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Keeping Microsoft in the frame

Kevin Johnson has two huge tasks: Chase Google with Windows Live and get the operating system back on track.

As if chasing Google wasn't a big enough challenge, Microsoft executive Kevin Johnson also has to get the Windows unit back on track in his spare time.

In last year's reorganization, Microsoft's former sales chief was promoted to head a business unit that includes desktop and server versions of Windows, as well as Microsoft's online services efforts under the MSN and Windows Live brands.

In that role, Johnson has to work to get Vista out the door without any further delays and at the same time help reshape the unit into a more nimble one that can release products far more often than it has in its recent history. On the services side, meanwhile, Johnson is faced with trying to overhaul MSN yet again, this time transforming it into an ad-funded effort that can compete with the myriad online offerings from Google, Yahoo and others.

Johnson took some time Wednesday to speak with CNET on a variety of topics, including how he splits his time, how to get the Windows team to release products more often, and how Microsoft plans to pitch services to large companies.

Q: You're in charge of Windows and Windows Live, two of Microsoft's most important businesses. That's a big task. How are you splitting your time?
Johnson: Yeah, there's really three business groups that I have accountability for: the Windows client business group, the Windows Live/MSN business group, and our server and tools business. Collectively, those three businesses represent a significant portion of the company's revenue and opportunity for growth.

Fundamentally, there are four priorities that I have. No. 1 is services. How we lay the foundation for the future growth of the company, and the future value that we can deliver through software plus services.

No. 2 is growth. That's a combination of how we grow the core, how we're expanding into these adjacent markets, and how we're laying the foundation for this online advertising world.

No. 3 is about agility. Fundamentally, how we are driving more agility into our R&D processes, with special emphasis on Windows. How we're focused on shipping Windows Vista, but also how we're going to drive more agility in the Windows business.

And then the fourth is around people and the work to ensure we continue to make this a great place for technical talent to come contribute and grow in their careers, and be challenged and motivated.

Following up on that third priority, Windows has become a huge project that's very difficult to update. Have you gained any insight into the keys to making it something that can be updated more regularly?
Johnson: Certainly, (it's) the way that we look at the Windows product, (separating) the core OS components from the application experiences.

An example would be Media Center Edition. Our Media Center technology has been able to evolve, and we've released new versions of Media Center every year for the last three years. That's able to run at different clock speed than the core OS.

So (we're) continuing to focus on how we architect the products, so that we can have a layering effect from the core OS to these application experiences, and we can run those at different clock speeds.

Then, I think, looking at Windows Live as a vehicle of releasing software as a service over the Internet--that also gives us an opportunity to even further accelerate some of those user experiences that are a combination of software that's part of Windows and the services that come through Windows Live.

I think third is Steven (Sinofsky) is going to happen in January?
Johnson: We've got the project plan in place that we announced, and I stay very connected with the team. Once a month, I sit down with them, and we go through all the project updates?Every week I sit down with the key set of the technical leaders and look at how we're progressing.

We're pleased with the progress we're making, but I focus on one milestone at a time, and right now, we're focused on Beta 2.

There's been concern, at least outside the company, that the anticipation around Vista will hurt holiday sales of PCs. What should the PC industry do until Vista ships?
Johnson: Well, we work very closely with our retail partners, PC manufacturers and the industry.

I think the work we're doing around defining the "Windows Vista-capable" PCs, so that people who are buying PCs know they're going to be capable of running Windows Vista, and the work we're doing collectively in the industry will support a good holiday season.

Will you offer free upgrades to Vista to people who buy PCs during the holiday season?
Johnson: We are considering all different types of opportunities?you know, what is the appropriate transition plan, in the form of some kind of technology guarantee or some program that we would do. We haven't announced anything, but the marketing teams are working on that, with feedback from PC manufacturers and retailers.

So there's likely to be something?
Johnson: Yeah, there's likely to be something, and they're working on specifics now.

The enterprise search tool that Microsoft showed off this week seems to be its first effort to bring the Live idea to large businesses. How does Live apply to them? And what are we likely to see next?
Johnson: First of all, the concept that we introduced today is this concept of enterprise information management, which is much broader than search. It's really about enabling information workers to find, use and share the information that's relevant to them...whether that's data that resides in PCs or SharePoint sites, or structured data that's in databases and line of business applications, and then being able to bring that together in the Windows Live search client.

The work we're doing collectively in the industry will support a good holiday season.

You (can) look at the evolution of distribution of software updates as one example. Through Software Update Server and SMS (Systems Management Server), we're constantly pumping out software updates over the Internet, as a service that complements the software that customers run on premise. They've been able to use that as a way to dramatically reduce costs of just owning and operating and keeping their IT infrastructure running.

Other examples: You know we made an acquisition of a company called FrontBridge, which is a back-end service that connects up with Microsoft Exchange. Basically, (it) will filter out spam before it even goes into the firewall for that customer's Exchange Server. So there's another example of software plus services relevant for business customers.

Bill Gates today talked about businesses being more willing than before to have their know-how, their data and their software running on other people's servers. Which types of applications lend themselves most to that?
Johnson: When it comes to line-of-business applications, different size customers will look at different scenarios and apply decisions relative to things that they would want to run on premise, versus things that they would look to have hosted and run as a service.

I'd just highlight the demo that was done (at Wednesday's CEO Summit) around Virtual Earth, and this concept of mash-ups. Look at the scenario that they showed around British Petroleum; that's a line-of-business application that's very important to them, the way they look at weather patterns and things in the Gulf of Mexico, where they've got these offshore rigs, and how that's going to influence business decisions that they take.

(They are) running a service with our Virtual Earth technology running on our severs combined with some technology that they run on premise that mashes up an application that's relevant to them. I think we're going to see more and more of those types of applications.

You mentioned mash-ups. I'm curious how much of the work with the services effort is really around getting developers to build on top of what you guys are doing. Is there a time when we'll really see more of the developer story around Windows Live?
Johnson: Windows Live--there are two aspects of it. One clearly is the set of seamless user experiences that we deliver to the market--the way that people look at messaging, communication, storage (and) identity. The second piece of it is the Windows Live platform, and creating the world's largest, most scalable, programmable platform on the Internet.

We are doing a lot of work really defining the (programming interfaces) and the programmability of the components of that Windows Live platform. We announced at MIX '06 this set of APIs to make search programmable. Within 30 days?there were over 60 search macros that developers had already built and put up on the Windows Live site.

There are hundreds of gadgets now that have been built with our gadget technology. These are examples of how the Windows Live platform will evolve to be programmable, and the outreach that we are doing to developers to enable that.

But I would also say there is work being done on sort of the (next version) of that Windows Live platform and how we dramatically open up the programmability of Windows Live, so that we can continue to embrace the innovation and creativity from developers around the world. That's a big part of what Ray Ozzie is driving for us in the company and my partnership with Ray.

What pays for many of the Windows Live services is advertising. You guys recently rolled out AdCenter (Microsoft's home-built ad engine). How we can measure whether the business side of this is working for Microsoft?
Johnson: How would I look and say measure the success of Windows Live? No. 1, it's about do we create value for the user and Windows Live activations? And how many people are using those services?

When you look today, we have over 260 million users of our Hotmail and messaging products (and) communications products. As Windows Live comes out with the new Live Mail and Live Messenger and Spaces, are we creating value that's driving user adoption? That's one metric of success.

Certainly the second metric of success will be the number of advertisers that come to AdCenter...To make this business model work, you've got to have critical mass of users and a critical mass of advertisers.

If you do those things well, it's going to lead to revenue growth.