Windows of opportunity

THE FRIDAY INTERVIEW - Jean-Philippe Courtois,  President, Microsoft International:LATER THIS month Windows 7, the latest iteration of the ubiquitous computer software, will hit the shops. October 22nd is a red letter day for the world's biggest maker of software but in an era when PCs are primarily used to access the internet the reaction from end users may pale in comparison.

The launch of Windows 95, which saw Microsoft licence a Rolling Stones song and buy up every copy of the Times newspaper in London, took on almost cultural significance, but the world’s biggest software company tends to be eclipsed in the hype stakes these days by upstarts such as Google, Facebook and Twitter.

For Jean-Philippe Courtois, the man responsible for Microsoft strategy everywhere other than the US and Canada, it should be a stressful time, but the straight-talking Frenchman is not showing any outward signs of concern.

“I have been in the company for 25 years,” he shrugs. “I was involved in the very first launch of Windows when everybody was laughing at us. When people were looking at Windows saying ‘Oh, you need a mouse?’ That was back in 1984. I can remember Windows 95 and that was clearly a big, big moment for the company. I’ve not seen or felt personally such positive vibrations coming from the customers than with Windows 7. I’m very optimistic but of course it’s coming at a very particular economic environment. We all know that and I’m not naive, but I think many people are going to take the opportunity to either refresh their PCs or go with a new device.”

Those economic uncertainties are already hitting Microsoft’s top line. When it reported fourth-quarter results at the end of June, it marked the first financial year that revenues from the company’s twin cash cows – Windows and Office – declined. In the face of a global recession, a 3 per cent decline in overall revenues from $60.4 billion to $58.4 billion is not going to cause too many sleepless nights at Microsoft headquarters in Redmond, Washington. But the technology giant – which now spans everything from games consoles to programming languages – is not resting on its laurels.

Courtois was in Dublin last week to cut the ribbon on Microsoft’s $500 million “mega data centre”, the first such facility it has built outside the US.

He described the opening of the high-tech, high-security centre as a “big day for Microsoft and I hope a big day for Ireland”.

With revenues from software licences declining, Microsoft has embarked on a strategy it calls software plus services which the Dublin data-centre will play a key role in delivering. “It is a journey we began five years ago,” says Courtois.

As he tells it, the journey began with a memo from senior Microsoft executive Ray Ozzie, “one of the two guys who replaced Bill G – I guess we need two people to replace Bill,” explains Courtois.

Ozzie and others in the company realised that both consumers and businesses were carrying out more and more of their activities – whether sending e-mail, storing contacts or sharing photographs – on the web. Although the move to web-based software had been mooted in the mid-90s, ubiquitous broadband and powerful mobile devices like the iPhone meant more and more people wanted to access their data and applications over the web.

The latest buzz-word for this is cloud computing because the services are pulled from multiple computers in the “cloud” but the process is invisible to the end user.

The advantage for businesses is that the servers and other infrastructure are provided by someone else and they simply pay a monthly fee for access.

“We take the pain out of the enterprise and we manage it for them,” explains Courtois.

Some big name Microsoft customers such as Coca Cola, Nokia, and Glaxo Smith Kline are already embracing the cloud. But the challenge for Microsoft, which has made its billions from selling software licences to installing software on a single computer, is not to cannabilise its existing markets.

“The first starting point you have to bear in mind for a strategy which is quite different from many of our competitors is to provide a choice to customers,” says Courtois.

“They can decide to keep using our applications on premise, which many will do for many years by the way. You can decide to move to the cloud for some applications like messaging, e-mail. Or you can decide to do both together. Which frankly speaking our key competitors don’t do at all.”

The services initiatives also join the dots between some of the major bets that Microsoft has made in recent years, such as the loss-making Xbox console and its Bing search engine, which was launched over the summer with a $100 million marketing campaign.

“What’s pretty remarkable with Bing, it was launched just a few weeks ago, but in a matter of a few weeks we have gained a few points of market share in the US, which is a very, very competitive market with one player (Google) owning 60-70 per cent of the market,” he says. “So for the first time for a number of years there is another player growing faster which is Bing.”

Over the last year Microsoft has also been adding more services to the Xbox console. There are now 20 million subscribers to Xbox Live, which can be used to download games, rent or buy movies and which will shortly integrate with social networks, including Facebook, Twitter and Last.fm.

“Xbox has come a long way – it has become the number two games console in the world in terms of share,” says Courtois.

“And more important we are the first one and still by far the largest ... community of users. That’s where the dots get connected. In many ways its about connecting the dots to people using those live services in the cloud on a games console, on a phone, on a PC and on the web.”

As Courtois puts it, Microsoft is pursuing the strategy “very agressively” and he describes the Dublin data centre as “the physical hub” where the services are being assembled and provisioned.

The official opening was attended by Taoiseach Brian Cowen, who will have been cheered to hear the French executive’s views on Irish economic policy.

“Investing in turbulent economic times, making bets to build a smart economy to attract investment, using some of these [cloud] technologies, will be a fantastic example of Ireland re-inventing itself again,” said Courtois.

During the formalities Microsoft executives made a couple of references to the European Commission, which has recognised the Dublin centre as being “best practice” for its low use of energy.

Does this suggest relations with the commission, which to date has imposed fines and penalties of €1.68 billion on Microsoft and threatened to block the release of Windows 7, have improved?

“One mention,” he counters before laughing. “There is not much more to report back. We made a pretty significant move back in July,” he says in a more measured tone.

The original EU case against Microsoft dates back to the 1990s, when the commission found it used its dominant market share with Windows to block the growth of the Netscape web browser and promote its own Internet Explorer.

After a long and costly process for all involved Microsoft has suggested that it would offer a “ballot screen” in Windows 7 which would give users a choice of browsers that they want to install.

Since then Microsoft has reportedly been in discussions with the commission about its proposed advertising alliance with Yahoo, which sees both firms pooling their resources to go after Google. Surely relations have thawed between Brussels and Redmond?

“I’m sorry, no additional comments,” stonewalls Courtois. “Over the past couple of years we have made some pretty significant moves, in terms of inter-operability, in terms of Windows and the browser, and clearly we have continued the discussion.

Clearly the commission is looking at what we proposed to them in the last couple of months.”

On The Record

Name:Jean-Philippe Courtois

Job:President, Microsoft International

Age:49

Family:Married with three children

Outside interests:Football, reading, and cinema. On the board for PlaNet Finance, an international microfinance group

Why he is in the news:Microsoft last week officially opened its $500 million data centre in Dublin

Something you might expect:The Microsoft veteran didn't mention that the interview was recorded on an Apple iPhone but politely pointed out at the end he might be able to provide a Windows-based device next time.

Something you might not expect:He loves the Irish weather – because it makes it cheaper to cool and operate Microsoft's data centre