Prophet In The Valley

Instead of summoning Silicon Valley partners to Redmond, Microsoft is now greeting them in their own backyard.

Few people noticed when the company opened the Microsoft Technology Center in Mountain View, Calif., last month, but it was a critical event for the software giant. During the opening ceremony, local politicians and the press were invited to admire the rows of gleaming Compaq and Unisys servers, and Microsoft chairman Bill Gates gave the keynote address in person. "We were not necessarily first to the Internet," Gates said. "But we were the most energetic, and we came up with some good products."

The Internet effort also proved something of a PR nightmare for Microsoft, which goes a long way toward explaining why Gates left behind an emissary to polish the companys image. His name is Danl Lewin, and he may have one of the toughest jobs in high-tech these days: convincing Valley companies that Microsoft is a square dealer with the kind of integrity they demand from an established giant.

Based at the Technology Center, Lewin gives Valley companies a go-to man when they want to catch the attention of Gates or CEO Steve Ballmer. And given his strong reputation and 25-year career at places like Apple Computer, GO and NeXT, he also provides a familiar face that can open doors inside Silicon Valley, making him quite a catch for Microsoft.

All of this might seem rather innocuous if it werent for Microsofts current quest to make .Net the de facto standard for computing. Microsoft has suddenly found itself desperately in need of developer allies just as it did with Windows, and its banking on Lewin to polish the companys image.

From the Java lawsuit with Sun Microsystems to ongoing feuds with Oracle to the current furor over Hailstorm—Microsofts latest .Net service—the companys behavior remains under the microscope. Furthermore, Microsoft has lost ground to Java and Linux, which were designed for the Internet, and it is now trying to rewrite its own technology while retaining the loyalty of its core Windows developers.

Call for Help Enter Danl Lewin. Bill Gates may lack credibility in Silicon Valley, but Lewin certainly does not. He is an accomplished salesman, and as a Microsoft VP, he has enough clout to get Gates or Ballmer on the phone. Before Lewin arrived, no Microsoft executive in Silicon Valley ever had that type of influence with Microsofts brain trust.

Lewin also is comfortable moving in Valley social circles where business tends to be conducted. Despite Silicon Valleys reputation as a melting pot and a land of opportunity, it has a tight-knit inner circle whose members pop up at PTA meetings in wealthy Peninsula communities or at restaurants where techies and venture capitalists hang out.

Perhaps best of all for Microsoft, Lewin believes in the .Net initiative. He claims Microsoft is doing the best job of any company thinking about Web services. It was Lewin who approached Microsoft—in December he sent Ballmer an e-mail proposing that he develop business around .Net for Microsoft in Silicon Valley, and Microsoft agreed to hire him in a matter of days. His timing was perfect.

Softbank managing director Heidi Roizen, also an Apple alum, says Ballmer and Gates had been looking for someone like Lewin for a while. Both Ballmer and Gates called her for references, she says, indicating the importance of Lewins position.

To be sure, Lewin will face plenty of critics. The OS and browser wars are over, but the scars remain. So do the questions about Microsofts motives, particularly in Silicon Valley.

In recent years, the Internet replaced Windows at the center of the computing universe. But with .Net, Microsoft is trying to regain top billing, say proponents and critics alike.

"Microsoft claims .Net is independent of Windows and DCOM, but nobody really knows—it is being invented as we speak," says Bud Tribble, who left Apple to co-found NeXT with Lewin and is now VP of engineering at Eazel, a startup that sells Web services for Linux.

"Think about single sign-on and the Web," says Tribble. "To play in .Net, who has to have a contract signed with Microsoft? The end user does, the service provider probably does. It puts Microsoft in a very central point of control. If an Eazel customer has a Microsoft wallet and wants to use it to buy an Eazel service, do we have to sign a contract with Microsoft? Were a tiny startup. I can imagine Amazon having those discussions right now."

Other industry pundits are sitting up and taking notice. "Microsoft is, in some ways, throwing everything away—their C++ compiler, COM [component object model], the Win32 API. Those are dead. They are not being enhanced," says Don Box, a co-founder of DevelopMentor, a software think tank that specializes in COM, Java and XML. "The .Net Common Language Runtime is the new operating system for Microsoft. Windows NT has been relegated to the Hardware Abstraction Layer."

Savior or Refugee? Lewins appointment, like every move Microsoft makes, has its naysayers. Lewin is one of several high-profile, one-time Microsoft competitors who have joined the company in recent times. Former Hewlett-Packard VP Rick Belluzzo ran Microsofts consumer business before being promoted to president and COO in February, and former IBM OS/2 evangelist Cliff Reeves, whom Lewin remembers meeting 15 years ago, joined Microsoft last month to evangelize Windows 2000 and .Net servers.

"Maybe Lewin has come to the same conclusion as the rest of us—that its better to be a pilot fish on the Microsoft whale than fish bait," quips Doug Cavit, CIO of McAfee, who sat on stage with Lewin during the Technology Centers opening ceremony.

Lewin says his thinking about Microsoft and Web services is built on learning he has done throughout his career. After graduating from Princeton, where he studied Jungian psychology and how organizations learn, he joined Sony as a salesman and moved to Silicon Valley. Sony exposed him to high-end graphics, and after Apple recruited him, he was a guinea pig for Apples work on user interfaces and ultimately became the person who built Apples presence in universities. He left Apple to co-found NeXT with Steve Jobs and Bud Tribble, among others. After a falling out with Jobs, Lewin went to GO in the early 1990s. At the time, GO was a startup working on pen computing.

GO struggled—due in part to competition from Microsoft—and in January of 1994 the company was sold to EO, an AT&T operation that folded six months later. But Lewin says his time at GO was valuable. "I walked away with the appreciation of not just trusting the technology, but thinking about the marketability and the convergence of technology and market entry," he says. "There was nothing radical about a desktop computing device, but pen computing was radical."

Hoping to pick up enough experience to become a CEO, Lewin consulted on several projects and then joined SmartPatents, which later became Aurigin Systems. Although he lasted less than six months as Aurigins CEO—Lewin and the founders disagreed on the companys direction—he learned to use the Internet to leverage data on intellectual property. Lewin resigned from Aurigin in August and took a sabbatical to clear his head. His conclusion? Work for Microsoft. "Where I came out was the evolution of open standards and the Internet as a platform, which is all about Web services. I believe Microsoft has the key—were back to the compute model I grew up in, where the person is the center as opposed to the back-end system architecture."

Lewin makes light of his reputation for honesty. "Life is short," he says, grinning and shrugging his shoulders. "Its easier to tell the truth so you dont have to remember everything."

The Best Policy Lewins reputation for honesty is vital to Microsofts ability to do business in the Valley. Roizen says, and Lewin confirms, that he spoke extensively with her before taking the job at Microsoft. He was concerned about the possibility of finding himself in a position where he would be fundamentally opposed to Microsoft. "Partnering is not something that has been in the Microsoft culture," she says.

Adds Kevin Compton, a partner at venture firm Kleiner Perkins Caufield & Byers : "Maybe the issues on privacy and so on will develop differently now that Microsoft has someone to speak for the Valley, as well. Maybe they will get heard." But Compton quickly adds that he has done several co-investments with Microsoft and has never found the company to be "unethical or immoral." Compton met with Lewin and Ballmer earlier this month to discuss how KPCB can take advantage of .Net.

Lewin also is quick to defend Microsoft. He says there is no substance to charges that Microsoft was responsible for the demise of GO, which in 1991 provided information to the FTC for that agencys ongoing probe into Microsofts business practices. According to Startup, a book published in 1994 by GO co-founder Jerry Kaplan, it was after Gates visit to GO that Microsoft came up with PenWindows, an OS to enable pen computing that bore a startling resemblance to GOs PenPoint.

"Theres another way to look at it," Lewin says. "When I left GO, there were five operating systems in development with no plans to enter alpha. The question of how to enter alpha was a Herculean debate. GO had a hard time on its own."

David Liddle, a former GO board member who is now a venture capitalist with U.S. Venture Partners, declines to comment on Microsoft, but he says Lewin excels at introducing new ideas to skeptical audiences. "Hes not a table-pounding revolutionary, but he can introduce a new technology in a win-win way, placing himself in the minds of customers and helping them to see why the technology is not just an irritant. He is a trustable and credible person in an industry not known for its credibility—a special and likable person and not just a lopsided Silicon Valley geek."

Those traits will be sorely needed. Most Web services are years away from mass deployment. No company has figured out how to make money on them, and even Microsoft partners have differing ideas of what .Net is and where they fit in to the initiative.

The startup Xdegrees has demonstrated an extension to Microsoft Outlook that shares files over the Internet, but CEO Michael Tanne declines to say whether he is talking to Microsoft. Tanne says the industry is hyping Web services as it does everything new, and that new technologies take years to develop. Myway.com, a Mountain View company that sells a Windows portal to media companies and telcos, has not decided whether to adopt .Net. But CEO Ed Wolyniec, who also sat on stage with Lewin, says he is encouraged because Microsoft has a bigger presence in Silicon Valley and is more responsive to technical issues than it has been in the past.

A New Threat? It has to be. Microsofts .Net is the biggest project Microsoft has conceived to date. Under the initiative, Microsoft will embed various Internet standards into its Windows operating systems. Next, the company will use and promote these standards to build various free and paid services for Internet customers.

Much like the Win32 API for Windows, Microsoft claims that .Net standards will be open to all comers. But depending on how it is executed, .Net could give Microsoft unprecedented control over customers and force partners to deal with the company in ways they would rather not.

Consider the uproar around Hailstorm. Announced last month by Gates, Hailstorm would provide XML services like Calendar and Contacts to customers who sign on through any Internet-enabled device supporting Microsoft Passport. Passport is a "black box" linked to Microsoft applications that authenticates customers and allows them to sign on once for Internet access, e-mail and instant messaging. Procomp—a trade association backed by Sun and Oracle, among others—has issued a white paper attacking Hailstorm and is trying to generate momentum around another antitrust lawsuit. Already, Microsoft has succumbed to public pressure and rewritten its Passport license terms, which originally contradicted its own privacy policy and gave it control over every customer communication sent through Passport. Microsoft calls the original license "an accident."

Says Box of DevelopMentor: "The whole Hailstorm thing bears the mark of the beast right now. Microsofts biggest challenge going forward could be convincing customers, partners and developers to adopt it."

In many ways, Microsoft.Net must overcome the same hurdles that Windows faced during its early years. Skeptics often wondered if the Win32 API was completely open and documented—many developers said it was not. And like Windows, Microsoft.Net cannot succeed without partners—thousands of partners that will be needed to license Microsoft technology and create and sell Microsoft Web Services.

Some partners are already on board. EBay, which Sun has touted as a prize customer, recently agreed to deploy Windows 2000 and Passport in exchange for integrating its commerce engine into the Microsoft Network (MSN) and other Microsoft properties. Microsoft also is reaching out to companies like McAfee, Plumtree and Myway.com that have built their architectures on Windows. Allegis director of business development Greg Price says he has turned Allegis into "a .Net poster child" and sought out Lewin to help.

Dont Be a Bully Lewin insists that the key to Microsofts success is good behavior, and while no one person can determine that, Lewins success or failure should be a good indicator of how much the company can really change. Microsoft partners describe the company as a house divided, with newer, more open-minded employees battling it out with the old guard. Its time, they say, for the company to start exercising leadership.

"Talk to any ISV that has worked with Microsoft, and theyll tell you Microsoft has a simple formula when it comes to bundling something into the operating system," says Brad Wardell, CEO of Stardock, an OS/2 veteran that writes desktop extensions for Windows. "If the ISV will license it to them cheaper than they could develop it on their own, theyll license it. Otherwise theyll develop it themselves."

But, says Wardell, this formula misses the costs of developing innovative technology. "Such behavior is OK in a startup, but Microsoft, as the market leader, should be behaving in ways that encourage innovation, not stifle it. Wouldnt it be nice if Microsoft had simply paid AOL what instant messaging is really worth and had a single standard?"

McAfees Cavit, whose company has bet its future on Windows, thinks Microsoft is making a sincere effort to break with its past. "Im not defending them by any stretch, but theyve been held accountable for their sins, and I do believe in the environment were in today, those business practices dont hold water any more."

Lewin hopes to build on that perception.

Mary Jo Foley of Ziff Davis Media contributed to this story.