Beyond Binary

As a guy who spent a decade in Silicon Valley, Stephen Elop says he, too, had his doubts when he first heard about Microsoft's "software plus services" strategy.

"The initial impression of that, as an outsider, is 'Is that just a cheesy way of saying we are going to hold off as long as we can," said Elop, who was an executive at Macromedia and Adobe Systems before joining Microsoft earlier this year.

Stephen Elop

(Credit: Microsoft )

But, if Elop was initially skeptical, he's now an ardent believer. In an interview in San Francisco last week, the president of Microsoft's business division spoke like a lifelong 'Softie, extolling the virtues of everything from SharePoint to Office Live to Microsoft's OneNote note-taking program.

Microsoft has not always been the easiest place for outsiders, particularly those who have been chief executives in their prior jobs. Elop said that's one of the things he thought about a lot before agreeing to take over for Jeff Raikes, who is leaving Microsoft after a quarter century to become head of the Bill and Melinda Gates Foundation.

In deciding to go for it, Elop said he spoke to folks who had made the transition well, such as Ray Ozzie and Kevin Turner, the former Sam's Club CEO who is now Microsoft's chief operating officer. Elop said he also talked to some for whom things didn't work out so well. (He didn't name names and there's a long list of people who fit that category.)

One of the things that became clear was it doesn't work to come into Microsoft and tell everyone how well things work at other places.

That said, Elop is not a total convert to Redmond's ways. Although he was quick to pull out a Windows Mobile smartphone when asked, he also admits that his whole family uses iPhones and that his was in the car.

These days, Elop justifies using the iPhone as him trying out competitive technologies, an effort that also has him playing with Google Docs and using a host of other Web 2.0 services.

"I'm a believer you have to experiment with these things," Elop said.

Although Elop had many of his negative perceptions changed as he interviewed at and later joined Microsoft, he also said there are some areas where he would like to see things happen faster, particularly when it comes to online services.

He didn't give out much in the way of new product details, but suggested a larger role over time for advertising-funded software. Even some businesses, he said, might want to use some ad-based software.

Elop pointed to, say, a trucking business that might use traditional software for its offices but let those on the road check their company e-mail from a Web-based service. The key word is choice, he said. Businesses will get to choose between traditional software, subscription licensing, or having Microsoft host the software itself. Consumers, meanwhile, will have options funded by a wide range of business models.

The Bill and Melinda Gates Foundation said on Monday that longtime Microsoft executive Jeff Raikes will be the organization's next chief executive.

Raikes announced in January he would be stepping down as president of Microsoft's Business Division, the unit that includes Office. In an interview with CNET News.com at the time, he had said he expected his next job would be outside the technology arena.

Jeff Raikes will become the CEO of the Bill and Melinda Gates Foundation in September.

(Credit: Microsoft )

"This is truly a dream job," Raikes said in a conference call with reporters. Although Raikes is known for his work at Microsoft, he has also been active in charitable efforts in the Seattle area, particularly the United Way. "I certainly have much to learn, but being able to work with such a tremendous team will be exciting for me."

Raikes, who will start September 2, succeeds Patty Stonesifer, who also once worked for Microsoft. The foundation announced in February that Stonesifer would be shifting to a new role.

Asked about the thinking in naming another Microsoft executive to head the foundation, co-chair Melinda Gates said that was something she and Bill Gates spent a lot of time thinking about. She noted that the foundation used an executive search firm and looked at 150 candidates before settling on Raikes.

"Microsoft and the foundation are clearly two separate entities," Melinda Gates said. But in the end, she said, they decided that what the foundation needed was a strong leader with ambition and a proven track record of handling complex projects.

Raikes said he sees a lot of common ground between his work at Microsoft and what he will do at the foundation.

"At Microsoft (we use) the magic of software to take on interesting challenges," Raikes said. "Here you have a similar situation where the use of science and technology and systems thinking is applied to take on very tough problems in society."

While he said he has some getting up to speed to do in terms of the subject area, Raikes said the foundation is in a high-growth mode, looking to grow substantially beyond its current 500-person workforce. He said he learned something about managing large and fast-growing entities during his time at Microsoft.

There have been a fair number of changes at Microsoft HQ of late, so we wanted to provide a program for those keeping score at home. Here are some of the top executives who have joined the company or are leaving the executive ranks.

This list is neither chronological nor exhaustive. It leaves out recent departures such as dealmaker Bruce Jaffe and strategy executive Charles Fitzgerald.

Instead, I've focused on a few key folks who have left or are leaving shortly who have the biggest impact in Redmond, as well as some key outsiders Microsoft has recruited in recent years.

Who's out:

Bill Gates

Bill Gates
OK. Well, the Microsoft founder isn't leaving the software maker completely. But he did cede his chief software architect title and plans to shift to part-time work in July.

His is the impact most likely to be felt across the company. Even as the company has grown, there was still the notion of a "Bill review" where a project's technical merits were discussed, as well as his twice-yearly "Think Week" where employees submitted papers on new ideas for the company.

Jeff Raikes

Jeff Raikes
Definitely a key part of Microsoft's old guard, Raikes is a onetime Microsoft sales chief, who, in recent years, has been responsible for building the Office franchise and expanding into other areas, such as business intelligence and unified communications.

Raikes, who joined Microsoft from Apple in 1981, is giving up the reins of the business software division at the end of the month, but will remain at the company until September.

Jim Allchin

Jim Allchin
Allchin, who headed the Windows unit, left Microsoft in January 2007, the day after Vista shipped. Allchin had a well-earned reputation as a perfectionist and tireless champion for quality and user experience.

Critics note that, under his watch, Windows projects were often late and had to have planned features taken out to meet already delayed deadlines. Steven Sinofsky, now in charge of Windows engineering, was known at the Office unit for getting releases out on time and staying "on message" in public.

Who's in:

Stephen Elop

Stephen Elop
Elop, who was hired on Thursday to replace Raikes, will bring a number of relevant experiences when he joins Microsoft later this month. His telecommunications experience at Juniper Networks could help on the unified communications side, while his experience at Adobe Systems could help Microsoft with its Silverlight push.

However, one financial analyst characterized him as a "job-hopper." In his most recent job, Elop was at Juniper for just one year.

Ray Ozzie

Ray Ozzie
Ozzie's been there since 2005, but his influence has continued to grow. He's now chief software architect, Gates' old role, and in charge of the company's Live services push.

Ozzie's hiring has been heralded by Gates and CEO Steve Ballmer, but we've heard precious little from him in recent months. He spoke at just two major public events last year--the company's Mix trade show as well as Microsoft's financial analysts' meeting.

Steve Berkowitz

Steve Berkowitz
The former Ask CEO, who joined Microsoft in April 2006, has been pushing the software giant to think less geeky with its Windows Live services.

However, the company's search share has continued to fall, and Berkowitz saw his fiefdom scaled back as part of a March 2007 reorganization. An insider said he may not be the right fit even for his present role.

Brian McAndrews

Brian McAndrews
Seen as a rising star within Microsoft, McAndrews was CEO of Aquantive, which Microsoft snapped up last year for $6 billion.

He now heads up Microsoft's advertiser and publisher efforts, within Kevin Johnson's Platform and Services unit. His domain includes the former Aquantive ad engines, Microsoft's homegrown AdCenter, as well as mobile acquisition ScreenTonic and in-game ad engine Massive.

Kevin Turner

Kevin Turner
Turner has also been around for a while now, having been hired as chief operating officer since August 2005, when he was hired away from Wal-Mart Stores.

Jeff Raikes, the Microsoft executive most closely associated with the emergence of Office, said that the rise of that product is clearly the highlight of his long career at the software maker, which will come to an end in September.

In an interview on Thursday, Raikes noted that Office didn't exist when he left his role as a Visicalc engineering manager at Apple in 1981 to join Microsoft. Now it has more than 500 million users, while Microsoft has grown from 100 employees to 70,000.

"It's been an incredible 26 years," Raikes said. "I couldn't be more proud of my team and where we've been able to take the business...I've truly lucked out."

To replace Raikes, Microsoft has gone with an outsider, former Macromedia CEO Stephen Elop, who was head of sales at Adobe following that company's 2005 acquisition of Macromedia. Most recently, he was at Juniper Networks.

Elop's hiring is certainly interesting in a time of growing competition between Microsoft and Adobe. Microsoft has come out with its Expression line of design software and its Silverlight software directly targets Adobe's Flash in the market for Web graphics.

The transition also comes at a time when Microsoft's traditional way of doing business is undergoing significant changes. Rivals such as Salesforce.com are offering business software over the Internet, as is Google in the consumer space.

Raikes has been among those championing Microsoft's response, which it calls "Software plus Services," in which it argues both businesses and consumers are best served by technology that can run either locally or from the Internet cloud. He has also been leading his unit's push into unified communications, where Microsoft is hoping the convergence of voice and data networks will allow it to grab a significant chunk of the business telephony market.

For now, though, Office and related products still account for 90 percent of the business division's revenue, according to Microsoft's most recent annual report. In fiscal 2007, the unit saw its revenue climb to $16.4 billion, up 13 percent from the year earlier.

Ever the optimist, Raikes said it was hard to pick a roughest time in his long run. (We might have picked something from the company's long antitrust battle, but hey, that's us.)

Raikes said that he had been talking with CEO Steve Ballmer about his departure for quite a while. "Steve and I have been talking for some time" about when best to retire, Raikes said, saying that the hiring of Elop came after Raikes had made his decision to step down.

Raikes said he hasn't decided on what's next, saying he planned to focus on Microsoft until he leaves this fall.

"I've made no decision, but it would likely (be) outside tech, something fairly different," Raikes said. As for the company he will leave, he said he is confident Microsoft is headed in the right direction--Google Apps notwithstanding. "Sure there will be curveballs that will be thrown at us...I think we'll hit them out of the park," he said.

Update: Meanwhile, strategy executive Charles Fitzgerald is also leaving Microsoft, as noted by Mary Jo Foley.

Fitzgerald is headed to a start-up, we hear. That makes three departures this week, with news Wednesday that deal chief Bruce Jaffe is also heading out.

CNET News.com's Michelle Meyers contributed to this report.

Microsoft sent out a cryptically worded media alert on Sunday, indicating the software maker planned to have a teleconference bright and early Monday morning.

Even more strangely, the company quickly killed the media alert, offering no details on what it was that it had planned--but no longer planned--to announce.

A source familiar with the first-news, now-not-news, said that Business Division head Jeff Raikes has been busy on the mergers and acquisitions front, not planning his own departure or some secret reorganization.

Does anyone know who is the apple of Raikes' eye?