Gates: Internet Is Core Strategic Weapon

Gates (l.), who donated $20 million to ward the construction of a new LCS building at MIT, meets with fellow computer pioneer Dan Bricklin. Bricklin's 1997 spreadsheet development was among the innovation sealed in the LCS time capsule, along with Gates' 1975 original Altair basic language.

Corporations that do not embrace the Internet as a core element in their competitive strategy could be risking their very existence, says Microsoft Corp. Chairman and Chief Executive Bill Gates.

While most companies have established an Internet presence, many are discovering that the software "look and feel" of their Web site is now being used by many to pass judgment on the company as a whole. "The Internet is actually taking capitalism and defining it in a more efficient form," said Gates this week at the Massachusetts Institute of Technology's 35th birthday celebration for its Laboratory for Computer Science (LCS). Events are scheduled to wrap up today.

Companies are also using the Internet to drill down into competitors' Web sites to gather strategic information, said Gates, which is not necessarily a bad thing. It is "a period of great change and great excitement," said the Microsoft chief executive.

As more people log onto the Internet, "pricing and the role of the middleman are all changing, for the good of the consumer since it results in better prices," added Gates. One obvious success model is Amazon.com, which has revolutionized the way people buy and sell books. However, Gates said, there are numerous others that are discovering that "software on their Web site will define that company and how they compete."

Microsoft's Web-savvy CEO should know. The company's Web site has evolved to become a major marketing and sales tool. Microsoft has also used its Web presence to put its own positive spin on the ongoing Department of Justice (DOJ) hearings. Gates also writes an online column and admits he spends more time reading material online than flipping through paper-based magazines and newspapers.

Nevertheless, Gates pointed out that only about 29 percent of the people in North America currently make use of the Web, including those who dash off an occasional E-mail message. Only about 5 percent are living the true "Web lifestyle" by integrating the Internet and its use into their everyday lives, he noted. And these numbers drop off considerably when you go outside North America, including Europe, "where you would expect better numbers," he said.

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