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Gates Plans Internet 3.1

4 September 2000

Bill Gates summoned a group of his underlings some months back and asked them to bring him copies of all the paper forms Microsoft used to deal with its customers.

The billionaire techno-baron wanted to make sure his information technology giant

was practising what it preached.

What an embarrassment it would have been if the chief proponent of the paperless office was still using old economy means to sell its new economy wares.

"I was amazed," Gates admitted at a recent business conference. "We had hundreds of them. "So I said, 'We are going to get rid of every single one of these because they are so inefficient'."

Within weeks, Microsoft had no forms. The majority of its business was now done either through intra-office e-mail or over the Internet.

As a result, a whole strata of clerical personnel was released from the monotony of paper-pushing and transformed into a new breed of more productive "knowledge workers".

That example, according to Gates, is just a small taste of how the emergence of the Internet has already reshaped the corporate world at a fundamental level.

The changes are much more profound out in the marketplace, where e-commerce is fast evolving from being simply an alternative way to do business to the dominant and most effective method.

And Gates feels we've only just crossed the starting line in the high-tech race.

"My proposition is that the Internet will change more dramatically in the next five years than it has during its entire history," he said recently.

"We have just seen the beginning of what the Internet can do for us as a revolution in communications and the way business is done."

It is Gates' belief that the rate of change is going to increase exponentially over the next few years as wireless technologies become embedded in the new communications landscape and Internet access continues to grow rapidly across the Asia Pacific region.

The greatest challenge for companies doing business in the region will be in building the IT capacity to keep up with the instantaneous demands of the online world.

"If the 1980s were about quality and the 1990s were about re-engineering, then the 2000s will be about velocity," Gates predicted in his best-selling book, Business @ the Speed of Thought.

"It will be about how quickly business itself will be transacted, about how information access will alter the lifestyle of consumers and their expectations of business.

"To function in the digital age, we have developed a new digital infrastructure. It's like the human nervous system. Companies need to have that same kind of nervous system - the ability to run smoothly and efficiently, to respond quickly to emergencies and opportunities, to quickly get valuable information to the people in the company who need it, the ability to quickly make decisions and interact with customers."

The Internet is the brain that will run this new digital nervous system. Its ability to change the business world will be limited

only by the imaginations of those companies,

such as Microsoft, that are devising the new software platforms from which it and the new generations of PCs will operate.

"One of the reasons that people underestimate the Internet is that they do

not appreciate how the personal computer itself will continue to improve," Gates said.

"Of course, the PC is based on chip technology and the power of the chips is doubled every two years. And that kind of exponential improvement allows us to make the PC much more effective.

"In the future, we will be using that power to create a very natural interface, things like speech recognition or handwriting recognition. Three or four years from now, you will have a computer tablet which will automatically do handwriting recognition of Chinese or Korean, or whatever language you are using.

"It will be very simple and because it is connected to the Internet it will be far more powerful. It's these kinds of devices that are going to make the Internet really pervasive. Even more pervasive than the PC itself has been."

Gates has been criticised by many of his rivals, most notably Oracle Corporation's Chairman and CEO Larry Ellison, for his tardiness in acknowledging the business opportunities presented by the Internet.

But Gates leaves no doubt now about the profound nature of the changes he sees occurring in the brave new world.com.

"When you give people new tools, breakthrough communication tools, it has a transformational effect," he said in a recent speech.

"To see the last time anything this dramatic happened you'd have to go back to the beginning of the Industrial Age, when mass production with uniform and repetitious methods led to a different way of thinking about products.

"And, of course, there was a huge increase in the standard of living that was brought about by the Industrial Age. But there was a lot of turmoil that was created as well."

The Internet Age has brought its fair share of turmoil, too. The wild fluctuations in the share market over the past two years have seen an enormous run up in technology stocks and the creation of an entire new class of dot-com millionaires.

But it has also left in its wake the inevitable pile-up of tech wrecks - dot-com start-ups that have skyrocketed in the initial market euphoria, only to come back down at twice the speed.

Gates has watched the value of his own company ebb and flow with the waves of investor speculation that have washed through the markets. His personal wealth has been lifted as high as $US100 billion and dumped as low as $US50 billion in the past year.

But for every company that has failed, there is another that has managed to maintain its stratospheric value through a mixture of calculated risk, good management and good luck.

Gates expects to see more of these new market players appear in the next few years - not just those servicing the emerging niches created by the infotech revolution, but also tech-smart companies applying new online disciplines to enable companies to do old business better.

"It's fascinating that for almost any business you can name, there are new companies being started that are taking a 100 per cent Internet approach: whether it's selling houses or travel, or loans or books, there is a little-league company doing it," he said in a recent speech.

"They went public last week, they're worth $300 million today, they'll be worth a billion tomorrow. It's a wild, wild time. And that's because people are saying there are going to be some big winners out of this."

Gates wants to make certain that his company is one of those winners, a challenge that has been complicated by the latest ruling in the US Justice Department's anti-trust suit against Microsoft.

Judge Thomas Penfield Jackson has ruled that Microsoft operates an illegal monopoly in software and "applies an oppressive thumb" on innovation and competition.

The judge supported the Justice Department's submission that Microsoft should be broken up into two companies - one handling the operating systems; the

other dealing with applications, such as its Internet Explorer.

Gates remains confident he will beat the ruling on appeal and has already applied to America's highest court, the Supreme Court, to hear the case.

The anti-trust ruling has been an enormous diversion for the markets and

the industry, but Gates has ploughed on regardless, launching into a range of new ventures as if the case had never happened.

Over the past year, Microsoft has undertaken a significant shift in focus, directing its imposing, $US4-billion research and development arm to concentrate almost entirely on securing a greater foothold in the Internet.

The corporate repositioning at Microsoft was a major reason for Gates's decision this year to hand over the chief executive's job

to his long-time Microsoft colleague, Steve Ballmer. Gates thought relieving himself of the onerous duties of a CEO would allow him to turn his own intellectual operating system towards helping design a software platform for the Internet.

The approach he is taking is much the same as that he adopted so successfully 25 years ago, when he sank his million-dollar inheritance into developing a fledgling software company with his university pal, Paul Allen.

In the beginning, Microsoft secured a virtual monopoly by forging an exclusive deal to supply operating systems and applications software to the then-undisputed giant of the PC industry, IBM.

Now, Gates is trying to apply the principles of his Windows software to the Internet in a way that will provide a platform for moving seamlessly between the variety of online operating environments.

He has said, in promoting this new direction, that he believes the Internet is now moving into its third and most exciting stage of existence.

The first phase were the years between 1994 and 1998, when most companies raced to establish some sort of website. Most were merely read-only pages with information about the firm and its products.

The second phase, from 1998 to the present, ushered in the truly interactive era

in which businesses and customers could buy and sell products online or communicate with each other through live webcasts, and in which products such as music, books and photographs became easily accessible in downloads from thousands of sites.

"Now, we're on the verge of moving beyond that transaction phase into a phase where we can really think of the Internet as a platform, where we have programs that work between multiple sites, where we have programs that are essentially written to the Internet and can empower knowledge workers to see information about the economy, or their market, on a single screen that combines information from many places," Gates said.

"In phase three, a knowledge worker will generally be looking at a set of information from many different sites. So, for example, if they're planning a new product, they'll see inflation forecasts, they'll see demographic forecasts, they'll see cost forecasts and they'll see that in a view that they create based on the work that they're trying to get done.

"That's a huge difference from what you would have to do today, where you would literally go out to dozens and dozens of websites."

Microsoft knows, though, that the marketplace has changed profoundly in the

25 years since it began to develop its stranglehold on operating software for PCs.

The Internet is an ultra-competitive environment and one in which many companies have already staked significant claims to the territory Microsoft is seeking to conquer.

Gates says he has bet his company on making a success of the Internet push, but

the risks are obvious to all involved.

"If we're wrong, we're toast," Microsoft's sales chief Jeff Raikes said recently.

BILL GATES admits he has always had image problems. Old school photographs show a gawky-looking kid in big glasses, apparently destined by genetic make-up to become the quintessential face of the computer geek.

Gates spends a lot of time working on his image. Recently, he has taken to dressing up as Austin Powers and using self-deprecating humour in an attempt to appear more likeable.

"I put the sin in syn-tax, bay-bee," the software mogul said in a spoof video he has used to lighten up several conference presentations this year.

"I'm Austin Powers - International

Man of Technology," he said, in a passable impersonation of Mike Myers' comic movie spy.

In another clip, he appeared in the courtroom of TV's Judge Judy, arguing with Warren Buffet about a $2 bridge debt.

Gates continually interrupted as Buffet tried to get across his side of the story, prompting a characteristic outburst from the outspoken judge.

"Mr Gates, you've got to visit shutup.com," she snapped.

Unfortunately for Gates, there are still many influential figures who see him more in the mould of Austin Powers' nemesis, Dr Evil - a strangely likable, yet nefarious character.

Even the Internet, the online world which Gates has made his next business frontier, is saying nasty things about him.

One site on the Web is simply titled "Punch Bill Gates". It invites visitors to click a "Let him have it!" button and watch as an image of Gates gets whacked in the chops by a giant fist.

Gates's corporate rivals delighted in the anti-trust ruling against Microsoft, which seemed to give credence to the complaints they had been making for years about his sometimes brutal business tactics.

The court heard that Microsoft attempted to crush its competitors by forcing PC suppliers into exclusive agreements that effectively froze other software makers out of the larger markets.

It did the same thing with its Web browser, by binding Internet Explorer to

its Windows packages.

Even inside Microsoft, there are those who talk less-than-glowingly about their leader. He is known for volcanic temper tantrums during meetings and to have Gates declare, "That's the stupidest thing I've ever heard!" about an idea is something of a badge of honour for Microsoft employees.

Gates sees the negative press as a natural consequence of success - what Australians would call the tall poppy syndrome.

"When somebody's successful, people leap to simple explanations that might make sense," he said recently.

"So you get these myths. People love to have any little story. Yes, I'm intense. I'm energetic. I like to understand what our market position is. But then it gets turned into this: the ultracompetitor.

It's somewhat dehumanising.

I read that and say, 'I don't know that guy'."

Gates is also bemused by what he sees as a lack of recognition for his philanthropic pursuits.

He and his wife, Belinda, have established a foundation with an initial endowment of $US17 billion to support programs in global health and learning.

Many commentators greeted the creation of the trust with a raised eyebrow, wondering whether it was merely a coincidence that Gates had suddenly decided to donate vast amounts of money as the US Government began its monopoly attack on his company.

Gates is also an advocate of biotechnology. He has a place on the board of the Icos Corporation and is a shareholder in Darwin Molecular, a subsidiary of British-based Chiroscience.

He said in a recent interview that he was disappointed with some of the attitudes expressed towards biotechnical innovation by fellow participants at the latest World Economic Forum meeting in Davos, in January.

Gates has been an active member of the Davos community, regularly attending

its annual conferences to rub shoulders with world leaders and to share his insights into how best to address the global challenges of equity and access to technology.

He joined a panel this year that included Dr Gro Harlem Brundtland of the World Health Organisation, Carol Bellamy of UNICEF, James Wolfensohn of the World Bank, Joaquim Chissano, the president of Mozambique, and Raymond Gilmartin of

the pharmaceutical giant Merck.

The group's task was to officially inaugurate the global vaccine alliance. Gates described the discussion as a colossal bore.

"We're talking about saving three million lives a year here ? but that was one of the least inspirational, least informative panels I've seen," he said.

Not quite the stupidest thing he'd ever heard, but close. Whatever else may be said of Gates, he certainly does not mince his words.

He hopes to find greater inspiration at the Asia Pacific Summit.

Mark Riley is Fairfax's New York correspondent.

Bill's billions

Not even a 45-per-cent slide in Microsoft's stock price could tip Bill Gates from the top spot on the world's rich list this year.

Gates, 44, watched as the value of his 141,159,990 shares in the company plummeted, driving down his personal net worth from a staggering $US90 billion to a merely befuddling $US60 billion between June 1999 and June 2000.

Despite the rocky ride on the stockmarket and the US Government's anti-trust case against Microsoft, the figures published in Forbes magazine's annual rich list show that Gates's personal fortune has more than trebled since 1996.

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