Gates sees ‘sea change’ in net services

Seattle, November 9:

The technology industry shift’s to Internet-based software and services represents a massive and disruptive ‘sea change,’ Microsoft chai-rman Bill Gates wrote to top-level executives in a memo aimed at rallying his troops against the new competitive threats the company faces.

In an e-mail to top executives, dated October 30, Gates urged company leaders to “act quickly and decisively” to move further into the field of offering such services, in order to beet formidable competitors. But he also warned that the company must be thoughtful in building the right technology to serve the right audience. “This coming ‘services wave’ will be very disruptive,” Gates wrote, “We have competitors who will seize on these approaches and challenge us — still, the opportunity to lead is very clear.” Gates compares the push toward such services — which range from online business software offerings to free Web-based e-mail — to the changes he saw nearly a decade ago.

Then, he wrote a now-famous memo, called, ‘The Internet Tidal Wave,’ the prompted a massive shift at Microsoft toward Internet-based technology.

“The next sea change is upon us,” Gates wrote to executives.

Gates included a memo from Ray Ozzie, one of three chief tec-hnical officers, which outlined ideas for broad company wide changes that can address the growing competitive threat. The memo stated that MS has not led the pack on Internet-based software and services, and now faces intense competition from firmslike Google Inc. Ozzie said MS needs to focus on key tenets of the new model, including a shift toward offering free, advertising-supported offerings and more sophisticated, Internet-based methods of delivering products.

Last week, Microsoft announced plans for Windows Live and Office Live, two Web-based offerings that aim to help the company compete with Google, Yahoo Inc, and other companies that are already seeing success with such Web-based offerings.

MS has recently faced criticism that its model, which still relies mostly on delivering software in traditional packaging, could grow antiquated. The concern is that, as more companies offer online services for everything from word processing to storing photos, there will be less of a need for MS lucrative Windows operating system and Office business software.