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NOVEMBER 10, 2000 VOL. 26 NO. 44 | SEARCH ASIAWEEK
Microsoft's Knook talks strategy, perceptions ALSO: Brickbats for Bill Microsoft's public image is under fire in Asia at a time the software giant needs all the friends it can get • New Focus for MSN: Microsoft is sprucing up the laggard portal, but is it too late? • The End of the Software Business: A Microsoft competitor explains why the Internet makes packaged programs obsolete Microsoft Asia president Pieter Knook doesn't have a lot of time. The 43-year-old native of the Netherlands plans his schedule six months in advance, a necessity when your responsibilities cover Japan to India. Before taking on the Asian operations three years ago, the 10-year Microsoft veteran ran Microsoft.com directly under Steve Ballmer, then head of worldwide sales and now Microsoft's chief executive. Knook recently agreed to a lengthy 90-minute interview with Asiaweek's Belinda Rabano and Assif Shameen to discuss Microsoft's Asia strategy and perceptions about the software giant. Excerpts from their conversation: How big are the stakes for Microsoft in this region? Asia is growing in importance. Consistently over the last three years, we've grown faster in Asia than in any other part of our business. You also see a situation where many of the hardware partners we have are building their equipment in Asia. A lot of innovation is occurring here, whether it's in Taiwan for motherboards and laptop miniaturization or in Korea for memory chips and LCD panels. Even in consumption of I.T., you see enormous growth. PC penetration in Japan is reaching up to 40% in the home, by some metrics. You're really starting to see the developed markets in Asia come up to exactly the same point as the advanced economies in the U.S. and Europe. But they still have a long way to go. Not very long. In countries like Korea, Taiwan, Hong Kong and Singapore you've kicked into a cycle where people are quickly adopting technology. I venture to make a prediction that in a couple of years, maybe less, you'll see higher internet and PC penetration in those countries than you do in the developed Western market. Tell us about the .Net strategy, which hasn't been much in evidence in Asia. Let's be clear about what we're trying to do with .Net. It isn't the next product. This is a roadmap as we see it of where the world will evolve to. We think that over 10 years the business of software will change quite dramatically, from a CD-ROM-based business to one where software is a service. In between, there will be some steps, and clearly there is a correlation with the availability of Internet and telecommunications infrastructure. You'll see it first in the business environment. In the consumer market it will take a little bit longer before we're fully transitioned into an environment where people are used to the idea that software comes as a service, that you pay a monthly fee and that you're going to download it or get that service from an Internet device. We need widespread broadband coverage, we need greater penetration of the Internet to really make that successful. That will take a few years. Will this move to software-as-service run into piracy problems? You could argue that. But I think one of the best examples of something that's delivered as a service today is the cellphone call. When you look at cellphone penetration even in places like China and India, you've got huge numbers of people that are paying some very, very large cellphone bills. There's no reticence to pay for a service that offers value. You don't believe if you cut prices in poorer markets, piracy would fall? That is a crazy argument. How much does a counterfeit piece of software cost? Zero. How am I going to compete with zero? Even halving my price, I'm still infinitely more expensive than the guy who's selling the software for nothing. It's not a pricing discussion. If I sell a DVD movie in one market for one-fifth the price of the same movie in another market, you get huge distortions in your distribution for years. Do you see Linux as a threat in Asia? It's something we've got to be very careful about. Linux tells us we need to make sure we're offering the right things to the user and that we cooperate with the government in the most appropriate way. If you look at some of the [domestic software] products that have been marketed very strongly on the basis of their national roots, you'll see that those companies have had a very hard time. They can't sustain the R&D investment that's required to keep meeting customers' expectations. That's the challenge that Linux faces. Does Microsoft need to respond to Linux's popularity in Asia? I would dispute Linux's popularity. When you go from zero to a lot, sure, it's infinite growth. It makes a great story. Every year there's a story about something that will topple Microsoft. The Netscape browser, OS/2 [IBM's now-defunct PC operating system], the network computer . . . Microsoft's image in Asia today seems to be of a big, profit-driven U.S. company. What are you doing to change these negative perceptions? I would challenge the perception. When we look at [surveys] of the most admired companies in the region, Microsoft I think is number one or two in most countries. Certainly our business is doing extremely well. Nevertheless there are still areas where we could be clearer about some of the things that we're trying to achieve. And you could argue that we've been naive in the past in assuming that our only job is to build great products and that they will speak for themselves and everybody will realize we're a great company and leave us alone. You've worked to build relations with governments in Asia. What about Microsoft's image with consumers? If you look at the image the average consumer has of Microsoft, if they use our products, it's extremely positive. First of all they have a great admiration for our chairman, Bill Gates. You see that when he goes to India or China and you see the crowds. The average consumer thinks of Microsoft as really a model company. We're the No. 1 foreign company that students want to work for in Japan and many other countries around the region. But people don't get a warm, fuzzy feeling from your company. They feel very comfortable with our products and they want to work for our company. Those two things matter a great deal. Write to Asiaweek at mail@web.asiaweek.com
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