Dozens of current and former Microsofties say that Google’s success is causing a corporate identity crisis. Gates basically created the notion that success in software is a function of the IQ of your team, and for years Microsoft has prided itself on having the smartest employees on the planet. Now many of those overachievers feel as though they’ve gotten their first B. Google, not Microsoft, is the hot place to work for young engineers. Every month it seems as if Google hires away one of Microsoft’s top developers. Before Google’s IPO last fall, Microsoft executives dismissed this brain drain as a function of greed. But when the exodus continued after the IPO—especially when Marc Lucovsky, one of the chief architects of Windows, bolted for Google—it was clear that Microsoft had a bigger problem on its hands. As of March, roughly 100 Microsofties had left for its search nemesis.Google has even had the nerve to set up an office five miles down the road from Microsoft’s Redmond, Wash., headquarters. Its opening last November was supposed to be an invitation-only affair, but word spread and by 7 p.m. the place was swarming with dozens of uninvited Microsofties—casually, and sometimes not so casually, looking for work. The Google migration has gotten so bad, says a former Microsoft employee, that when he told his bosses and colleagues he was leaving earlier this year, “the first question out of their mouths was ‘You’re not going to Google, are you?’ ” (He was not.)
Why old strategies won’t work as well against Google:
Microsoft’s array of weapons has so far proved next to useless against Google. For one thing, any attempt to bundle search with its products will probably be scrutinized by antitrust regulators. Meanwhile, you no longer need a PC to use Google—it works fine from a Treo, a BlackBerry, a cellphone, a television, an Apple, or a Linux computer—any device with some kind of keyboard and Internet access. Nor can Microsoft undercut the price of Google software as it did with Netscape: Google is already free. There’s no quick and easy way to lure away Google’s online advertisers either. They pay based on the price of a keyword in a search and on how many times users click on the ad, but Google doesn’t control that—it’s set by auction. Says a former Microsoft executive: “Microsoft can play its old game to compete with Linux and Apple. It has to play Google’s game to compete with Google.”