Brother Bill and the next Holy War

I have known Bill Gates since his company was called Micro-Soft and its headquarters was in Albuquerque.

The man is an adrenaline junkie and nothing jump-starts his heart more than a well-focused enemy. Gates needs an Enemy of the Day the way you and I need water. He has built his company on a series of jihads, identifying competitors that he can focus on, analyze and vanquish.

Gates relishes tapping into his mental powers to figure out a way to defeat a foe. Sometimes the enemy can be overcome with technology, sometimes with clout, sometimes with guile, sometimes with size.

Early on, the enemy was CPM, an operating system available on the first IBM PCs and the industry standard at the time. Later, it was Novell, whose NetWare was the industry standard for LAN operating systems -- for a while. Then it was application software, where Gates displaced WordPerfect, the market leader, with Word. Lotus 123, the dominant spreadsheet company that IBM bought, became toast next to Excel. Who can forget the OS2 vs Windows war with IBM? Let me know if you are picking up a pattern here.

Gates' new enemy is Google but nothing excites him more than recognizing in the nick of time that an enemy is at the gate. This is exactly what he did with Netscape -- first sound the alarm, then rally the troops, then plan short, stopgap measures until he could bring in the heavy cannon.

Search technology, in and of itself, doesn't threaten Microsoft, but search technology as an engine to enter more businesses does. If you view Google as a platform for a variety of new services, then Google is a very real threat. With Netscape, all Gates had to do was bundle Internet Explorer and offer it for free to choke off Netscape's air supply. But with Google, what is Gates' solution when the competitor's product is free, supported by advertising revenue and outrageously profitable? This is the reason this battle is so intriguing to Gates.

Also realize that Microsoft today is already fighting wars on several fronts - XBox vs Sony, and Sony is winning; Microsoft vs Linux, and Linux seems to be gaining; Apple and music (iTunes); Firefox (free) vs Internet Explorer; BlackBerry -- but all these are chump change compared with the Google Wars -- with Gmail battling Hotmail, Google Blogger going head-to-head with MSN Spaces, Google Picasa fighting Microsoft's photo management and Google Hello facing off with MSN Instant Messenger.

The key to Google is that its funding is independent of desktop buyers - the company has figured out how to get paid for "eyeballs". By using Google's automated, discrete matching system, advertisers can find potential buyers. But Microsoft has never sold advertising, so it is a skill not evident. So far, Microsoft has committed about $US250 million in development and advertising, but that might just be the opening gambit.

Gates has just what he wants: a new Holy War.

Howard Anderson is the founder of The Yankee Group and lectures on technology at the Massachusetts Institute of Technology

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