Case Study Back in 1975, two high school friends decided to start a business in the embryonic software market. The first commercial microcomputers were just coming to market, and the two friends had fallen in love with both the technology and what they saw as its long-term potential. Their first product was a version of the programming language BASIC. The fledgling business grew steadily as they modified and extended their BASIC programs for new computers just entering the market. In 1979, the two friends, William Gates and Paul Allen, moved the business-called Microsoft-to Seattle. And the rest, as they say, is history. Microsoft's big break came in 1980 when IBM selected Gates and Allen to write the operating system software for its new line of PCs. Gates and Allen bought the rights to an exist ing program for $50,000, modified it a bit, and named it MSDOS (for Microsoft Disk Operating System). Even though IBM was a relative latecomer to the PC market, its dominance in the computer industry brought it instant respect. And because other software developers wanted their products to run on IBM computers, MS-DOS quickly became the industry standard. Paul Allen became seriously ill in 1983 and left the firm in Gates' capable hands. Microsoft developed relationships with other computer manufacturers and began introducing new application software like Word (for word processing), Excel (a spreadsheet), and PowerPoint (a presentation package). When the firm made its initial public stock offering, Gates became the PC industry's first billionaire. Popular new products like Windows 95, Windows 98, and Microsoft Office and deals with new industry giants like Compaq and Dell cemented Microsoft's place at the top of its industry. Today, Word controls 90 percent of the worldwide market for word processing, and Excel has 87 percent of the spreadsheet market. Windows 95 and Windows 98 together have 83 percent of the operating systems market. And the firm's total annual revenues are approaching $10 billion. Because of the clout Microsoft has throughout the industry and perhaps because of its continuing success-both the firm and Gates are widely feared and criticized in some quarters. Other software developers complain about the company's unfair business practices. Some computer manufacturers fear that they may become too dependent on Microsoft as the sole provider of software for their products. And even the government keeps a wary eye on Microsoft for possible antitrust practices, as evidenced by the lawsuit brought against the firm by the U.S. Department of Justice in 1998. But Gates keeps his eye on the future and steers Microsoft unwaveringly toward it. For example, he personally oversaw the fifteen-year development of one of the firm's newest success stories, Windows NT, an operating system for computer networks. And he actively participates in every major decision made by the firm's top managers. He also fosters communication throughout the organization, however, and stresses the need to keep the firm lean and nimble, always wanting to avoid the bureaucratic procedures that saddle many big companies. And he keeps a close eye on the bottom line at all times, closely analyzing monthly and quarterly sales reports. In many ways, however, Gates' biggest role at Microsoft is as its public persona. He appears at all major news conferences, makes all major announcements, and travels extensively to keep in touch with suppliers, computer manufacturers, customers, strategic allies, and government officials. He typically works sixteen hours a day and seldom takes any time off. Even when he is away from "work'; he still keeps up with 1

business via e-mail. Microsoft employees look at Gates with something bordering on awe. Some, for example, visibly copy his mannerisms. They also recognize that because of Gates' personal work habits and schedule, he expects no less from them. The firm's dominance in its core software markets continues to grow, and its products are gaining ever-wider recognition and acceptance. But a few thunderclouds are looming on the horizon. For one thing, Microsoft faces formidable competition from America OnLine, especially since that firm acquired Netscape, in the emerging markets related to the Internet. And for another, computer giants like IBM and Compaq are seeking new alliances to avoid being too much at the mercy of Microsoft. But the chances of these thunderclouds raining on Gates' parade are quite slim.

Case Questions 1. Identify examples in this case of the four management functions and ten management roles. 2. Which management skills do you think have played the biggest role in Bill Gates' success? 3. What future events could derail Microsoft? Case References "Microsoft's Future," Business Week, January 19, 1998, pp. 58-68; David Kirkpatrick, "He Wants All Your Business-And He's Starting to Get It," Fortune, May 26, 1997, pp. 58-68; Hoover's Handbook ofAmerican Business 1998 (Austin,Texas: The Hoover's Business Press, 1998), pp. 978-979; and David Kirkpatrick,"Microsoft: Is Your Company Its Next Meal?"Fortune, April 27,1998, pp. 92-102.

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