Gates Starts Slow Transition From Full-Time Microsoft Duties

Gates will continue to serve as chairman and an adviser on key development projects even after he stops working full time. Effective immediately, however, he is giving up his chief software architect title to Chief Technical Officer Ray Ozzie. Company watchers had been expecting that move since Microsoft bought Ozzie's Groove Networks last year.

In addition, Craig Mundie, another CTO, is now chief research and strategy officer and will work with general counsel Brad Smith on intellectual property efforts.

Microsoft said Ozzie will begin working side by side with Gates on all technical architecture and product oversight responsibilities and Mundie will work closely with Gates to take over Microsoft research and incubation efforts.

Gates said he has decided to announce his plan publicly two years in advance to give the business the "time to make a strong transition."

One cynical observer noted this is a "slow-mo transition." Last year, the company segmented the company into three divisions with Windows under co-presidents Jim Allchin and Kevin Johnson; consumer technologies under Robbie Bach; and business software under Jeff Raikes.

Gates said that when he and Paul Allen started Microsoft 30 years ago, he never imagined "what an incredibly important company" Microsoft would become.

"I have one of the best jobs in the world," he said. "I love software and I love working with smart...passionate people at Microsoft. Together we built a great company."

For the past several years, Gates has devoted more time and energy to the foundation, which focuses on world health and education issues.

Martin Tarr, CEO of Tiburon Technologies, an Independence, Ohio, Microsoft partner, said Microsoft is in good hands. "Ozzie has a reputation for being one of the best programmers and technology people in the business," he said. "I think he was specifically recruited by Microsoft to take over for Gates. It's my guess this plan was put in place over a year ago. This is a well thought out succession plan, which is good for everybody."

Lance Russell, director of marketing and alliances for Pointbridge, a Chicago integrator specializing in Microsoft technologies, concurred. Ozzie has "brought tremendous focus and vision on [software-as-a-service]," he noted.

Others say the company, despite its repeated claims of innovation, has struggled to come up with compelling products in the past several years and suffers in comparison to Google, Apple, and others. Its Windows Live and Office Live efforts, cited several times on Thursday's call, are its call to arms in the SaaS space, and Ozzie has been front and center of that charge. He spoke Sunday night about business opportunities for Windows Live at Tech Ed 2006 in Boston.

Some were relieved to hear that Ballmer is staying on as CEO. There have been rumors and rumblings in recent weeks that he might step down. "Ballmer has always been and is still today the biggest channel champion inside of Microsoft," Russell said.

Joe Balsarotti, CEO of Software To Go, a Clayton, Miss. solution provider who has been selling Microsoft software for the past 25 years, said Gates' move marks the end of an era. "I don't think Gates is involved in day to day at this point," said Balsarotti. "I wish he were."

"The problem is there has been no software innovation at Microsoft in the last decade," he said. "The entrepreneurial spirit is long since gone at Microsoft. They grow now through acquisitions and trying to ring as much money as they can out of existing products."

Balsarotti said that when he started selling Microsoft software, he looked forward to the next product that the company would bring to market. "Now it's new versions of old products with enhancements that quite frankly most people don't need," he said.

Ballmer vigorously defended his company's record on those points recently in an interview with CRN.

--Additional reporting by Stacy Cowley.

This story was updated Thursday evening with additional detail and partner quotes.