Microsoft is boosting its research and development investment by 8 percent
to $6.8 billion, Chairman and Chief Software Architect Bill Gates
told a crowd of analysts at the company’s Financial Analyst Day in Redmond, Wash., on
The company also said it plans to expand its workforce by between 4,000 and
5,000 positions worldwide during the fiscal year, including between 3,000
and 3,500 positions in the U.S.
“It’s a serious number, $6.8 billion,” Gates said. “When you think about
that, don’t think about buying hardware or anything unusual. That is
people, about 80 percent within a mile of this location, coming into work
every day, finding out what kind of experience our customers are having
with software, and then driving forward with the advances there.”
The number also covers the added expense of the company’s new equity
compensation plan, which awards employees actual stock as opposed to stock
Gates said the major focus will be on management, storage, workflow,
business intelligence, model-based programming (i.e. XML advances), and speech/language.
Much of it is built around advances that are geared for the forthcoming
version of the Windows client, codenamed Longhorn. One of the major
advances planned for Longhorn is the new Windows file system, dubbed WinFS.
“A lot of that involves the file system understanding things like meetings,
appointments, contacts, customers, movie and music tracks, where we
describe to the system how the things work,” Gates said.
Based on technology from SQL Server 2003 (codenamed Yukon), the new file
system will abstract physical file locations from the user, allowing for
complex data searching that is not possible currently.
Longhorn will also feature a new user interface, video rendering
technology, security features and managed APIs.
Longhorn is scheduled to debut in 2005, but Gates said intermediate releases will appear before that.
“We will be handing out CDs there to get the developers going, to let them see the great capability we have, that we are putting into Windows,” he said. “And then later next year, we will be doing Beta One, a broad beta of the technology of Windows codenamed Longhorn.”
He added, “There a tremendous amount of underpinning that we are spending R&D dollars on to move up in terms of that foundation, go with great scenarios.”
In the meantime, Microsoft is still putting effort into the Windows XP platform. Allchin said Microsoft has now shipped 130 million Windows XP licenses, with Windows XP Professional making up about 70 percent of that mix. Microsoft plans to release Service Pack 2 (SP2) for Windows XP later this year. It will feature a host of bug fixes and security patches and a P2P networking update. Allchin said the firm will also update its Media Center edition this year, with an announcement scheduled in the next few months. A Tablet PC Edition update is also on the slate for this year.
Microsoft’s Small and Midmarket Solutions & Partner Group, part of the firm’s Business Solutions Business Group, is also going to get a chunk of the new R&D dollars, as Microsoft refocuses its efforts on capturing what it characterizes as one of the last open frontiers of the software market: small and medium businesses.
The firm defines SMB as companies with 1,000 or less employees, and Orlando Ayala, senior vice president of the Small and Midmarket Solutions & Partner Group, told analysts that the market has about 45 million customers. Mover over, it is a highly fragmented market in which the top nine vendors only own about 30 percent of the space.
That presents an opportunity for Microsoft to take a defining lead, Ayala said, by giving these businesses solutions that provide broad automation and insight that until now has only been available to large global enterprises.
“There is no reason why these customers should not be able to operate as a global enterprise,” Ayala said. “No reason they can’t get to the supply chain.”
He added, “It’s a broad set of customers. Our target would be 40 million customers that should be able to benefit from this value.”
To capture that opportunity, Microsoft will unveil the Small Business Server in the first half of 2004, giving those businesses a server, for less than $1,000, that can give them the operating system, email, a portal, and “all the other elements to be able to run that enterprise.”
Ayala said the firm is investing $2 billion in the space to capture the opportunity, bringing the Microsoft Business Solutions Business Group 1,700 employees focused on R&D.