Minding Microsoft's other monopoly

More than a decade after helping to establish Microsoft Office as a virtual monopoly, company veteran Jeff Raikes is being called upon to revitalize the sagging franchise.

Charles Cooper Former Executive Editor / News
Charles Cooper was an executive editor at CNET News. He has covered technology and business for more than 25 years, working at CBSNews.com, the Associated Press, Computer & Software News, Computer Shopper, PC Week, and ZDNet.
Charles Cooper
7 min read
As a part-time professional baseball owner--he owns a minority stake in the Seattle Mariners--and a full-time software geek, Microsoft's Jeff Raikes is quite used to wearing more than one hat.

Considering what's on his plate these days, that experience will come in handy.

The 21-year Microsoft veteran is part of a coterie of top executives entrusted by Chairman Bill Gates and CEO Steve Ballmer to get things done. The architect behind Microsoft's successful Office suite strategy in the late 1980s and 1990s, Raikes was put back in charge of Office as group vice president a couple of years ago and set the task of finding a way to kick-start the business.

In addition, Raikes has another full-time job at Microsoft in charge of driving the software maker's business tools division, business solutions group and Tablet PC product.

However, given anemic corporate demand--growth in Microsoft's Office business slowed to 1 percent for the year ended June 30--there are no silver bullets. And even though Raikes is upbeat about an upcoming update to Office, Microsoft will have its work cut out convincing corporations to upgrade at a time when businesses are watching their pennies.

But Raikes envisions a future in which Microsoft expands the appeal of the applications software suite to people who aren't considered typical Office customers. That's where he hopes Tablet PC will help. In early November, Microsoft will officially launch the stylus-based product, which lets users scribble notes onto a computer screen.

On a recent visit to CNET News.com, Raikes, with his Tablet PC in tow, explained the still unresolved technology issues surrounding handwriting recognition as well as his ambitions for the future of Microsoft Office.

Q: Microsoft Office has oodles of features that people never touch. Isn't it true, though, that you're still putting in more than what people can absorb? There's almost a disconnect.
A: There is a disconnect, but the disconnect is that people are supposed to use all those features. That's never been true and never will be true. We can say there's only about 10 percent or 20 percent of the features that we'll use, but your 10 percent is going to be different from my 10 percent. We learned a long time ago that what customers tend to really want is a set of tools that can meet their needs and be similar to the tools that others are using as well.

The trick isn't whether we can get people to use a bigger percentage (of the program features).
Regardless of how much of the program's functionality they use?
The operative piece of information isn't whether you're using 20 percent or 40 percent or 100 percent. The operative information is whether that the product does a great job for the 20 percent and, with the new release, is there something in there that's important to me?

The trick isn't whether we can get people to use a bigger percentage (of the program features). The trick is whether we're building the kind of things that are compelling enough to get them to move to the next release.

But isn't it also true that Office remains a resource hog?
In terms of 30-gigabyte drives? Let's get serious here.

But Microsoft makes software with big footprints. Doesn't it make sense to come out with smaller versions that use just fraction of the total features now found in Office?
That's where customer education comes in--we have to do a better job on that part. When it comes to footprints, there was a point in time when I would have agreed with you. But the size of hard drives has outstripped our ability to fill them up.

You've been quoted recently as saying you expect to grow the Office business ninefold by 2010. Are you still sticking with that?
I don't really know how much I can grow the business. The way in which that (quote) has been replayed in most of the reports is that I somehow said I would grow the Office business by that much. I want to grow the information worker business, where Office is a part of it. It's about a $10 billion business today.

For the growth we can achieve this decade, about one-third will be from continuing to grow and enhance Office, while two-thirds will come from creating new categories of application value and services to support information work.

I see you've brought your Tablet PC with you. Where you think the next generation of handwriting-recognition technology is heading?
There's going to be a big powwow in December with Bill (Gates) where we're going to go through all this.

Is there much debate?
There is, yes. On the one hand, it seems obvious, right? But the problem is that this is basically just a big database of inking samples. If you put new samples (of handwriting) into the database, are you going to improve the database or are you going to degrade the recognition?

I think we're going to get there. I really believe that. But there also are very smart, very reasonable people who would say that's the wrong approach.

Is it reasonable to believe you can improve upon the technology to get to 100 percent recognition?
Recognition is very dictionary-based. At times, it works beautifully, and you say to yourself, "Gosh, how does it figure it out?" You'll be inking and make a mistake and say to yourself that there's no way it can recognize this--but it does. We need to figure out ways to get more words into the dictionary. We also need to improve the way we recognize context.

I believe you can type faster than you can ink, but what you can't do is be as expressive.
What do you mean?
It would be much better if our recognition approach could be more easily sensitive to the context in which someone is inking. If I ink something, and it doesn't get correctly recognized, we should relax the dictionary relationship on my second attempt. I think a large percentage of the times that it fails is because you're inking something that wasn't in the dictionary.

You carry around a tablet during the day. What do you use handwriting recognition for?
I use it in the same way people that use a laptop or the way they use a piece of paper.

You take extensive notes on it?
Sure. I believe you can type faster than you can ink, but what you can't do is be as expressive. For example, while you're doing your notes, try and type this (underlining a word on his tablet computer). You just can't do that.

The value is not that people can ink notes faster than they can type notes. The value is that they can do notes the way they have always done notes--and more, like the ability to search on notes.

What's the profile of the person who you expect will use this stuff?
Here's my theory. If you can get (a notebook) for about $1,800 with long battery life and high screen resolution, and for less than a 10 percent increment have your tablet (PC), I think a significant part of that market will find that a compelling value proposition.

How about languages? Which ones ship first?
English, French, German, Japanese and simplified and complex Chinese. I know our Italian and Spanish guys are not happy with me. We're pretty good at doing stuff in lots of languages. But the recognition technology actually takes years to develop in a given language, because you have to accumulate the database of all those samples of ink. It even turns out with U.S. vs. U.K. English that we've found some degradation of recognition accuracy. And that just means we have to beef up the database language.

What sort of devices do you think will be the most suitable for handwriting recognition?
I'm a big fan of the pocket-sized form factor because it's something you can actually stick into your pocket. I also think you'll want a device for note taking. I think when it gets to 12.1-inch screens, then you'll feel like, "Wow, I'm really writing on piece of paper."

The other one is something that we're working on at Microsoft Research that we call "broad bench." Think of it as three 20-inch LCD (liquid-crystal) displays treated as one display.

Let's talk about what Microsoft can and can't do as a monopoly. In contrast, there are things Apple can do, and nobody going is going to accuse it of abusing its 3 percent of the market. Do you think you're being held to a different standard?
We have to accept that. Part of the epiphany we've gone through is that we're going to be held to a higher standard, and we have do our very best to live up to that. It's not a worthwhile question to ask whether we like it or don't like it. It comes with the territory.

It's been a tough year for the tech industry. What's a reasonable growth expectation for the next six to twelve months?
Very moderate. But most of the things that I'm really excited about in terms of establishing new areas of application value don't really have big business impact until three, four or five years down the road.

What about the more general economic outlook? What are you hearing and seeing?
I don't see any significant upturn on the horizon--and I'm a guy who tends to be an optimist. I'm very disappointed to say that. People are still seeing a lot of pressure. But I'm very bullish long-term. We're fortunately in a business where we can invest for the long term.

Are there any obvious catalysts?
Because I'm an optimist, I think tablets will be very important. But I won't say it's going to turn around the industry. Next year will make it about four years since the last time that people upgraded for Y2K. My gut would tell me that there's going to be an impact.