FREE ESSAY ON MICROSOFT'S SUCCESS

MICROSOFT'S SUCCESS

Derek Foellmer
BA101 Nelson
03/22/99
Term paper
Microsoft's Success
In 1975 Bill Gates and Paul Allen created a company called Microsoft. A little more than
twenty years later, Microsoft is a leader in the field of computer programming. Gates and
Allen both had big plans for their fledgling company and came up with different ways of
managing people and products in order to create possibly the most effective and versatile
workforce of any corporation in existence. To study Microsoft's way of doing business is
to look at the company from many angles, from a managerial and organizational standpoint
to its process of developing products and services for its customers. To truly understand
Microsoft's way of doing business is to view how the companies different project groups
and divisions work together to create superb products that the consumers desire, there
really is no one true secret to Microsoft's success. 
From an organizational standpoint, Microsoft starts by using an extensive interviewing
process to sift out the smartest, most qualified individuals to perform all the tasks
associated with their specific workgroups workload. We start using the very best
practices, which was just hiring great people and having small teams...(Cusumano pg. 25)
Gates said of his selective hiring process. Every group manager, line manager and program
manager not only has the leadership and managerial skills needed to keep the process
moving along, but also the technical skills that their subordinates use. This may remind
some of the way the enlisted ranks in the military perform their assigned tasks. With a
leader who possesses the technical skills, decisions can be made without consulting
technical advisors, and can be made with a great degree of accuracy. Regarding his choice
of middle management Gates stated We don't have non-technical management trying to make
technical trade-offs. (Cusumano pg. 26). Microsoft often promotes from within, again
similar to the military, this provides the greatest common knowledge of the tasks at hand
and how to effectively get the job done. By using these types of people as managers,
small workgroups could become large workgroups but still function as efficiently.
Microsoft also thought that all of its development should be performed at one site, this
allowed project groups to share information and test their specific programs together
with the least amount of downtime and hassle. Microsoft's workgroups are also organized
by the product they are designing in order to allow these groups to function together and
exchange technical information easily, People in these jobs work in multifunctional teams
organized by product, with some mechanisms to integrate across the product groups.
(Cusumano pg. 35).
Microsoft not only has a formal organizational chain of command, but also what they
consider a brain trust of employees from every level who work together to create product
ideas and plans of attack. Microsoft also does a good job of retaining its employees by
giving them a plethora of stock options and retirement plans to fit everyone's own
personal investment style. While Microsoft's salaries may seem a bit on the low end of
the scale and the fact that they pay no overtime might discourage some, more than a few
of the companies employees are millionaires. Approximately three thousand out of
Microsoft's 17,800 employees are also millionaires due to the stocks they own...(Cusumano
pg. 117). Microsoft has biannual bonuses of up to 15 percent and allows employees to use
up to ten percent of their salary to buy stock at 85 percent of the market value. Most
employees work very long hours sometimes for a few days straight, Jim Conner said of
Microsoft employees You get weird cases where people actually move into their offices...
I would have to order people to go home because they were exhausted. They would work for
three or four days straight...(Cusumano pg. 95). With an organizational setup where
everyone knows everything about the assignment they are currently working on and all
employees feel included and have the drive and the technical skills to get the job done,
it is no wonder that it has one of the most productive workforces around.
Microsoft not only leads the programming industry, it helped define and create the
industry. By creating innovative and useful programs, Microsoft also created an ever
expanding market for their products. By creating the best in GUI (graphical user
interface) operating systems, Microsoft paved the way for a huge home PC market. Along
with the home PC's came a brand new market for more operating systems. By creating a new
market they insured a continued demand for products which Microsoft is more than willing
to supply. Operating systems now account for about one-third of Microsoft's revenues
(Cusumano pg. 132). Microsoft also uses another strategy to produce continued demand for
their products by continually updating their products with new capabilities and features,
which in turn eventually renders older versions of the same program obsolete. Chris
Peters stated that In a sense Office makes the individual apps(applications) obsolete
(Cusumano pg. 146). Microsoft also enters into exclusivity contracts to keep the
companies products in the forefront and to keep sales from slowing down. Hardware vendors
can reduce the OEM price by as much as $30 dollars if they agree to install Windows 95 on
50 percent of their PC shipments or adopt the Windows 95 logo and sign a contract by a
particular date (Cusumano pg. 161). Entering into these contract makes perfect sense from
a business and marketing standpoint, but has drawn allegations of monopolizing the
industry from their competitors. While it is true that Microsoft has what would appear to
be a monopoly in this industry, it would be absurd to have more than one or two operating
systems because it would limit the supply of software for each system. Microsoft simply
has a good product and an excellent marketing strategy. Microsoft's contracts with
leading PC producers in effect isolated IBM when it tried to introduce such alternatives
to Windows a Presentation Manager an then OS/2 (Cusumano pg. 161). By using strategies
like these Microsoft has become and remained a leader in the industry.
In order to be proficient at producing and shipping products on time and with the least
amount of problems, Microsoft uses certain methods of production such as continually
testing their programs as they build them. Also as mention before they develop all
programs at one site. Despite the benefits of electronic mail and it extensive usage at
Microsoft, single-site development allows project personnel to get together physically on
a regular basis and to explore ideas interactively (Cusumano pg. 285). By allowing
different workgroups to share ideas and share problems they encounter, these workgroups
will be more efficient and hopefully prevents them from running into the same problems
that their fellow employees encountered. By continually testing the programs as they were
developed, Microsoft enables the immediate shipment upon completion of the programming.
This process of testing frequently also allows Microsoft to keep a close eye on the
progress of each project and allows them to put more programmers on the project if needed
in order to keep it on track. As stated by Mike Maples, If you do it right, the time from
when you finish the product to when you can get someone the whole product is very
short.... It does make the process much more predictable. You know much earlier in the
process when you're in really bad shape.... You know where you are (Cusumano pg. 277). By
developing the product at one site, with multiple teams of programmers working together
on separate sections of the programs, and by having the program ready to go the second it
was completed has allowed Microsoft to introduce products and programs to market quickly
and inexpensively.
Bill Gates truly has a keen eye for business and has steered his company in the correct
direction in order to create a well organized corporation. Microsoft has used good
policies in order to build a strong, intelligent and loyal work force, not to mention
excellent benefits and stock options in order to keep their employees happy. By using
middle managers with technical backgrounds Microsoft allowed project managers to make
technical decisions without the concern of making technical tradeoffs. By working in
small groups that overlap in responsibility and work at one site, employees could be as
productive as possible and do their jobs with the utmost precision. By frequently
updating programs and entering into exclusivity contracts, Microsoft has made sure that
there will be a continued demand for their products in the future. Microsoft creates
markets for its products and product ideas by designing new technology and getting in on
new technology early on. Microsoft's frequent testing of programs and products during and
between every stage of the design process allows them to make sure projects are running
smoothly and also allows them to ship the finished products to market quickly. Bill Gates
has proved that he and Microsoft have what it takes to make it in today's business world,
with good policies and good employees Microsoft is here to stay. 
Bibliography
Bibliography
Cusumano, Michael A., Microsoft Secrets, New York,
The Free Press, 1995.