Down home with Jim Barksdale

Down home with Jim Barksdale
By Margie Wylie, Nick Wingfield and Jai Singh
Staff Writers, CNET NEWS.COM

Jim Barksdale seems like a sporting Southern gentleman, perhaps the kind of man born to money but who chose a career as gentleman farmer. Maybe it's his easy Southern accent, but Barksdale seems too, well, civilized to lead the fiercely competitive businesses at which he's been so successful.

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Barksdale made his mark at Federal Express where he served first as chief information officer in 1979. At FedEx, he perfected the delivery company's sophisticated electronic tracking systems. (Now you know who to silently thank the next time FedEx tracking saves your bacon.) He left in 1991, after being the company's CEO for eight years, to lead McCaw Cellular as president and CEO, where he remained through AT&T's buyout. In 1995, he stunned industry watchers by signing on as the head of Netscape Communications, an unknown, tiny software company.

Today, about 85 percent of all Web browsers come from Barksdale's upstart company. But with Microsoft entering the market, it can't last. Talking to Barksdale, you get the feeling that the wily fox's plan to march Netscape onto Microsoft's turf just might work. Always the gentleman, Barksdale refuses to belittle his worthy opponents. He isn't, however, above tossing a little wit at them through homilies so down-home they'd make even Ross Perot blush.

NEWS.COM: Why were you attracted to Netscape?
Barksdale: I looked at this as the product that people want. Now, [as far as] whether we're ultimately [going to] win all the battles? I'm sure that we'll win some and lose some. But the moment I saw it, I thought, "This is it," because it was a very small deal at the time and very high-risk. I gave up a lot to come here.

But it's paid off?
It has. High risk, high return.

NEXT: Selling intranets to the IS guy

Selling intranets to the IS guy

Who do you pitch on this?
A lot of times what's happened to us is sort of pull marketing. In other words, they call us. They want us to bid on or help them build a departmental Web site [for] the marketing department or the HR department. People that were sort of the departmental buyers [the HR department] picked up the money, deployed it with the CIO's blessing and the IS guy's blessing.

Then what happened, let's say late '95 to early '96, was that the CIO got Navigator. All of the sudden, you went from no corporate budgets for Internet software, to the last time I saw, where about 70 percent of the major companies having a budgeted line item for purchasing this kind of software.

We've seen some applications that some of our customers have put up that were going to cost $22 million. They stopped, they turned around, took the same back-end databases they had, put it on the intranet, and brought it up for less than $1 million in a matter of weeks.

Do you think it's possible to do everything with Internet software that you can do with Lotus Notes today?
No, but you can do a lot of things with Internet software that you can't do with Lotus Notes, too. It's not a direct overlap; each has its advantages.

Notes is a very expensive cost-of-ownership proposition. We can do many of the functions you can do with Notes and many more that you can't do with Notes. We think that by the time you get to release 4 of the Navigator and beyond, you get into some very good collaborative opportunities, both on the client and on the server side. So the world is changing.

I think we will see the day where we are certainly functionally equivalent to Notes, plus a lot of other things that you get with open-standard software. Look at Notes more or less as a specific type of a database. Hook all of [those databases] together with an intermediate type of software, such as open standard Web-based software like we make.

That's a big market! It's the thing people like me have been dreaming of for years. How can you ever get out of the world of all these little islands that you've built over 20, 30, 40 years that you never could ever quite get connected, not just within your company, but with your customers? Notes wouldn't be a very good solution for all that.

We've worked with Lotus. I have great respect for them. And I don't mean to imply that they're not a real player. My goodness, I'm sure Lotus has the largest installed base of collaborative software on the planet. We wouldn't take that away from them.

Then again, IBM probably sells twice to three times as much corporate software as Microsoft or Lotus. A lot of that is certainly license renewals. I used to pay a lot of that and it used to frost me because I thought, "Wait a minute! I'm paying huge amounts of money and there's no way to get out!" I loved IBM; it was a great vendor. Microsoft's a great vendor, but I'm bringing up 10,000 lines of code today and it only runs on its software, and I said, "How do I negotiate with somebody like that?"

That's why I love this product. If you don't like Netscape software, it has a very low switching cost. You can go to somebody else because it's all built on standards. We have to sell it like anybody else and we're not the biggest guy out there and certainly other guys have more salespeople and more marketing dollars and more PR people, but at least we get invited to the dance. A year ago, we didn't get invited to the dance. Today, everybody who's buying full-service Internet wants to talk to Netscape. Now they may want to talk to two or three besides Netscape--Lotus and Microsoft certainly, as well as other players--but at least we get a shot. That's a great thing for a company that's two years old. You get to play in the big leagues.

NEXT: Upgrade early and often

Upgrade early and often

IS managers typically are used to upgrading software every 18 to 24 months. Are there complaints about upgrading Netscape so often?
Yeah, you hear that. It just caused us to rethink some things. That's the good news [and the] bad news of the product. Frankly, I have never been in a business where people said, "You're coming out with new products too quickly," but that's the issue in this business.

We tell all the corporate guys they probably shouldn't be downloading all the beta [test software]. If you want to play with it and help us debug it, fine, but don't be using the betas for production and don't let people download them.

From release to release, let's say it is six months. Maybe you can skip a new release if it bothers you; it doesn't hurt you to not have it. Of course, we would like for you to have it. There's still a very high percentage of 1.0 releases out there, with people using it and very happy with it. It allows them to do a lot of what they want to do. We're talking about a lot of different ways to help ameliorate that problem with different internal software products that could help manage that for you.

Electronic distribution?
Yes, within the company. That's what our catalog server and other products in our new development kit do to make sure you can lock out certain functions and features, and lock down only those features you want for your corporate users.

Think of PointCast: I get upgrades almost weekly. You don't update the whole thing; you just add features. Maybe we're moving from the world of releases, which we in the software industry have been in--God didn't make it that way--to just updates that are frequent. I just get feature, feature, and feature. So then what's the business proposition? Well, maybe the business proposition is just a license. We offer you a license that has unlimited upgrades. So you just continue to get a better and better product.

Then there are other revenue models. In our case, we get a fair amount of revenue from people who want to advertise. Or in the case of PointCast, it makes all its money from the advertiser pushing advertising at you. So there's this whole food chain I see turning over with great opportunities and great risk. What's the revenue model? What are people willing to give for this in a fair and even exchange?

NEXT: Competing with you-know-who

Competing with you-know-who

Do you think Navigator's going to be able to hold onto this 85 percent browser market share?
I wouldn't think we'd hold on to 85 percent, but we think we have a big start. We were the first to market; Microsoft has been delivering browsers now since last August. It's captured, I think, a 10 percent share, so things don't move as fast as people want to believe they do. But certainly the company is focused on this, and as clever as Microsoft is, with its huge amount of resources and extremely competitive nature, certainly it will capture some of this.

One of the best uses for browsers is to browse for a browser. And so as the market grows and it distributes Internet Explorer, 40,000 sites now let you click and download the Netscape Navigator. That's how we get most of our hits and most of our downloads. What happens is people bring both down and kind of play with them and then pick one. Just because you got one from your ISP doesn't mean that's the one you're going to stay with. I think it's extremely unrealistic to expect that just all of the sudden, next year [Microsoft] will have 85 percent and we'll have 10 percent.

What do you think is the more likely balance?
I think if it's a two-horse race that it's 50-50.

By next year?
Oh, I don't think quite that soon. Generally speaking, markets tend (depending on how many players are in it) to divide up because some people like vanilla and some people like strawberry. I don't try to kid myself, but I certainly think we can differentiate our product. I think it's still a better product and will continue to be a better product. Look, if Evian can differentiate water and compete with free water, certainly we've got a chance with something as sophisticated and complex and beautiful as computer software to differentiate our product. After all, our only focus here is Netscape.

That was always true when IBM focused on OS/2 as a better product. In everybody's estimate, it was a better product, but that in itself didn't amount to much.
Because Microsoft was first to market. I'm first to market here. I think being first to market carries a lot of weight.

If IBM had come out with OS/2 in 1981 instead of mid- and late '80s, what would have happened? That's the issue here. But I do think being first to market and more features and certainly the intensity of our focus are great advantages, but that doesn't mean that you win every battle.

I think we would have been very foolish to have ever thought Microsoft wouldn't have seen this as something so important. I think it has surprised us that it has taken the company as long as it has, but it's certainly not surprised us that it's here.

The fact that Microsoft is willing to continue to give it away for free as long as it takes, does that make a big difference?
Most people, an awful lot of people, get Navigator from an ISP who has paid me for it. The ISP doesn't charge them, so they get it for free. I think that we can continue to differentiate it and demand some price. We have to because that's our source of revenue. Microsoft can give it away and get money from the other end.

As Microsoft embeds the browser into the operating system, will users be less likely to switch?
Not really. On my screen and on most people's screens today, the Navigator or the Internet product is on the front. I very rarely look at the operating system front page and haven't in years or months. However, that's one way of integrating a product. That's an argument to be won or lost over the next year or two.

I think we've got a few tricks up our sleeves. I don't think that pulling your files up with an HTML browser is all that difficult a thing to do, and I think we can make the front page of the browser just as exciting an experience and just as full-function as you can make an operating system, in terms of searching your files on your hard drive and searching the Internet. We've always argued that HTML was a much better metaphor for a desktop page than these goofy icon things laid out on screens, where you can never find what you want to find if you've got a lot of stuff in there.

But your point is well-taken and certainly one we're acutely aware of. We don't want [Microsoft], by doing that, to all of a sudden pull everybody back into that keg. Windows is not a standard product. It's not open or Internet-compliant. We think that's a critical point here.

Can Microsoft do it? Sure it can do it. Can we pull those functions up into the client? Sure we can. We think that we have an awful lot to gain by doing things like that. It forces us to be more clever. That's good for the consumer.

Will Navigator become an operating system as Microsoft alleges?
No. We think it will be viewed as a platform, but certainly there are some functions that your operating system already does very well and we don't care to devote the resources to do those things. The reason Microsoft builds those products was to have independent software vendors like us build products to run on top of them. Here we build a product that runs on top of it and they say, "We want that one down in here." Now wait a minute!

Now, if you start doing things that are proprietary, be that marketing advantages or product advantages that in some way or another make it a unlevel field in a legal sense, then there are other avenues to take care of those things.

Such as what, the Justice Department?
Microsoft sent us a letter the other day telling us you can't have but 10 users connected to a Workstation NT server. The week before, the company had announced that it was taking that out of the product but wanted to leave it in the license just to protect everybody! Well, that's absurd. We've tested those products at a million hits a day. There's no reason to have an artificial governor. People put a lot of stress on servers all over the world and the vendor never says, "Oh, don't try that!" I think those are the kinds of things I'm suspicious of if you asked me. And we did file a complaint with the DOJ when they sent us that letter. That's a ridiculous position for them to take. I think that they probably regret it, quite frankly.

Look, we all push and shove and it's a competitive war; I don't mean to claim it isn't. I think, though, that they acted on something that they probably shouldn't have. The company's position is untenable and we will not abide by its position. It's just trying to force people to pay more for a product that has no other inherent advantages.

With Microsoft having an existing consent decree that was set up to allow other people to compete with them, particularly in the OS space or platform space, to then do things that would stop you from competing, that specifically violates its own consent decree that it agreed to just two years ago.

Certainly, we're in a very competitive market. That's good for everybody. That's good for us. It keeps us more on our toes. We're thinking probably more actively than we would if we didn't have any competitors, but I've never been in a business that didn't have a good competitor. I think a good competitor is almost a blessing; it keeps you really pushing out there. Both companies rise faster than they would have separately. If Netscape hadn't come along, would Microsoft be so focused on the Internet? I don't think so. That's good for its customers. We would wish them well. We've certainly created a good business for ourselves. We're the fastest growing software company in history.

NEXT: The Barksdale view

The Barksdale view

What do you worry about at night? What keeps you up?
I don't. I get a good night's sleep.

Have you been working harder since Microsoft got serious about the Net? Are you putting in longer hours?
Not really. We always assumed that it was going to get serious about the Net. We've been dead serious about what we needed to do from day one. We're very focused around here. I have cautioned our guys to not get so focused on any one competitive thing. Probably the biggest competitor we're going to have five years from now is some company that you and I have never heard of that came up out of some garage around here, like all of these things do.

Is there a Barksdale's Law?
Keep the main thing the main thing. Stay focused on creating and keeping customers. As long as we do that, we'll do fine. If we get distracted and start worrying too much about looking over our shoulder, I think it would be bad for us. But I think we would be naive and foolish if we didn't stay constantly alert to all the forces around us.

Doesn't that mean that you would to expand in other areas, like Microsoft getting into publishing or Intel getting into all these other side ventures?
I don't think so, not for a long time. I also don't want to compete with my customers. I learned that a long time ago that you can get very distracted trying to pick up these niche markets when you've got this huge thing, unless you just stay focused right on it. It's got all the business we could possibly hope for. Now, there are certainly branches and things you can add to, but they're part of the main thing.

That's my whole point: Risk a little company and it gets a reputation like ours, and boom! It runs over here, tries to do this, and wants to be all things to all people. The next thing you know, it's spread its resources so thin that it can't stay focused on the main thing. You and I know a lot of companies that that's happened to. It's not good when you don't have a lot of resources. Now, when you've got a huge amount of resources like Microsoft, it can go get into the TV business with NBC and it can get in the movie business, etc., and still stay very resource-intensive on something like ours. Quite frankly, I think those things are mistakes and distractions, but I'm not here to worry about its strategy.

If you're going to be in the publishing business... [Say] you're Microsoft, and you're going to be Cityscape. Now, what do all the newspapers do? They come to me, right? Then you're going to be in the TV business. What happens to the other networks? They want to talk to me. When you get those kind of things, you create new competitors against your main product. That just argues that you'd better be successful in those other businesses. I don't know of any business that's got enough really focused savvy and strategy and brand and marketing throwaway to be successful in that many different kinds of businesses, and I just find that a lot of times those things become distractions and mistakes. But that's their business to worry about. I don't know where Microsoft's going with its business; maybe its going to become a media company. Then fine, go that way and leave me alone!