Dick Brass, VP of technology development for Microsoft, insists that when the company was most derided and under legal attack, his engineers had their heads down, working. Brass, who once wrote speeches for Oracle CEO Larry Ellison that routinely condemned Gates as a monopolist, now has the zeal of a convert. "I think there was an expectation, a hope by our rivals, that we'd shrivel up and vanish," he says. "But adversity, if anything, served as a stimulus."
A breakup seemed grotesque to Gates and his fellow wonks, but the real horror to contemplate would be technological irrelevance. In the 21st century, the Internet – not the PC, on which Microsoft had reaped its fortune – would be the universal platform for business software, running bite-size programs that customers linked to online. Worse, it was shaping up to be a realm dominated by Unix servers, IBM or Oracle databases, and Sun's Java programming software. The Redmond giant would be left out in the cold with an old business model.
Microsoft's solution to this coming crisis – a bet-the-company initiative called .Net - began to come together only in 1999. The fundamental .Net concept is that, while Windows applications still will work best on Windows-based systems, with .Net they'll be able to talk to non-Windows machines and applications across the Internet. In the long run, the shift online will completely change the Microsoft business model.
Desktop applications, which currently account for 70 percent of the company's sales, gradually will morph into Web services over the coming years. They'll no longer be sold in a package. Instead, they'll be delivered online via subscription to consumers and businesses.
Microsoft announced .Net in June 2000, right after the trial ended. Rivals quickly dismissed it as vaporware. But this March, Hailstorm added flesh to the .Net bones, and the scope of Microsoft's ambition became more visible.
In a small conference room on the Redmond campus, Senior VP Paul Flessner can barely contain his excitement about Hailstorm. An Oracle T-shirt bearing the grinning mug of Gates nemesis Larry Ellison hangs on the wall, left over from a previous meeting. ("Our chief motivator," he quips.)
