September 7, 2008

Beyond the Ads, a Fevered Campaign to Improve Vista

By Steve Lohr

Yes, Microsoft is spending hundreds of millions of dollars on an advertising blitz to polish the tarnished brand of its Windows Vista operating system.

But according to Bill Veghte, the man responsible for sustaining what may be the most lucrative franchise in history, the ads are just "air cover."

For more than a year, Veghte and his team have been working on the ground, developing ways to transform the experience of buying and using personal computers that run Microsoft software.

Corps of Microsoft engineers, for example, have been dispatched to tweak hardware and software to make Vista PCs faster and less prone to crashing. Microsoft has stepped into the world of PC retailers in a way it never did before, with training and advice - and is even paying to put hundreds of "Windows gurus" in stores.

By now, Microsoft insists that it has resolved most of the technical problems surrounding Vista, which was introduced in January 2007, after repeated delays. Many industry executives and analysts agree.

Yet Vista's travails have opened the door to alternatives to Windows as never before. Windows, to be sure, still commands more than 90 percent of the market for personal computer operating systems. But Apple's Macintosh operating software - which runs only on Apple machines - is gaining ground, especially in the United States.

Microsoft's stumbles have also given momentum to the shift of software away from the PC and onto the Web. And Web-based programs for e-mail, word processing, spreadsheets and other tasks run on a browser, undermining the value of the underlying operating system. Indeed, Google's entry into the browser market is an implicit declaration that the browser is increasingly supplanting the PC operating system as the strategic software gateway to computing.

Microsoft's Internet Explorer currently holds more than 70 percent of the browser market. But Web-browsing software is free, a byproduct of Microsoft's decision to bundle its Internet Explorer with Windows in the 1990s, partly to undercut the early leader in browsers, Netscape Communications.

Microsoft makes its living largely off Windows, and a very good living it is. In the year ended in June, Microsoft's Windows group generated revenue of nearly $17 billion and operating profits of more than $13 billion, a phenomenal 77 percent margin.

The lucrative Windows business depends on consumers and corporations upgrading to new versions of Windows.

"What we're seeing with Vista is that for the first time, some significant portion of consumers and business customers have decided it's not worth upgrading," said David Yoffie, a professor at the Harvard Business School. "If they don't, the end of the franchise is at hand."

The main Vista problem, Microsoft says, was that given the delays, uncertainty and significant code changes in the operating system, the rest of the industry was not ready when Vista finally arrived. There are one billion worldwide users of the various versions of Windows, and Windows is the hub of a vast business and technical ecosystem. Hundred of thousands of hardware devices and software applications run on Windows. The third-party software and hardware requires connecting programs, called drivers, to work smoothly with Windows.

Vista, a big shift from its predecessor, XP, required a lot of these new connecting programs to be written - and Microsoft did a poor job of communicating how much work was needed. Often, Microsoft says, an older driver still worked on Vista, but it made the PC sluggish or it crashed Vista. Today, 77,000 hardware devices and components run compatibly with Vista, more than twice the number when Vista was introduced.

"We are in a very different position with Vista than we were even six months ago," said Veghte, senior vice president for Windows strategy and marketing. "And there are a lot of people holding forth with criticism of Windows Vista that have not used Vista, or not recently."

Just after Vista shipped, Steven Ballmer, the Microsoft chief executive, tapped Veghte to move to the Windows business. In his 18 years at Microsoft, Veghte has had a wide-ranging career in sales, marketing and software development. (He holds two patents.)

Vista's troubles were seen within Microsoft's management ranks as an opportunity. Mike Nash, who had worked with Veghte before, signed up to join him.

"There was so much we could do better," said Nash, who is vice president of Windows product management. "Our task was to shake things around and make the Windows business much more sustainable over the years."

In a meeting in July 2007, Ballmer signed off on Veghte's plan to step up investment in the Windows business. In broad terms, the strategy was to reposition the Windows brand in a multiyear marketing campaign that Veghte called "a sustained conversation about what Windows is." The team dubbed its mission "FTP 168," short for Free the People 24x7. To them, it means the freedom to do all manner of things with Windows on a PC, cellphone or on the Web, at any time.

The campaign is meant to move the Windows brand decisively beyond the PC, so the Windows business can thrive even if the PC becomes less important in computing. Microsoft believes its broad reach in PC, mobile and Web software gives it the upper hand against rivals like Apple or Google.

"It's about the PC, phone and the Web, and Microsoft and Windows can connect those for customers in a way no other company or technology can," Veghte said.

To set more detailed plans, Veghte plucked 10 other managers from across the company, and the group set up offices away from the headquarters in Redmond, Washington, in an office building in nearby Bellevue, which they called "The Bunker."

In their opening meeting, Veghte, according to team members, began by saying three things: Your personal reputations are on the line. We won't automatically respect what Microsoft has done in the past. We'll try and test things quickly, in rolling pilot projects.

In a Seattle warehouse, Microsoft built a "retail experience center" to test shopping concepts and behavior. With retail now accounting for 40 percent of PC sales worldwide, and growing twice as fast as other sales channels, Microsoft decided it had to get more directly involved instead of just delivering products and promotional subsidies.

"We weren't coming in with the tools and people to help them," said Bill Brownell, general manager of retail marketing at Microsoft.

Microsoft is conducting more retail research and sharing it with retailers, and paying for a few hundred Windows experts in Best Buy, Circuit City and other stores. These "Windows Gurus" technically work for employment agencies, but Microsoft recruits them, pays them and trains them.

Manny Gouveia, 30, is a "Windows Guru" in Orlando, Florida. A college graduate and technology enthusiast, Gouveia received a seven- day training program at Microsoft, regular online training and participates in two conference calls a week to share information and tips with Microsoft and other gurus. He works at a Circuit City store, where he demonstrates how a Vista PC can be used to edit movies, post family photos on Web sites and record television shows.

"We're there to give people a sense of the great experiences they can have with a PC, not just e-mail and Web browsing," Gouveia said.

"People do come in with the view that Windows Vista is not up to par," he said. "But I can turn that perception around in five minutes."

With PC makers, Microsoft started an initiative called Vista Velocity to improve performance. It includes days of specialized testing, close collaboration between engineers at Microsoft and PC makers, fine-tuning software programs and hardware drivers. On some models, for example, the boot-up time for Vista has been reduced by 60 percent.

At Sony, 20 percent of its Vaio consumer models have gone through the Vista Velocity program so far, and the goal is to eventually have them all go through the program, said Mike Abary, senior vice president for marketing in Sony's Vaio PC business.

The result, Abary said, has been significantly improved performance that should make for a "more compelling why-to-buy proposition."

"There has been hesitation in the marketplace," he said.

Originally published by The New York Times Media Group.

(c) 2008 International Herald Tribune. Provided by ProQuest LLC. All rights Reserved.