Microsoft's Mundie Talks Long-Term Strategies

By Renee Boucher Ferguson  |  Posted 2008-02-27

Microsoft's Mundie Talks Long-Term Strategies

LAS VEGAS-Craig Mundie, Microsoft's chief research and strategy officer, said long-term research and development will carry the day at the company, despite mounting competition from the likes of fleet-footed Google, Yahoo's reluctance to accept Microsoft's $44.6 billion acquisition offer, and longstanding intimations from industry watchers that the software giant has lost its edge.

Mundie spoke Feb. 26 at the Goldman Sachs Technology Symposium in a question-and-answer format with Goldman Sachs analyst Sarah Friar. Mundie's main contention-reflecting his job function-is that Microsoft's steady drumbeat of long-term innovation represents the bigger picture for the company and for the industry as a whole, despite what appear to be bumps in the road.

"I think this comes from Bill [Gates'] own intuition that you're not just a one-trick pony, that you have to sustain this core research over period of time," Mundie said. "While it's a relatively modest part of our overall R&D budget, we do have Microsoft research and we do incubate new businesses. I contend that where most companies fail is, when they start to feel the margin pressure, the easiest thing to cut is the long-cycle R&D. They cut the R out of D. They start to farm it out. But it doesn't get you where you need to get when you're at our scale."

Mundie said research and development in computer science is the opposite of research in, for example, biology and pharmaceuticals, where federal funds and academic research are plentiful and companies are able to easily acquire research from academia. In contrast, academic research in computer science has fallen behind industry research over the past 10 to 15 years, Mundie said.

"Today computer science sadly has devolved in the university environment to be a lot more about training people to use the computers we already have, rather than what the computers should look like," he said. "So industry has to do that for itself. Today, notably Microsoft and Intel are carrying a disproportionate amount of the world's cost to figure out what computing will look like."

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Mundie said Microsoft's contentious bid to acquire Yahoo is just one example of the company's appetite for R&D.

When asked whether the Yahoo purchase would be more about technology or about people, Mundie said the reason Microsoft believes it has synergies with Yahoo is that there are a lot of redundancies in R&D between the two companies. The rationale is that with two R&D teams devoted to developing search engines or advertising systems or other components, the world doesn't need both. At the same time, according to Mundie, for Microsoft to develop state-of-the-art online search and advertising capabilities without Yahoo, "it's just a lot longer grind if we end up doing it on the ground," he said. "But we'll play the ground game if we have to."

Microsoft, Google and the Future


Likewise, Microsoft's relationship with Google-which boils down to Microsoft's faltering attempts to catch Google in the online search and advertising game Google essentially created-might well be a blip on the screen when viewed through the lens of long-term R&D, Mundie said. 

Microsoft doesn't look at Google with the thought that it will fail and Microsoft will succeed, he said. Rather, it's a case of where the "big pots of gold" are. While online search and advertising is an important pot, and one that Microsoft is committed to pursuing, it's only one. Unlike Google, Microsoft has other pots to pursue, including databases and operating systems, Mundie said.

There's also the company's long-term desire to move beyond the current computing methods to a more intuitive, analytically aware system that enables computers to analyze human behavior and react accordingly, rather like having an assistant that sorts through one's mail each night. The other piece of that innovation, Mundie said, is having integrated content across a whole plethora of platforms, including mobile, desktop and other computing surfaces that will emerge from Microsoft.

Those changes in computing will come about starting in 2010 to 2011, spurred mainly through the "radical rearchitecting" of the microprocessor, he said, adding that this shift will, for the first time, afford a change in the programming model as well as an interesting challenge.

"If I said we are going to make Word, Excel and PowerPoint 100 times faster, would you care? Probably not, unless we qualitatively changed what those things did or how you interface," Mundie said. "I think these computing changes-assuming we master them, and I am quite confident we will-will really create a whole new cycle and concept of applications that support people. I think we've become comfortable with computing as we've coded it and as we've known it and it's going to change quite dramatically."

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