Page last updated at 23:26 GMT, Thursday, 19 June 2008 00:26 UK

The secret of Bill Gates' success

By Charles Miller
BBC Money Programme

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From schoolboy to software titan, Bill Gates on how it all started

As Bill Gates prepares to end his full-time work at Microsoft, he tells the BBC in an interview that it wasn't just what Microsoft did, but what his rivals didn't do that let Microsoft get ahead.

"Most of our competitors were very poorly run," he tells Fiona Bruce, for The Money Programme.

"They did not understand how to bring in people with business experience and people with engineering experience and put them together. They did not understand how to go around the world."

Sir Alan Sugar, one of Britain's computer pioneers with his Amstrad range, testifies to Microsoft's global mobility even as a comparatively small company in the 1980s.

Amstrad, in Brentwood, Essex, was visited by a Microsoft salesman - or "mid-Atlantic smoothie" as Sir Alan describes him - who came to sell Microsoft's MS-DOS operating system.

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Sir Alan declined, telling the salesman he was quite happy with the rival DR-DOS system from Digital Research for his new computer, explaining that "we're a consumer electronics manufacturer here, we're not a bunch of geeks, we don't give a sh**".

But the Microsoft man wouldn't take no for an answer, and "was constantly coming back each day" to the Amstrad offices, Sir Alan says, until a deal was done.

Long game

Sir Alan believes he got the better of it, buying MS-DOS for a pittance, a figure he's legally unable to disclose to this day according to the contract he signed with Microsoft.

Most of our competitors were one-product wonders
Bill Gates

From Mr Gates' point of view, it was all part of the long game.

Getting MS-DOS out there was more important than the price of any particular deal.

Debates about Microsoft's tactics to win dominance of the software industry have been stuck in entrenched positions for years.

On the one side are Microsoft's competitors, along with some government regulators and courts, arguing that the company has benefited from strong-arm, even illegal practices.

On the other, Mr Gates and his colleagues insist their only purpose in life is to make "great software" and that if customers don't like it, they wouldn't choose it.

The interview with Mr Gates adds a new dimension to the debate.

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"Most of our competitors were one-product wonders," he says.

"They would do their one product, but never get their engineering sorted out.

"They did not think about software in this broad way. They did not think about tools or efficiency. They would therefore do one product, but would not renew it to get it to the next generation."

Self-serving claims?

Doug Klunder, a former Microsoft staffer, and the lead programmer for Microsoft's Excel spreadsheet agrees.

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"People forget that what really launched Microsoft was [the programming language] Basic," he says.

"And then they made the transition to DOS, and then to applications and then to Windows, and managed to do all of those successfully."

Klunder says it was Mr Gates' ability to understand the business as well as the technical side that gave Microsoft the edge.

On the other side of the argument is Mitch Kapor, founder of the Lotus Corporation.

Lotus was at one time bigger than Microsoft, thanks to the success of its 1-2-3 spreadsheet software.

Mr Kapor pulls no punches in his criticisms of Microsoft.

"Claims by Microsoft that people were buying the software because it was good are pretty self-serving," he says.

"I'd like to smoke what he was smoking."

Intermediary

Mr Kapor claims that Microsoft "took advantage" of its position in controlling the operating system to make life hard for independent software developers like Lotus.

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When these criticisms are put to Mr Gates, he says he finds it "ironic" that he could be accused of such a thing when Microsoft had "evangelised" its software to other companies, begging them "please write software for our platform".

And when the criticism is attributed to Mr Kapor, Mr Gates says that he had personally visited Lotus "so many times" to plead with the company to adapt 1-2-3 to work on Windows.

In a sense, it is possible for both sides of the argument to be right.

On the one hand, Microsoft did hold the fate of other software companies in its hands.

When it decided to develop Windows, smaller companies had to fall in line with Microsoft's plans, or risk disaster.

But it is also true that because of the success of Microsoft software, its operating system became the intermediary between one industry, of application developers, and another, the computer manufacturers.

Slow response?

Heidi Roizen is a software entrepreneur who became a friend of Mr Gates.

She says of Microsoft that "because they were the operating system, everyone else in the industry had to deal with them".

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Microsoft's clout was, by this argument, unavoidable.

Mr Gates himself attributes the success of Microsoft's own applications in 1995 - providing a second great profit centre alongside the operating systems business - to the tardiness of other companies in shipping products ready for Windows.

"We tried to get everyone who did productivity software to come along and support Windows," he says.

"But they were quite slow, so our own Windows applications, Word, Excel, were doing incredibly well."

'Conservative approach'

Others will say it wasn't as simple as that.

But there is a final essential element in the Microsoft formula, which is indisputable: its use of massive cash mountains to insulate itself against the vagaries of the market or the failure of a particular product.

Mr Gates describes this as his "conservative balance sheet approach".

In the early days, Mr Gates explains, he needed money in the bank to provide security for the families of his first dozen employees, most of whom had shown enough faith in him to move to Albuquerque, New Mexico, the location of Microsoft's first office.

But as the company expanded he wanted "great financial strength so we would have the flexibility to do software in the new way, or whatever we wanted to do".

Mr Gates is proud to claim "we are very conservative", and points out that "even today, if you look at the Microsoft balance sheet, you will see that we keep quite a bit of cash on hand".

Well, yes, more than $25bn should be enough for a good few rainy days.

The Money Programme special Bill Gates: How a geek changed the World, Friday, 20 June, on BBC Two at 1900.

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