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May 20, 2007

Microsoft Memories – Sleeping with Telcos

“So we get married but we don’t sleep together?” I asked billg (Bill Gates) facetiously.  It was a late night meeting which had coalesced in his office over whether to make a huge deal with AT&T or MCI.  Interested parties drifted in as word of the decision in the making spread through the company.

My point was that the cultures of AT&T and Microsoft were vastly different, that any marriage would collapse under the weight of incompatibility.  We didn’t generally get along with the AT&T people we met and they didn’t appear to like us much either.  Billg knew we made fun of them when they left.

I was hardly disinterested.  An ad hoc group I was part of had just finished negotiating what we thought was a super deal with MCI (this was the pre WorldCom MCI that had started as a telecom upstart).  When we brought our deal to billg for approval, we found that another group was as far along as we were but with AT&T as the intended. We sorta knew they were talking to AT&T but had no idea they were making so much progress.  They probably felt the same way about us.

Their negotiations had suddenly leaped forward due to an accidental meeting of an AT&T exec and a Microsoft exec on a plane.  They’d talked all about content and content excited some people at Microsoft (and lots of people at AT&T).  The MCI deal by contrast was much more about the kind of content people create themselves – email, for example, and chat.  These were in the days prior to the launch of MSN (Microsoft Network) and whichever telco we did a deal with would be a big part of that network and help determine its nature.

BTW, it wasn’t unusual for two groups to be working in parallel and in competition at Microsoft.  It seemed to be part of Bill’s management style that he’d withhold deciding between groups until he saw which one was doing the best job.  This was as much true in the development of software capabilities as it was in negotiating partnerships.  The process may seem wasteful and it was sometimes frustrating but the competition often made us do better than if one group were granted a monopoly on developing an idea.

In this case, even “group” was not well-defined. I was the business unit manager (BUM) for Microsoft Mail and the to-be-released Exchange product and had no formal responsibility for telco relationships.  But I knew something about telco technology and knew some telco people from former lives so I got to work on these deals as long as it didn’t interfere with my day job.  Besides, I was almost the only executive who was more than half the age of the telco folk.

“We don’t actually have to have that much to do with them on a day-to-day basis,” billg said.  “We just do this strategic stuff with them, use their network, and get access to their customers.”

“So,” I countered, “we marry them and we don’t only not sleep with them, we don’t talk with them either.”

The argument went back and forth well past midnight as I remember.  Probably something more persuasive than my marriage analogies was used because finally billg decided: “OK, I’ll call Bob Allen (then AT&T Chairman and CEO) in the morning and tell him no deal.”

“Great,” I said, “do you want me to call MCI and give them the good news or do you want to do it?”

“We’re not doing a deal with MCI, either.  All the same arguments apply.” said billg.  “They’re a telco, too.”

Microsoft didn’t do any big telco deals that year or for many years after.  Ironically, a little more than a year later I accepted a job at AT&T developing that company’s Internet strategy.

More Microsoft memories:

Microsoft Memories

Microsoft Meetings

How MAPI Beat VIM (an historical footnote)

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