Microsoft: Coming from behind

In the business-software market, Microsoft is in an unaccustomed spot: It's a bit player in the shadow of much larger rivals.

If Gates & Co. have their way, Microsoft will become a force alongside Oracle and SAP in the multibillion-pound business of selling human resources, financial planning and other software. The company has set lofty goals: Microsoft has said in the past that it hopes to rake in $10bn (£5.2bn) per year in business software sales by 2010.

However, sales at the company's Business Solutions unit aren't growing as quickly as hoped. A new software platform intended to unify the company's disparate product lines won't be completed for at least three years. And there are questions about the overall demand for business software amid industry consolidation.

History shows that when it comes to new markets, Microsoft keeps trying until it gets it right — or it gets out. In this case, Gates is willing to bide his time. He spoke to ZDNet UK sister site CNET News.com about his strategy, ongoing efforts in security and how to get PCs into more hands across the globe. Q: Various Microsoft executives talked this week about how, long term, there are going to be four large players in the business-software arena: Oracle, SAP, IBM and you. How do you see that future?
A: I think it's an oversimplification to say there will just be the four players. You'll see some consolidation and you will see people who have built things from the ground up taking their special stuff and building it on top of, say, our platform. The more you have good tools and more extensibility hooks, then you will get people sharing what we already do for them so they don't have to try and duplicate that piece.

Year by year there will be consolidation. There will be people who decide to drop accounting or just do customisation. This will always be a very complex market.

Are there customers that had built on top of Microsoft at the foundation level saying that if Microsoft is a competitor on the application level than they want to look at, say, Linux or Java?
There certainly has been a need to reach out to our ISVs... We're not going to do product bundles in a way that would be disadvantageous to them. We've needed to go out and talk that through. In most cases they already competed with the company we bought. It wasn't some new competitor but it was a competitor that would have the Microsoft name.

In our history as a company, on the Windows platform, we've always been both a platform provider and, in many of the key categories, a competitor of people building on Windows. That worked well for Windows. I don't think we've lost many, but boy, it means it's very important for Microsoft to be out there talking to people, explaining where we are going, what pieces go on the platform side, what pieces don't go on the platform side. I had a concern about that. So far it's turned out to be less of an issue than I expected.

Lots of people want Microsoft to do something on the antivirus front, and you guys have said you are going to do that. At the same time, the role of securing Windows as a platform is not something Microsoft wants to tackle on its own. The Symantecs of the world want partners, but that seems like a really tough relationship to balance as you enter those markets.
I don't think so. The history of Windows is that we do something in the platform and then there are some things missing that sell in high-volume as add-ons. If a broad set of people want the thing, then in some future version (we add it). We're very clear; we show people, we tell them and then we build it in the system.

People used to buy TCP/IP stacks. People used to buy basic backup software. People used to buy fonts. At least nominally, people paid for browsers... When you come into the world of software you know that if you are up at a higher level and you have something superimportant, it's going to move down, down, down and eventually be part of every copy of the operating system if it is something superimportant.

Security is a very broad topic. There are so many different pieces of security, which creates immense opportunity for people like Symantec — if they keep innovating. There will be some things that they do that will move into the platform. We're very open with those guys. We talk to them every day, massively... We will get the benefit of the platform getting better and those partners continuing to add value.