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| Authored by: Anonymous on Monday, September 10 2012 @ 01:21 PM EDT |
PLAINTIFF"S EXHIBIT 1627
Comes v. Microsoft
Teresa Jennings
From: Bill Gates
To: Bemard Vergnes; Brad Silverberg; Chris Peters; Jeff Raikes: Jonathan
Lazarus; Lewis Levin; Mike Brown; Mike Maples; Mike Murray; Paul Maritz; Pete
Higgins; Steve Ballmer
Cc: Bill Neukom; Steven Sinofsky
Subject: Two Companies with Business Focus
Date: Sunday, April 25, 1993 2:10PM
THIS is a very confidential memo.
I have a major concern that our sales force is too focused on our system
products and that we dont really generate activites based on profit potential.
Does our sales investment go primarily into increasing OFFICE share? I havent
seen many clever ideas for increasing OFFICE share for a long long time I doubt
that our sales investment (over $1 per year including everything) is really
focused or clever. I think we could do a lot better as suggested by this memo. I
am not saying we should split but we can have the benefits without spitting or
without any major reorganization.
If we split systems and applcations into 2 truly seperate companies. What would
be different? I am not saying we should do this or that I am even considering it
but rather I want people to consider what the strategies would be.
First take the system company. It has decided to use OEM sales at low prices as
its totally channel for new users. The volume It drives thru the oem channel
insures that the users it misses in this channel and its upgrade products will
have high demand so it does not have a retail sales force. It has 3 very focused
and fairly small (<15O each) sales groups: 1) OEM sales - a lot like what we
have today. 2) ISV evangelism and 3) "Server sellers". Groups 2 &
3 meet directly with very few customers - no EBC and no account plans. Any
account that is a problem must stem from an ISV that group 2 needs to work on or
something in group 3. The systems group has a headquarters operation that
assembles task forces to look into segments of the markets where our products
are not dominant. Because there is a fast moving task force mentality with a
budget and leverage thru outside consultants there have been attack plans for 4
specific markets are assembled per year - examples include: K-12 education, OTP,
As/400, and banking. Once a market is fixed the group moves on. All of those
plans set measurable results for the various "sales groups" and these
objectives are reviewed. The marketing budget of the systems group is very small
focused on: new product introductions and the task force goals. All of the
seminars it does are break even and very leveraged thru 3rd parties. All of its
ISV activities and education out reach are break even or profitable - very
little course delivery and lots of certification. It does gather an end user
name list for direct mailing upgrade information. It does not attend a show
unless it has a major new product introduction or a task force tells it to. The
"server seller" group is not vaguely defined around solution selling -
it is defined around selling servers. It has group events for the people who
sell servers all the time and it is in a clear feedback loop. Vague words like
˜client-server" do not confuse this group. This systems company does has a
VERY small support organization since it pays 3rd parties to handle the surge of
new introductions and only 30-90 days free support. Because of thls it really
trains a lot of people before every new release. This company does not have an
executive briefing center or a subsidiary presence in most countries of the
world. It has determined that platforms standards in countries outside the US,
Europe and Japan will be set based on what happens in those countries. The
server seller group uses a lot of 3rd party relationships in various countries.
Total headcount outside the US is less than Compaq: 400 people from the 3 sales
force groups. Fnancial systems for this company are simple. Since the systems
software upgrade business has such peaks and valleys manufacturing is mostly
outside. This company would have 5 standard speeches updated regularly - where
is our system going, how we connect to other systems, why our servers are
better, how/why to develop for our platform, how we work with OEMs. This company
is easy for the press to understand. It is highly profitable since support,
sales, marketing and other overheads are kept very low. Development cost is its
primary expense and it has a task force on each of the following topics: tools
for developing more efficiently with lot of shared ideas, making testing less
headcount intensive, how to do a "release" every 12 months on a
predictable basis with every other release being major [2 hardware design points
at all times - today it would be 4megabytes and 16megabytes], getting all
documentation on line, doing all support on line. Most corporate customers have
an annual contract that lets them get all the upgrades on all of their machines.
When products do not sell the response is not some sales force thing but rather
a focus on getting the product right. This company does not advertise in the
business press except for alliance announcements or major introductions.
[In a major simplification I am skipping the tools business altogether in this
analysis. It is focused on the
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[Stamp:
Exhibit 2
Sinofsky
9-24-01
]
mass of developers and has a very small sales force]
Now lets take the applications business. Its primary focus is high market share
in primary categories by selling OFFICE. This company also does not have an
Executive briefing center since it focuses on design wins for OFFICE that are
commonly done at lower levels. It only works with retail outlets when it can get
a specific competitive advantage by doing so. It has high enough share that it
doesnt have to work with people to get stocking or to talk about normal course
of business issues. The reduction is retail outlets has allowed it to be very
focused. Its products are popular enough that retailers like Egghead participate
in all major initiatives. Walking into a store this company has spent time with
shows e noticeable difference. This company wakes up every day and says
"how do we avoid people thinking of our product and the competitions as
interchangable? All of its marketing and technical work focus around this goal.
When this companies executives give speeches they start with excltlng concepts
but they quickly focus on_the competitive advantage. It is amazing how many
exciting demonstrations this company can give of its upcoming products. This
company is not held back by puritanical views about showing the future since by
the time something is shipping it is old news and now covered and the
competition can already demonstrate many of the same features in that time
frame. A few zingers are kept under the covers until shipment for 2 reasons: a)
to spread out the news so that both the early reveal innovations and the ones at
shipment get coverage and b) so that a few things competition does not initate.
This company has also gone to a 12~24 month cycle for its products showing
brilliance in tying its work to the exciting work the systems company is doing.
This company has managed to convince the systems company to ship applets using
exacty the same flle forms and command structure as the ones in the major
applications so it is natural for people to use these applications. It is
amazing the great presentations this company gives about: support issues and how
the new product responds to those, examples of users working with advanced
features and the future of the categories.[note: I still cant get decent slides
out of our applications group]. This company does not have account coverage on a
regular basis at all. They spend time with accounts when there is an opportunity
to get them to switch. For example they have a huge focus on companies that have
no moved their standards up to Windows. This company loves showing customers how
we read the competitions files and are a superset of them. This company
understands the economics of its competitors. This company knows the research
that will affect its products. The support policies of this company are tuned
for one thing: competitive advantage. It does not spend money on support things
that cannot be proven by credible 3rd parties to be worthwhile things. This
company has subset products to use for OEM deal but it also has a presentation
for the press or oems saying how hard bundle deals are not that great for the
customer. This company also has a reduced presence in the field since people
dont bother it with lots of random questions - only questions about its
products. It is easy to have a sales force know all the answers to the top
questions about these products. When a product does not sell the focus is on
getting the product right rather than spending more marketing money on it. This
company does not advertise in the business press except for a maior alliance or
product introduction. The company relishes getting backing unique to it because
it is thinking competitively. This company has the same kind of
"vertical" approach as the systems company however these is somewhat
more permanent staff because once you win in a category it doesnt stay won as
easily as systems. This company knows which market segments it is strong in and
which ones it is weak in.
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