Microsoft: Coming from behind

You have particular interest in emerging markets. There's a whole rest of the world that today doesn't buy a lot of software and doesn't have a lot of computers. Microsoft has been trying a lot of different things, such as Windows XP Starter Edition and some trials before that. What are you learning?
Computing is expensive, but when I say that, I don't really mean the hardware and the software. I mean the communications cost. In all these countries, communications costs wipe out the cost of the computer or the software. What do people do? They go to a sharing approach where you have a community centre with a computer or an Internet cafe. The Internet Cafe phenomenon is really quite unbelievable in some countries. In China, in particular, it's phenomenal.

Now we have a special version of Windows that when one user is on it, there is no problem for the next user. You can just come in with all your files on your USB drive. There are technical requirements from these community centres and these Internet cafes. We learned a lot about this when Microsoft put PCs in all the libraries in the United States… we reach out to these Internet Cafes as a customer base.

Our India Research Centre has a particular focus on low-cost computing, which basically means finding a way to use various wireless approaches to avoid having any communications costs... That really can make a difference, but we need some magical wireless approaches to get the communications costs out of there.

What are the things Microsoft sees as its opportunities?
The broad area is called mesh networking. It's a collaboration of actually every one of our research sites. The UK guys are, historically, the networking experts. Both China and India have a super interest in this rural low-cost computing stuff. It's going to be a few years before we can prove this stuff out. Having a lot of donated software, donated training and then helping to get the communications costs down a dramatic amount — those are the ways we really foster [computing] in the places we don't see PCs yet.

What about in the slightly more developed areas where there is a business opportunity for Microsoft?
Of this triumvirate — communications costs, hardware costs, software costs — the communications costs dominate. And then the hardware costs dominate. And then comes the software cost. We offer Works for like a buck or two bucks. We provide all the software you'd ever want in a consumer type activity space for super, super cheap. Sometimes we even do donations, mostly educational-related or community-access type projects.

Governments have done special tax deductions, or companies have for their employees, or unions have for their members. Mostly in Europe, there have been a ton of those things where we package the software up in a lower-cost way. There are people who don't have PCs where we'd like to help them get PCs and then there are people who have PCs, have our software and haven't paid for it. Those are really two different challenges.

You guys have been doing a lot in the last few months to address piracy, kind of carrot-and-stick stuff.
Yeah, Windows Genuine Advantage. The biggest place where there is a problem today is China. There are other places, but it's stark that the number two PC market in the world is not in the top nine of Microsoft revenue. That has nothing to do with market share, believe me.

Not some zeal for Linux?
It's software being used without being paid for.