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Host: John Furrier

I had a chance to sit down and podcast with Dan’l Lewin, Vice President of Microsoft running the Silicon Valley campus. Dan’l is a veteran Silicon Valley executive where he worked at Apple during their formative Macintosh years, started new ventures with Steve Jobs, and has worked with many respected entrepreneurs and venture capitalists in Silicon Valley. Dan’l is a great guy who as they say has “been around the track” as few times. This is a must listen to podcast for anyone interested in what Microsoft is up to in Silicon Valley and beyond. Plus Dan’l gives his unique view in his own words on the key technology trends in technology, the Silicon Valley, and Microsoft –

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Full transcript:

John: What’s happening in SV and what’s new?

Dan’l: Microsoft’s campus is about 5 years old in the valley. Microsoft’s history in the valley goes back 20 years with the acquisition of Forethought which was PowerPoint. The physical building which house about 1200-1400 people are really a microcosm of centers of excellence inside of Microsoft doing actually some of the most innovative work as a company all tied together around media, content, broadcast, distributed computing, obviously Mac office which we know and love, and media center infrastructure, xbox hardware engineering, some of the best world class database distributed folks in the world are here, hotmail infrastructure, passport infrastructure for identity and presence that’s all here, major operations center..etc. This (Silicon Valley) site is a really a fundamental development site for us in the world.

John: Microsoft people tend to think Redmond a big campus up there. Kind of closed which is not really the case. Is it?

Dan’l: No no. We got sites all around the world and this site (Silicon Valley) is the largest outside of Redmond. It’s the only one that really has this distributed set of work that rolls up into multiple areas in the company. Typically our remotes sites are tied to particular business units for various reasons so this is a unique site. I mean the valley is unique on to itself. My role here is not tied to managing all the different development operations but really our physical presence in the valley. The valley is a center point for the industry although things are distributing these day very rapidly around the world. There is still a lot of center of gravity and pull here and as you said venture capital. Alot of my personal beat is tied to how Microsoft interacts with the entrepreneurial, innovation, venture capital community and we’ve been working on that for about 3 plus years.

John: Everyone knows Microsoft has been really a consistent winner in the 80s and 90s in terms of building great software and have really created a lot of wealth for a lot of people including Microsoft employees and venture capitalists (and individual investors). You guys are doing work with startups in Silicon Valley and around the world. With Silicon Valley being very startup centric, how do you talk to venture capitalists and entrepreneurs? Is it open? Is there a community built through there?

Dan’l: Yeah in fact you’ll see a lot more. There’s been a lot going on and we’ve been building the plumbing and foundation. It’s a little bit like web services and distributed computing is here to stay. It’s about the data. It’s about the network. The early stages as you pointed out from Microsoft were tied to client server computing and the company did extraordinary well on the client side you know VB, operating system kind of bolted to the hardware gives you set of APIs, you get a lot of lift tied to office automation apps, automating rational tasks, corporate development around GUIs with VB etc. However, the world changed at some point not to long ago with TCP/IP sort of being spread wide and IP being the broadest standard since Oxygen and maybe even water - you don’t even have to have a different kind of plug anywhere in the world. It’s kind of like electricity only better. So on top of IP a lot of great things happened and are happening so in 1997 Microsoft committed to building a distributed object framework – the .NET framework. The objective is to tie together and open up all the data through interoperable standards and we have been working with a lot of companies on that front from SUN and IBM to Oracle, BEA..etc.

So what were doing with the venture community in this new world around distributed computing is really tied to a conversation – an intimate conversations where we’re clear about what we’re doing - which is a hard thing to do. We got 20+ major product groups around the company doing amazing things on a lot of fronts. We spend 6-7 billion dollars a year on R&D - so being able to inventory and carry on an intelligent conversation by domain with the entrepreneurs and venture capitalist who are looking at marketplace problems such as large high return investment areas..etc. It’s taken us a while to both build up the conversation and the language and the trust on both sides. I think we’ve done well on that front we now have a methodology for communicating by segment and were able to be really clear about what we’re doing and obviously and if you’re an entrepreneur or venture capitalist and want to invest in the modern world you have three choices: 1) you got to pick a partners, a platform and some plumbing to work with and so if you pick ours we love it and we can give you some lift in our partner ecosystem and partner channel and hopefully reduce cost of sales and give you breadth and presence. You also have two other choices: 2) you can avoid what we’re doing or 3) compete with us. Those are all fair game. Two of the three we really like - where they don’t collide for the wrong reasons into what we are doing. When they (developers, entrepreneurs, and investors) bet on our plumbing we love it. If they chose to compete that’s great too competition is a good thing.

John: It used to be in the 80s with Microsoft they had a great development community and in the late 80s & early 90s there was that philosophy of ‘your with us or against us’ but with the Internet now standardized as a platform – a development platform there is open source out there and you have .NET. Your playing in that arena so it doesn’t cost a lot to do a startup these days. Lets talk about the conversation that your having with entrepreneurs and venture capitalists. These days the feedback and conversations don’t go on that long. Today feedback is fast almost instant at many levels (communications, blogs, development, ..etc). For $100,000 I can start a technology company and get a few customers and hey there is traction. How is Microsoft looking at this world? There is obviously a new set of developers coming out that are media developers and new breed of software developers and the technology has become standardized. What is your view there?

Dan’l: Well we just got to reduce the friction and have to understand where the edges are of everything that we’re doing and make it easy to do business with us. You’re absolutely right. I think in the world of client server computer a world of automation rational tasks which was the first 20-25 year of the microprocessor revolution it was all about things like how do you automate moving words around on the screen so that they look good on paper and how do you automate and manipulate data and gaining access to data over a network because it was in some sort of datastore. Frankly it’s the integration of standards in the core platform whether it’s ODBC for database connectivity or TCP for broad connectivity that has allowed an abundance to occur on top. So we are focusing quite aggressively in this new modern world of distributed computing of total interoperability of modularizing everything that we do and being pragmatic in working with companies who want to use facet of what we have whether it’s directory services making sure that they (directories) federate, whether its interoperability of data through various EAI kinds of things that we’re doing with biztalk, content in media and so on. So the company is really looking at how to build out our platform assets so that they are: a) interoperable with everything else b) work better together so that you can pick more of them when you build your solution and ideally that works well in our partner ecosystem.

At the end of the day as you go out towards the edge of the network verses collapsing to the desktop – where the first 20-25 years was focused on collapsing to the desktop. It’s now about making “stuff” work better together in an integrated and smooth way. The opportunities are abound whether it’s understanding where things are, inventory, social connectivity, ..etc. We’ve seen massive natural forces take place at companies like eBay and Amazon, Yahoo, and others where large collections of people go. As the network plumbing starts to work together whether it’s our stuff working with IBM, or BEA, or working with SUN stuff, it’s fertile ground for new interesting new models to emerge. We’re all about enabling people to use our stuff in a friction free way to build new business models.

John: It’s like a new Microsoft. In the old days it was about a computer managing information as a utility, getting tasks done, office suite, databases ..etc. Now you have a modularized approach with the xbox as entertainment turning into a info/media appliance. The computer is really turning into a device for manage consumption you’re also putting a ton of money into search. All this stuff is colliding. There is a major shift going on the so called web 2.0. Is this changing what you’re doing? For entrepreneurs looking to start a company and for businesses adopting this new technology benefit, how does Microsoft look at that trend (web 2.0 platform, xbox, mobile, and entrepreneurs)?

Dan’l: Were in a fortunate position. The company has done extremely well with an incredibly innovative model over the last 25 coming up to 30 years in the company history. So it’s a foundation for everyone to build onto and from that you see a lot of the recent success of new companies many of which we mentioned you’ve named some of them. It’s about building on the shoulders of giants. This is classic stuff in the software and computer industry in that there is always something that comes before you that lets you build on to and build better. We just want to maintain presence and compete within those frameworks. There will be lots of new innovative models that leverage what we build and what we continue to build. We have to compete and execute extremely well in some key areas. As a large public company we have shareholders and have to be responsive to that and grow our business. We have to either partner better, either be a better acquirer, and in some cases invent new businesses which is what were trying to do in many areas within Microsoft. For example like the xbox next generation which is eminent. It is going to create a foundation and a real locomotive - a driver for a whole new kind of ecosystem.

John: So nothing has really changed. Microsoft since its founding has been all about collaboration and competition and …

Dan’l: Yeah yeah … let me cut you off… the reality here is that 96-97% percent of Microsoft revenues are generated with other people making $7-8 dollars per every dollar that Microsoft makes. There is an ecosystem that drags our stuff out there.

John: Hey it’s a business model!

Dan’l: It’s a business model. A very innovative business model!  If you can find a spot that connects the dots in that channel or ecosystem then amazing things take over. Now with the network the nature of friction in the channel is changing. It’s assembling differently. The network removes distance so you don’t need physical proximity in all instances because you got this bang (a network effect). For example trading has been around for a long time and investing money and resources to remove distance is a natural fit.

Now that we got the big players Sun, IBM, us and everybody working on interoperability we got a fertile ground of platform assets that are going to work together upon which a lot of the old great ideas that were thrown out with the bath water with now work which just weren’t ready previously – it’s a fertile environment now!

So I think entrepreneurs are going to come around and those companies from the dot com era that have lingered and have had either the capital or patient investors or have hunkered down and cut their burn or gone offshore or whatever they’ve done to migrate and survive. I think that were going to see some fantastic things in the next 5 years all of which are going to sprout diversity. Call it what you want long tail, bla bla bla. There is going to be a lot of cool new things.

John: There is a maturing of this (Internet) platform

Dan’l: Totally

John: Those ideas were sound but the execution wasn’t there from a platform perspective

Dan’l: Absolutely so the team and part of what I do around here is to make it clear to entrepreneurs and clear to the investors that we’ll be clear about what we are doing and where were are going.

John: Tell me your big prediction for the next 5 years something profound that will happen 5 year from now.

Dan’l: Oh it’s just going to be the same as it ever was. It’s all about new ways of doing old things. Most of the interesting things have been done so we’ll see just new ways of doing them. Again it’s the confluence of presence on the network, controls associated with your own personal presence, and it’s about two things: 1) the communities and 2) the data depending what matters to you. So I think it’s the same as it ever was. I mean it’s innovation and all about connecting things in new ways.

John: Great prediction. Thanks Dan’l lets do it again.

Dan’l: Thanks John.

Dan’l Lewin Microsoft Venture Capital Entrepreneurship Technology Podcast Silicon Valley Microsoft Silicon Valley John Furrier Business Podcasts Executive Podcasts podcast shows Microsoft Podcast