Gates Touches On EU Ruling, Outsourcing, Longhorn At Gartner Event

Gates spent about an hour on stage with Michael Fleisher, chairman and CEO of analyst firm GartnerGroup, in a question-and-answer format during the conference, held this week in San Diego.

During a discussion on research and development, Fleisher asked how last week's European Union ruling against Microsoft might affect the company's R&D going forward.

Gates said Microsoft has a business model that allows the company to take a $50 operating system, add new features but still offer the product for $50. "That's our Moore's Law," he said.

Under some proposed models, changing the way Microsoft does business would slow the company down, said Gates. However, in the United States, such issues have been solved, and so Microsoft is moving ahead with R&D, he said.

Fleisher also touched on issues related to delays in its next-generation Longhorn operating system.

Gates said Microsoft still plans to offer an alpha release of Longhorn this year, after which it will be possible to offer a more precise release date for the final version. He said Longhorn, rather than being a date-driven release, depends on the development cycles of several modules within the operating system as well as customer feedback at each step of the process.

Gates also reiterated that Windows XP SP2, the interim release of Windows XP scheduled for this summer, is all about upgrading security, and not about new features or APIs.

Earlier in the day, Fleisher told the audience of CIOs and other corporate executives that rather than trying to combat the move towards outsourcing IT overseas, they must be prepared to embrace the growing strategy.

"Trying to stop this trend through protectionism or laying the blame is doomed to failure," he said. "It's up to you to control the growth of outsourcing."

Later, when Fleisher brought up the subject with Gates, he responded that Microsoft is less concerned with producing Longhorn, its next version of Windows, 20 percent cheaper. Instead, the company is focused on deploying it six months faster, done best by keeping the development team together, he said.

However, Gates said it is not necessary that all parts of the development be centralized. For instance, Microsoft recently set up a research team in China to work on graphical interfaces. Instead of the expected five years to see results from that investment, the China team was actually showing results in only six months, he said.

Gates said that if he was born in India or China, he would consider doing all the development there. However, such a process has the disadvantage of being far removed from the United States, which he called the biggest, most demanding market.

When asked what major IT changes he expects the world will see in the next 10 years, Gates said to watch for changes in speech recognition and the digitizing of ink.

While speech recognition has not advanced as expected in the past 10 years, Gates said that in small domains where limited vocabulary is needed, the results have been good.

However, he said there are certain things, such as filtering out background noise and understanding speech in terms of context, where humans still far outperform machines. For instance, he said, tell a computer "recognize speech," and it might interpret the phrase as "wreck a nice beach."