An assault on complacency at Microsoft

SEATTLE - Microsoft Corp.'s operations chief took it personally when one of the company's biggest accounts was threatened by Google Inc.

Hundreds of workers at Procter & Gamble Co. were testing Google's e-mail, word-processing, and spreadsheet programs as potential replacements for Microsoft products. It would have been an unprecedented loss. So Kevin Turner flew to Cincinnati in July, spent a day wooing P&G chief information officer Filippo Passerini, and left with a bigger three-year contract.

Back in Redmond, Wash., there hasn't been much time to celebrate. Turner is fighting more skirmishes as Google and Oracle Corp. try to eat into Microsoft's $35 billion corporate-software franchise.

"To the extent the world moves to Web-based software, that's very hard for Microsoft - it completely unlocks their grip on your desktop," said Sarah Friar, a Goldman, Sachs & Co. analyst in San Francisco. "Within Microsoft, people just pooh-pooh that idea. There's a huge complacency within the company."

Turner, 43, once the youngest corporate executive at Wal-Mart Stores Inc. and one of the few outsiders among the Microsoft brass, is concerned the biggest software maker isn't fighting hard enough.

"Losing a Procter & Gamble would be something where I don't think I'd sleep well," Turner said in an interview. "I want to make sure that anybody that knows anything about it would also not sleep well."

The Web has become a reliable way for corporations to run even their most important functions. That's made Microsoft's main business, selling software like Windows and Office for computers, vulnerable.

With a weakening economy, Microsoft's sales growth may slow to 12 percent in 2008 from 18 percent last year, according to estimates compiled by Bloomberg News. At the same time, Google, Oracle, Apple Inc., and VMware Inc. are getting stronger, Turner told 12,500 employees at a sales conference in Atlanta in July.

Twenty-eight percent of technology buyers in a Goldman survey this month said they were trying Google applications or plan to in the next year, a percentage Goldman said was higher than expected. Google, based in Mountain View, Calif., recently sealed deals at French auto parts maker Valeo SA and Silicon Valley contract manufacturer Sanmina-SCI Corp.

P&G went to Google looking for cheaper and more Internet-capable options. Turner kept the contract by giving Passerini an early look at plans for Web-based systems and promising P&G the flexibility to shift between those and standard applications. P&G confirmed the deal, declining to comment on details.

When Turner came to Microsoft from Wal-Mart in 2005, the differences were stark. Wal-Mart had weekly sales quotas. Microsoft didn't even have quarterly ones. Now, the staff can almost provide weekly updates, said Robert Youngjohns, who runs North American sales.

Turner introduced procedures such as a "conditions of satisfaction" document that details what Microsoft will provide each client. A screw-up requires a "correction of errors" in which employees review the mistake and lay out steps to ensure it doesn't happen again. He also created standard scorecards with 30 categories to measure each subsidiary's performance. Previously they were judged by as many as 1,500 different metrics.

Being an outsider helps, said Matt Rosoff, an analyst at Directions on Microsoft in Kirkland, Wash. "He's a bulldog," he said. "And he isn't one of those executives who grew up at Microsoft when the company was living off the two cash cows of Windows and Office. He's come in the more difficult times."