Gates Speaks On Oracle-Siebel Deal, Channel Opportunities

CRN: Can you talk about how partners -- VARs and integrators as well as developers -- can make money off the technology you showed today?

GATES: The fundamental framework stays the same, which is that the magic of software is when it gets mapped into a solution where you have a trusted person who understands that solution and is evolving it for you and giving you support around that solution.

And that's why Microsoft has always had a partner-centric strategy. It's a key asset for us. In a lot of competitive situations over the last several decades we've learned and evolved our strength of the things we do with partners.

Today's focus is really on developers. How does that affect these partners? It means that when they go in to build solutions, they're starting at a somewhat higher level than they did in the past. And their ability to be more ambitious is furthered because of things like how do you do rich presentation, how do you do rich communications flows, how do you do workflow. Instead of building a lot of that plumbing themselves, they're starting on that higher foundation, and so every year what they can do is better.

Workflow is a good example of that. In Jim [Allchin's] speech he's going to show a language innovation where you write a lot less code when you bind a program to the data. So nothing here alters the role we have relative to our partners. It just means that they are starting with a richer platform. Obviously they have customers, their customers don't have Vista today, but a year from now that's going to start to roll out and so we're giving them early visibility. This is our hardest-core event that we do. I mean, we have the highest percentage of machine code developers here, device driver developers here, and then we add to that TechEd that we do a lot of those.

And so I'm sure our partners, some of our partners are here, but the message out of this to them should be evolution of the platform, same business framework.

CRN: On the MBS side there's this perennial worry, you know, Doug [Microsoft Senior Vice President Doug Burgum] always talks about white space on top of your applications so that you're pitching MBS as A platform. But a lot of ISV-type partners are very worried that you guys are coming up and eating their lunch. Can you say anything to these people?

GATES: Well, the size of the software business is growing and so the pie we participate in, as you get digitization of the economy and digital work style, digital lifestyle, the total size of the opportunity is bigger. That might seem paradoxical because as packaged software incorporates in printer drivers and now workflow-type things, some of those lower level pieces are just there, you can assume those. But the fact is the market expands every time the platform gets richer.

And so we let people connect in very low [level] into our platform. The place you get the biggest concern are people who do security add-on software, because we are so active building more and more security capabilities into the software. And so they have to look at our roadmap and see where they can add value on top of that.

As you get higher up the stack, the concerns about overlapping with us go down. I'm sure they're always there, because if you do accounting software, obviously we're doing more with Small Business Accounting and hopefully driving the share of the Business Solutions type products we have. If you're a vertical though, we do almost nothing there. In fact, other than our Retail Management solution, we rely on partners for verticality and we always will, so you're not seeing a big change in that.

Last week was a big week in terms of the commitment to the small business with the introduction we had there in the medium-size business. But you didn't see anything where we're doing vertical type stuff there.

So in horizontal spaces people do watch what we're doing and make sure they're complementary. That's why we're so open about our strategy.

CRN: So the CTP of Vista that you showed today, how is it different from beta 1?

GATES: It's not dramatically different. I'm sure somebody who knows Vista better can go through it. See, the whole point of CTP is it's not a one time thing. CTP, the acronym means that I think every six weeks or so they'll be giving out new Vista builds to people. So even between now and beta 2, which is the first really broad beta, there will be a number of additional releases. So CTP is a process. The first one is not dramatically more than beta 1.

CRN: OK. So for developers is there an SDK or something they can be working with?

GATES: Oh, absolutely. Yeah, I mean, the CTP, you can write code that runs against it, and...

CRN: But is there a Vista platform SDK?

GATES: Actually, we package the tools vs. Vista itself. We have to get somebody to clarify that. I think the SDK doesn't get revved at the same rate that the Vista thing itself does. I think we ship those -- that SDK, which we already have, I think asynchronously we update that. I'm not sure we update that again until beta 2.

CRN: You guys have been more partner-centric than IBM and Oracle. However, both of those companies are trying to paint themselves as the ISVs' best friend vs. you guys. I would love to get your comment on the Siebel-Oracle deal and how that might change the competitive situation.

GATES: Well, [Oracle CEO] Larry [Ellison] predicted that the software industry would consolidate. Through billions of dollars of his spending, he's managed to make his prediction come true.

Historically, the main company that we really competed for partners with was Novell. They had that as a huge asset and because of some missteps in their software strategy we've been a huge beneficiary. As they didn't generalize their platform, we picked up a lot of those partners.

I think if you go out there numerically in the world, there still may be more Novell partners than there are Oracle partners or IBM or SAP partners. Anything Microsoft does that's successful gets -- whether just purely in rhetoric or in actual execution -- gets our competitors thinking, hey, that's a good thing.

I don't think they'll find it particularly easy to do, because you actually have to be willing to give up a substantial part of that revenue stream and generate more dollars for your partners than you generate yourself. And if you've got a services organization that's quota driven and a substantial part of your P&L -- which in the case of IBM and Oracle those are huge parts of their P&L, even more so for IBM than Oracle, but very large for Oracle -- you just get a basic conflict there.

Where we've taken our consulting services and said: 'No, we'll always keep that constrained to serve a strategic role and not a substantial P&L [profit and loss] role.'