Tuesday, August 27, 2013

Young Tech Sees Itself in Microsoft’s Ballmer

These days, it is Microsoft’s turn to fend off the upstarts as it struggles to compete in a computing world that is increasingly mobile and based in a “cloud” of Internet-connected computers to which many customers gain access at the same time. It’s all part of the inevitable life cycle for technology companies.

“Getting disrupted is the defining characteristic of this industry,” said Aaron Levie, the chief executive of Box, an online data storage company. “You can even have a near monopoly like Microsoft did, and then everything gets redefined.”

Mr. Ballmer will not have to take Microsoft into the future; last Friday, he announced that he would retire within a year. But young executives like Mr. Levie are not gloating over Mr. Ballmer’s exit. They know well that one day — if they are lucky to be as successful as Mr. Ballmer — they could face the same problem.

“It just feeds my already-healthy sense of paranoia,” Mr. Levie said.

The rare tech company manages to thrive from one generation of technology to the next. Only a few of the big ones — I.B.M., Intel and Apple — have done it. And it is not yet clear if Microsoft has a clear path to joining that list of multigeneration kingpins.

Mr. Ballmer was closely identified with the personal computer revolution, and later with corporate software running on computer servers. Those innovations brought Microsoft the cash and talent to adapt to the early Internet with the Explorer browser, and diversify into online gaming.

What it could not buy Mr. Ballmer, the younger generation in tech says, was a clear vision of the future. Apple and Google have led development of smartphones and a long list of companies like Amazon.com have led the development of cloud computing. Microsoft, meanwhile, has often had to play catch-up.

“All technology aspires to be legacy,” said Scott Dietzen, chief executive of Pure Storage, a data storage start-up. “It’s that or obsolescence.”

“The most powerful factor,” he added, “is that the very best talent is drawn to doing something disruptive to the legacy, something new and fresh. And in this business the best are so much more productive than anyone else.”

During Mr. Ballmer’s tenure as chief executive at Microsoft, the company had considerable growth. Mr. Ballmer led the creation of the Windows Phone operating system, which received good reviews but has struggled to gain traction in the market, and Microsoft’s efforts in cloud computing. Also under his leadership, the company acquired Skype, an Internet communications service, for $8.5 billion, and paid $1.2 billion for Yammer, a social network for business.

But the breakthroughs, whether they were in Internet search, smartphones or Internet-based software, have usually happened somewhere other than Microsoft.

Mr. Levie, 28, grew up near Microsoft’s headquarters in Redmond, Wash. Several of his schoolmates’ parents worked for Microsoft. Few of his generation, he said, followed their parents there. Among those who did, he said, few stayed.

“I think about being 40 or 50 and being disrupted,” said Mr. Levie, whose company was founded in 2005. “You can be a visionary, and have a great business model, but no tech company can avoid it. There is no quick way to transition into the next thing.”

The closest to a safeguard, he said, is to be “like Amazon: race to the bottom on prices ahead of your competition, keep profit margins low and make things tough for them.”

Mr. Ballmer joined Microsoft in 1980, and its breakthrough software, Windows 3.0, was released in 1990. Its stock peaked in December 1999, shortly before Mr. Ballmer replaced Bill Gates, Microsoft’s co-founder and his close friend, as chief executive. Since then, Microsoft’s shares have fallen about 33 percent.

This article has been revised to reflect the following correction:

Correction: August 26, 2013

An earlier version of this article misspelled the name of the start-up for which Mr. Ozzie recently raised $4 million. It is Talko, not Taiko.

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