that individuals can understand."

Gates' Predictions

Gates said Microsoft is committed to developing graphics-based applications running on its three strategic environments: Microsoft Windows, OS/2 and the Apple Macintosh.

He said Microsoft's successful applications to date have largely been on the Apple Macintosh and outside the United States, but that the domestic market provides a "tremendous upside" as users adopt a graphical interface on their PCs.

Further, he said multimedia -- adding motion video, voice, audio and other features -- open up a variety of new applications categories and radically change the interaction between user and machine.

"We're investing many, many millions of dollars in this area and in several years I think it will be money very well spent," Gates said.

OS/2 and You

Gates sid the OS/2 operating system provides a more powerful graphics environment than either Microsoft Windows or the Apple Macintosh.

"The only thing that even comes close to the graphical power of OS/2 is Display Post-Script. There you have about 85 percent overlap and 15 percent of capabilities that one does that the other doesn't."

Nevertheless, Gates admitted that there are some who feel that emphasis on graphics has slowed the adoption of OS/2 while potential customers wait for graphics-based applications to be released.

Gates said that by mid-year a full suite of character-based productivity applications will be available for OS/2, allowing users who feel constrained in their present MS-DOS environment to move to OS/2 without abandoning many popular programs.

"The last to become available will certainly be Lotus 1-2-3 Version 3. We are anxious to have them release that application. I don't think anything will be a more vivid indication that we are running out of gas in MS-DOS," Gates said.

The Microsoft chairman responded to users who want his company to "make DOS last forever" by suggesting they "must not think dBase V or WordPerfect 6 or Excel version 3, or any of the applications that can never be squeezed into DOS, will be very compelling."

"They must be saying that today's applications are exactly what we need and I certainly think that's far from the truth."

Gates said people tend to underestimate the role of standards in the personal computer industry and don't notice how quickly a standard is adopted and spread.

He predicted that while OS/2 will be largely chosen by early adopters over the next 12 months, it would soon thereafter become "the easiest decision for people to make."

One factor holding that up today is the price of memory, which Gates predicted would decrease by more than half over the next 18 months. That would make it easier for users to purchase the 2 to 4 Mbytes of memory a loaded OS/2 system requires.

Gates said the Apple Macintosh poses the greatest challenge to acceptance of OS/2, but has penetrated only desktop publishing and certain niche markets.

There are only two standards in the office market. One has 90 percent share and the other has about 10 percent, and that's in the U.S. where the Macintosh has by far the best penetration of any country in the world.

He said France is the only market where Apple has approached its domestic acceptance but that it is essentially absent from Germany and Japan.

Despite a pending lawsuit over Microsoft's Windows user interface, the relationship between Microsoft and Apple "has never been stronger," Gates said.

"We still make more money when a Macintosh is sold than when an Intel architecture machine is sold. Because we have been able achieve approximately one Microsoft application sold per Macintosh, that more than makes up for the revenue that we presently get from a DOS-type machine."

Gates said Apple will see its market continue to grow over the next 18 months, but questioned what will then differentiate the Mac from OS/2 Presentation Manager.

"I think there will be a considerable challenge for Apple to stay out in front. We are anxious to continue to see them remain strong, but their proprietary approach may run into some problems."

The Unix market continues to grow and has met success as a multi-user business system and in engineering and academic research markets, which is pretty much where it will stay, Gates said.

"We see Unix as a growth market but we don't ever see it as appropriate for the packaged-product, high volume office desktop market that MS-DOS addresses today and OS/2 will address as the applications become available and the costs of memory comes down."

Increasing Pressure

Gates predicted manufacturers of non-Intel machines, such as those which typically run Unix, will come under increasing price/performance pressure from next-generation PCs. In response, Unix hardware vendors may increase their reliance on special-purpose applications platforms to avoid the price pressure placed by commodity priced PCs.

Microsoft's State of the Union Address

By David Coursey
MIS Week

March 6, 1989

REDMOND, Wash.--A top Microsoft executive says his company may have "shot ourselves in the foot" by placing its emphasis on OS/2's Presentation Manager, rather than on the operating system itself.

Steve Ballmer said Microsoft has placed so much importance on the Presentation Manager graphical user interface that potential customers are not buying the operating system until PM applications are available.

"We many have shot ourselves in the foot for 1989" because of the promotion given the graphic interface, said Ballmer, Microsoft Corp.'s vice president of systems software.

"We were, frankly, disappointed by how long it took to make applications available," said Ballmer, who predicted the OS/2 and Presentation Manager floodgates will begin to open this spring.

Ballmer made the statement at the recent Systems Software Seminar, which was held for reporters and analysts at the Microsoft's headquarters, here.

Among OS/2 applications expected during the first half of 1989 are WordPerfect 5.0, Microsoft Word 5.0. Lotus 1-2-3 Version 3, and Ashton-Tate Corp.'s dBase IV, Ballmer said. All will be character-based applications closely resembling those running under MS-DOS.

Current OS/2 character-based applications include Borland International Inc.'s Paradox, Digital Communications Associates's E78 terminal emulation software, MicroPro International Corp.'s WordStar 2000, Microrim's R:Base, Oracle Corp.'s DBMS and Symantec's Q&A.

Presentation Manager applications will arrive more slowly. Ballmer said he expects CAD (computer-aided design), communications, database, desktop publishing, electronic mail, spreadsheet, and word processing applications to be released during the fist half of this year.

PM applications to be released during the first and second quarters of this year include Micrografx Designer, Hilgraeve Inc.'s HyperAccess, DataEase DBMS, Microrim's R:Base, Aldus Corp.'s PageMaker, and Microsoft's Excel, Ballmer said. Third-quarter products are expected to include a DBMS program from Lotus and a Crosstalk communications program from DCA.

"Making OS/2 popular is priority one, two, three, four, five and six at Microsoft," said Ballmer, who predicted that in 1990, OS/2 will outsell the Apple Macintosh, with each selling between 1 million and 1.5 million units.

Ballmer further predicted that in 1992, OS/2 will outsell MS-DOS for office applications.

The Microsoft executive said users have come to accept the need for a standardized graphical interface across both applications and platforms. This, he said, is evidenced by the success of OS/2 Presentation Manager, Microsoft Windows and Apple's Macintosh, as well as by moves toward a common user interface by International Business Machines Corp. and the Open Software Foundation (OSF).

(Microsoft plans a number of enhancements to OS/2, which are discussed in separate stories appearing on pages 20 and 25. The remainder of this report contains information presented by the company during the seminar and related to a variety of other issues.)

Networking OS/2

Rob Glaser, director of marketing for Microsoft's network business unit, predicted that by 1992, PCs will be the standard tool for manipulating corporate data. In this scenario, a business's mission-critical data would reside on local area network servers which might also serve as a gateway to main frame applications and data.

Microsoft's view is of a three-tiered corporate information architecture, with PCs on desktops, server PCs providing local area networking and communications gateways, and mainframes hosting large applications or providing access to data not kept on the servers.

The most important aspect of this architecture may be the absence of minicomputers, to be replaced by 80386 and 80486 (and beyond) LAN servers and gateways at the low end and traditional mainframes from above.

In this environment, OS/2, MS-DOS, Macintoshes and Unix machines would be used as workstations and personal applications hosts, connected to one another through Microsoft's OS/2 and Unix LAN Manager products, which would run on the PC-based servers.

The architecture would also be the foundation for client-server applications and SQL (Structured Query Language) databases, which Microsoft believes will play important roles in business computing once they become commonly available during the early 1990s.

Microsoft is positioning LAN Manager against Novell Inc.'s NetWare and other LAN software by stressing LAN Manager's "unique benefits," such as its use of OS/2 or Unix as a standard server operating system, instead of relying upon its own proprietary operating system.

While Novell and others have promised to make their networks operate in an OS/2, client-server and SQL environment, Microsoft said its relationships with IBM, Digital Equipment Corp. and other hardware vendors will give its LAN offerings a significant lift in the marketplace.

OS/2 LAN Manager is available from 3Com Corp., IBM (as LAN Server), Ungermann-Bass Inc., Torus and Interlam. Forthcoming implementations are expected from NCR Corp., Olivetti, Apricot, NEC, Hewlett-Packard Co. and Excelan Inc., Glaser said. The Unix version is expected to be available during the third quarter of this year.

Glaser, stressing OS/2 LAN Manager's interoperability with IBM's LAN Server, said the two will be able to run side by side on a single network without causing problems.

Client-server and SQL applications will rely on the network to transport information requests to the host and the responses back to the workstations. SQL Server, scheduled to begin shipping in April, will allow various applications -- such as Microsoft's Excel spreadsheet and Ashton-Tate's dBase -- to serve as "front-ends" for accessing data in a single "back-end" database.

Client-server applications would work in a similar fashion, with the client portions of an application running on workstations and communicating with the server portion located on a host system.

In Microsoft's scenario, the host would typically be based on an 80386 or later processor while the workstations could be a variety of devices, typically 80286- or 80386-based.

An important aspect of the SQL Server would be a rules facility, to allow the database administrator to impose restrictions on users, regardless of the front end in use on the workstations, Glaser said.

Applications would asess mainframe data through an SNA (Systems Network Architecture) Gateway, located on a communications server machine, which would handle protocol conversions and provide a library of interfaces to build gateways to databases.

For the future, Glaser said, Microsoft plans to exploit further the 80386 processor and add support for 80386 co-processors while improving LAN Manager to the point where a single server will support "hundreds of workstations." Also scheduled for improvement are fault tolerance, security, electronic mail and file directory services.

Unix, the Stepchild

If MS-DOS is the older child, and OS/2 is Microsoft's much-loved new baby, then Unix is the stepchild, assigned to live in the shadows of its two siblings.

Or at least so it appeared to some attending the seminar, who commented that although Microsoft is continuing to support Unix, it often appears to be doing so only because it must to remain competitive.

"There are strong forces behind Unix, and we believe that model will be with use forever," said Paul Maritz, general manager of Microsoft's distributed computing business unit.

Maritz said Microsoft is committed to Unix, as borne out by its recent purchase of a 20 percent share of the Santa Cruz Operation Inc. (SCO). At the same time, however, his presentation focused on how Unix systems could play in an OS/2-dominated world.

Microsoft supports efforts to standardized the Unix user interface and is working toward that goal with both the OSF and Unix International. Maritz said Microsoft has licensed its Unix "Style Guide" to OSF and reiterated its announcement of Presentation Manager for Unix (PM/X):

Nevertheless, Microsoft is not yet ready to throw its lot with either of the competing players in the Unix standards battle. "We don't see a compelling reason right now to become members of either OSF or Unix International," Maritz said.

In outlining his company's plans, Maritz said Microsoft will continue to rely upon SCO to port and support key applications. He would not, however, commit his firm beyond current plans to port character-based applications, such as Word, Works and Multiplan, to Unix. Graphical applications, such as Excel, may or may nor find a Unix home, Maritz said.

Microsoft believes Unix and OS/2 can be made to coexist, even though Unix will likely remain a several-headed beast spanning multiple operating system implementations and user interfaces.

Maritz said he believed OSF's Motif interface will predominate, although X-Windows, OpenLook, X/News and others will be used. Unix's primary role will remain as an operating system for high-end hardware, technical applications and multi-terminal systems and will broaden into general productivity applications as they become available.

OS/2, according to Maritz, will be positioned as the successor to MS-DOS and will enjoy a single graphical user interface and the most sophisticated applications.

In networks, Microsoft will push LAN Manager in PC environments and Unix only where non-PC hardware is chosen, Maritz said.

Even as OS/2 ascends the throne, Microsoft expects MS-DOS to remain a significant product, especially in the home market and in countries slow to adopt OS/2.

At the same time, the company is committed to making MS-DOS as attractive an entry vehicle to OS/2 as possible, said Russ Werner, general manager of Microsoft's MS-DOS and Windows business unit.

Werner said Microsoft and IBM are committed to continuing a coordinated enhancement of MS-DOS and usability and performance improvemets. Future releases will improve multiple applications support, increase shell functionality, including better Presentation Manager equivalence, and better support machines with lower memory configurations.

Windows sales are strong, Werner said, with monthly unit volumes equal to, or surpassing, the Apple Macintosh. He predicted that best-selling Macintosh applications will continue to be ported to Windows, with several becoming available by April.

Mike Maples, the IBM executive tapped last year to head Microsoft's applications division, said his company remains committed to having a core suit of applications available in four "flavors": character-based OS/2 and MS-DOS, OS/2 Presentation Manager and the Apple Macintosh.

At present, only word processing and spreadsheets are available on all four platforms. Development money is being spent on presentation graphics, database, project management, electronic mail and integrated productivity applications.