Why did Bill Gates really leave Microsoft?

Have you ever wonder why did the richest man in the world leave the biggest tech company in the world?

Bill Gates

The answer may be found in an internal memo that Gates sent out on October 30, 2005 to the top engineers and most trusted managers of Microsoft.  The memo stated that there was potentially a very disruptive technological revolution, which was about to sweep over the entire world, forever changing the way we get information and do business. He also warned that this revolution could wipeout the $200 billion business empire that he spent his life building.

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What he was referring to was the mammoth windowless warehouse built by Design LLC, code named Project 2. The International Herald Tribune described the towering monolithic structures as looming like an information age nuclear power plant. While this may sound like something out of a science fiction novel, the results of this undertaking are now here in a form of a cloud computing. This nascent industry is still in its infancy but the growth potential is enormous; some predict that within next few years it will reach $160 billion, eventually growing to $1 trillion. That is why well known companies such as Amazon, Apple, AT&T, Hewlett-Packard, IBM, and Oracle are all raising to position themselves to cash in on this massive technological shift.

Mainframe computers

Most of the readers do not remember the time when mainframe computers took up entire rooms and were only used by companies, which needed to do intense mathematical calculations. This has all changed when Intel produced a microprocessor and Bill Gates started writing software; the first PC was born. Before long, companies began building intra-office networks so that their employees can run programs like Microsoft Word, Excel, and PowerPoint on their computers and also access programs, files, and printers from a central server. But this model was far from perfect. Due to a lack of standards in computing hardware and software, competing products were rarely compatible making PC networks far more inefficient than their mainframe predecessors.  In fact, most servers ended up being used as single-purpose machines that ran a single software application or database. Every time a company needed to add a new application it was forced to expand its data centers, replace or reprogram old systems and higher IT technicians to keep everything running. As a result global IT spending jumped from under $100 million per year in the early 1970s to over $1 trillion per year by the end of 1990s. Having a monopoly in the market Microsoft raked in billions. You may not know this, but for every dollar that a given company spent on a Microsoft product it spent an additional $8 for IT expenses! One IT expert admits that ‘’trillions of dollars that companies have invested in the information technology have gone to waste’’, yet until now companies have had no choice but to run these obscenely expensive and highly inefficient Microsoft based networks. But that's all about change.

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What scared the heck out of Bill Gates was his realizations that thanks to the thousands of miles of fiber-optic cables laid during the late 1990s the speed of computer networks has finally caught up to the speed of computer processors. An IT expert, Nicholas Carr, explains ‘’what the fiber optic Internet does for computing is exactly what the alternating current network did for electricity’’. In other words, computers that were once incompatible and isolated are now linked in a giant network or cloud. As a result, computing is fast becoming a utility in much the same way that electricity did, which is why Mark Dean, a high-ranking executive at IBM, recently remarked that PCs are ‘’going the way of the vacuum tube, type writer, and vinyl records’’ and why even Bill Gates now readily admits that the next sea change is upon us.

In order to understand what a truly monumental change this is, you’ll need to think back a few years. Back then anytime you wanted to type a letter, create a spreadsheet, edit a photo, or play game you had to go to the store to buy the software and installed on your computer. Nowadays, if you want to look at pictures on Facebook, find directions on MapQuest, watch a video on YouTube, create or edit Google Docs, or sell furniture on Craigslist all you really need is an Internet connection. Even though you might be using your PC, none of the content you are accessing or the applications you're running are actually stored on your computer, instead they're stored in a giant data center somewhere in the cloud. As a matter of fact you don’t even need a PC anymore to access this, your tablet or smartphone are enough. This is not just a great modern convenience but is turning into an enormous industry. Everyone, from individuals to multinational corporations, can now simply tap into the cloud to get all the things they used to have to supply and maintain themselves. This will save companies millions.  

As computing moves online the sources of power and money will increasingly be shifting from Microsoft to the more agile and proactive thinking companies. Apple paved away with its iPhone then iPad tablets. Google, Samsung, Amazon are closely following with their own hardware, and what is more important, with their own cloud based applications and content. People can now access the Internet just about anytime and anywhere they want all without going near a PC, and given the convenience these mobile devices offer it is little wonder that by the end of this year there'll be more smart phones sold worldwide than desktop and notebook PCs combined.

Microsoft’s ‘bread and butter’, Windows and MS Office products, are increasingly becoming obsolete in a post-PC world.

This is why the debate about Windows 8, or Windows Phone 8 is a mute one; it does not matter any more how good or bad this software is, someone else is already deeply entrenched in the mobile market, whether it be smartphones or tablets. OEMs can now turn to Chromium for their preferred operating system (for now, I am sure there will be more companies dabbling in operating system development in the near future). Heck, the OS is no longer all that important in the cloud based computing. Why pay exorbitant licensing fees to Microsoft if OEMs can get the OS for free, and move to the place where the money is: the apps market. Even Bill Gates is 'not satisfied' with Microsoft's innovations.

I have no confidence in Microsoft’s future and would not bet my stock dollar on their future market performance. The reason, if it needs to be re-stated, is that Microsoft has never really had to compete in the real world, its Windows and Office defined the PC based computing. Whenever it did foray beyond its monopolistic Windows or Office arena it failed dismally. Remember Zune or Kin? The demise of PC era spells the demise of Microsoft too.

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What are your thoughts on this? Does Microsoft have the know-how and the stamina to go against Apple, Google, or Amazon?