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“The only thing worse than being talked about,” said Oscar Wilde, “is not being talked about.” That has until recently applied in spades to Steve Jobs of Apple, a guy who, when I’ve interviewed him, has always asked what other people have said about him, “especially the bad stuff.”

Steve is a guy who likes being talked about.  He likes it so much, in fact, that he’s adopted a strategy to encourage it.  This strategy involves very carefully doling-out bits of himself to the press not in an effort to discourage coverage, really, but to ENcourage it by limiting the supply.  Like everything else about Steve it is brilliant and cold.

This was the case until Steve Jobs got sick, of course, at which point he went from skillfully managing the press to just as skillfully avoiding it.  I wonder why?  What did he have to fear about the world knowing he’d been ill?  It’s probably just an artifact of his obsessive need to control.

Whatever the reason, ever since his bout with pancreatic cancer in 2004, Steve and his Apple minions have tried valiantly to keep his health condition out of the news, citing it as a “private matter.”

Except of course it isn’t a private matter at all.  Steve is the CEO of Apple, Apple is an enormous publicly-held company, and many Apple investors are onboard (or remain onboard) specifically because of their confidence in Steve as a sort of high tech rainmaker.  This is a concept that over time Jobs and Apple have done absolutely nothing to discourage or dispel.  And so now I (and the SEC from what I hear) believe Steve and Apple have to live with it.

Steve Jobs’ health is material to Apple and to Apple shareholders.  To say that having taken a six-month leave of absence changes that would be wrong.  What WOULD change that would be Jobs’ resignation, which he hasn’t yet given to the Apple board.  As long as Steve is still intending to return to Apple, his health is material to the company and should be disclosed.

Whatever Apple claims about privacy and however much whining and threatening Steve does to reporters by e-mail and phone, his condition remains squarely on the table, hot and steaming and ready to be served-up, as it should be.

Maybe he wants it that way.  Maybe this is just more of the same limiting supply to increase demand.  It’s possible but I simply don’t know.

Now look, we’re nine paragraphs into this story and I’m finally getting to the lead, which should have been in the first graf.  But by now you understand why I have to do it this way, because you don’t give out unseemly news (at least I don’t give out unseemly news) without putting it in some proper context.  The eight grafs above explain why I feel it is important to say that Steve Jobs has stopped using his computer.

Huh?

Steve Jobs has stopped using his computer.  He’s off curing himself of something he won’t name and in some manner we can’t know but I CAN tell you right now it doesn’t involve using his computer.

A friend of mine has for years been one of Steve Jobs’ Internet chat buddies.  And as such his chat client has – again for years – shown as Steve came online each day and remained there for hours and hours as you’d expect a Silicon Valley mogul to do.  And it’s a trend that continued well past Jobs’ announcement that he was taking a six-month leave of absence to get well.  But then Steve started logging-on less and less.  And several weeks ago he stopped logging-on at all. 

Silence.

No big deal, right?  He’s off the clock; Cook and Schiller are fighting for the tiller; Apple’s in good hands; who cares?

Anyone cares who actually expects Steve Jobs to return to Apple.  

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As promised, here’s part three of my series on fixing Microsoft for the 21^st century.  This assumes we’ve already spun-off the Internet properties to Yahoo as I suggested a few days ago and a Bank of America/Merrill-Lynch analyst quickly copied.  Does that copying qualify me for a Federal bailout?

The big Microsoft news this week, at least from the press it has received, is Redmond’s decision to open a chain of stores.  Nearly all the pundits think this is stupid, while I think it was merely inevitable, given the nature of current Microsoft management, which seems to be more and more from Bentonville, Arkansas, home of Wal-Mart.

See that guy in the picture?  That’s Microsoft Chief Operating Officer Kevin Turner, who spent his entire pre-Microsoft career rising through the ranks at Wal-Mart.  I’ve interviewed the guy and he’s smart and a lot tougher than he looks.

Microsoft has drawn heavily from Bentonville and for good reason: those Wal-Mart folks sure know how to make and manage money.  Wal-Mart and Microsoft make about the same amount of profit each year, though Wal-Mart has over four times the sales of Microsoft.  This makes them more similar than they are different, because each exists in a rarified financial atmosphere where the amounts of money involved dwarf the budgets of most nations.  When these companies hiccough, the world economy sneezes.

So it seems inevitable to me that as Microsoft is operated more and more by executives from a giant retailer, that Microsoft will try doing some giant retailing of its own.  And sure enough they are doing just that through this new plan to open Microsoft stores – a plan that could equally be laid at the feet of Apple as yet another Microsoft tactic copied from Cupertino.

Only Microsoft stores are different from Apple, stories, we’re told, and that’s true: Apple needed distribution while Microsoft HAS distribution, in spades.  In fact Microsoft has so much distribution that this chain of stores could be viewed very negatively by Microsoft resellers but probably won’t be because I doubt that Microsoft will be actually trying to sell much stuff, and what they do sell will be at full retail unlike everyone else.  It’s like buying wine at the winery: you never get a deal, but the samples are free.

So you can try out that cool game computer at Microsoft but actually BUY it at Best Buy, just as you would have before.

Why even do it, then?  Why have these stores? 

Propaganda.

Phil Schiller of Apple made the point back in January when he explained that Apple stores had 400,000 visitors per day or the equivalent of 20 Macworld shows EVERY DAY.  Microsoft wants the same thing.  They want to bypass the press machine that they feel has tainted users against Windows Vista, making sure the same thing doesn’t happen to Windows 7.

If Microsoft can achieve that one goal – just that one – then the Microsoft stores will have been worth doing even if they never have a dollar of retail sales.

So Microsoft will build those darned stores and they’ll build them fast because they’ll want 100 or more to be open for business by the time Windows 7 officially launches, which we’re told is this year.

In this economy finding retail space is easy, Microsoft has lots of money, so of course this retail build-out will be simple.  AND I predict that Microsoft will achieve its goal of disintermediating pundits like me.

In my case I have long made it clear that for the right price I’ll simply go away, but Microsoft never takes me seriously. 

There was a time in the late 1990s when I had an interview scheduled with Bill Gates.  His net worth back then was growing at a calculated $34 million per day or more than $1 million per hour on a 24/7 basis.  So I offered to give the hour back to Bill for half price — $500,000 – but for some reason he didn’t see it as such a bargain.  Nor will they this time.

So look for the Windows 7 roll-out to go a lot smoother than any other Windows release, ever, simply because in every major media market there will be real people down at the mall in Microsoft shirts ready to explain how to do all the arcane crap required to keep running Windows – even Windows 7.

The Microsoft stores are a brilliant move.

But the impact on Microsoft of the Bentonville Mafia hasn’t been entirely positive.  They ran out of town Jeff Raikes, for example – one of the best Microsoft executives.  The Bentonville crowd, you see is brutal even in Microsoft eyes and Raikes just couldn’t take it any longer, which is why he “retired” and then un-retired a minute later to run the Bill and Melinda Gates Foundation.

Enough about the stores, already — now should be done with the rest of Microsoft?

Break it up.

This is not, by the way, a prescription for justice or vengeance or an attempt to get really good service the next time I visit Paris.  It’s a 1980’s “greed is good” style prescription for giving current Microsoft shareholders better value for their money.  Simply put, the parts of Microsoft are worth separately more than the whole, mainly because of all those anti-trust shenanigans but also just because Microsoft forced itself to get too fat simply to keep its earnings growth in line.  Well it is time to release some of those excess divisions and let them find their own values, which I guarantee will be uniformly higher,

Here are my quite specific – AMAZINGLY SPECIFIC – recommendations, then, for the restructuring of Microsoft.

1) Cut by job category.

Don’t simply cut products. Cut by job function. There are too many testers and Project Managers across the company. Probably too many developers, too, but it’s hard to imagine Microsoft ever conducting a mass layoff of developers, since they form the core of Microsoft’s corporate culture, and most are valuable employees.

There are scores of new job functions at Microsoft, many of dubious importance. For example, one of the latest buzzwords at Microsoft is “business intelligence.” As in, “We need to look at the BI for this project.” There are many new “BI analysts” who look at spreadsheets and analyze all sorts of business and customer data, looking for trends. There’s nothing wrong with this, but a lot of these people could be cut with little impact on the company, since they’ve clearly had little to no impact and left all this crap for me to clean up.

Total cuts by job function — 5,000 Project Managers, testers, business intelligence analysts, and other job categories with more people than Microsoft needs for its surviving products.

Microsoft should balance this with 1,000 new hires in the areas of usability, design, and Project Managers who actually want to create more usable software.

 2) Microsoft Research  

This has long been a favorite pet area of Bill Gates, but Gates is gone now and Microsoft Research has ballooned during years of fat profits to thousands of PhDs scattered around the world. Hundreds of these highly paid people could go, and many others could be transferred to product teams.

 3) Product lines

Here’s where the bulk of the cuts should be – 15,000 to 30,000 jobs. When deciding what products to cut and keep, the devil is in the details.

Products to cut:

MSN – We’ve dealt with this already – MSN should go to Yahoo as I described recently, or absent Yahoo it should go somewhere else, just not in Redmond.  Why is Microsoft in this online business that keeps losing money year after year? Microsoft is not a content company. The cuts should include:

MSN Home Page – persuade MSN users to create a Windows Live home page instead.

MSN’s many individual websites – MSN Money, MSN Music, MSN Entertainment, MSN Video, MSN Celebrities, etc. Why is Microsoft creating a big new website for celebrity news? Is there anything more ridiculous for a software company to be focusing on?

Microsoft adCenter (online advertising system) and Display Ads Platform – Microsoft is not an advertising company. They should hire advertising companies to do this work, and sell this business to Yahoo.

MSNBC – Microsoft is not a news organization – sell to Yahoo or GE.

MSN Games

Tools

Microsoft Expression – Does anyone actually use Expression? This is a weak attempt to compete with Adobe in the graphics market.

Windows Live – This is a major future push for Microsoft, and Microsoft is doing a lot of experimenting by tossing out dozens of Windows Live programs and services to see which stick and people actually use. Microsoft could definitely do some cutting here, and focus on a core group of popular Windows Live services, such as Windows Live Mail, HotMail, Messenger, and Photo Gallery.

It is probably cheaper for Microsoft to ACQUIRE future Windows Live services than to create them.  That’s how Cisco does it.

Don’t know if Microsoft should keep or cut:

Live Search – This is a tough call. I don’t know if Microsoft should give up on search or keep trying to compete head-on with Google. But I think it’s sunk too much money hiring the right people to give up now before giving these smart new hires more time to try. And they have a big new launch planned this spring, with a new name, so what the heck.

Windows Embedded and Windows CE – I don’t know how successful these are. They seem like niche products.

Keep some, cut some:

Office – Obviously, Microsoft should not get rid of its most profitable Office products. But the product line has ballooned in recent years and could use trimming. SharePoint is successful, but Microsoft could cut:

MapPoint

Office Live Meeting

Office for Mac (does Microsoft really need to sell Mac software?)

Office Accounting (sell it – there are buyers)

Probably some other small Office products

Microsoft Dynamics – I don’t know much about Microsoft’s business solutions division. But they sell a whole line of products (Dynamics AX, CRM, Enterprise Reporting, GP, NAV, Retail Management, SL). Some should probably be cut.  Or better still just sell the whole darned group to some private equity firm.

Server products – Microsoft’s line of enterprise server software is huge and constantly growing. Many of the products are undoubtedly successful and Microsoft should keep them. But the product line appears to have ballooned out of control to more than 40 products.

Figuring out exactly what to cut and keep here would take some work. I’m no expert on this, but Microsoft should keep Exchange Server, SQL Server, and its other big server products.

But a lot of small products like these should probably go:

Forms Server

Groove Server (sorry, Ray)

Identity Lifecycle Manager

Keep and grow:

Windows client = Cash cow. ‘

Internet Explorer – Microsoft needs to offer a free web browser, despite the antitrust headaches this causes for the company in Europe.

Windows Server – Another big cash cow, and the basis of its server product line.

Office – Keep most Office products, but cut some (see above). Another cash cow.

Office Live – Microsoft needs to start pushing its successful Office apps onto the web.

Hardware – Microsoft has sold millions of mice and keyboards over the years. This seems like a successful and profitable business, but Microsoft should be careful not to let the product line grow out of control. It’s already expanding into presentation pointers and other dubious new hardware peripherals.

Microsoft Auto – Ford Sync seems to be successful, and other auto companies reportedly want Microsoft to create similar software for them. Although the auto industry has tanked recently, it should recover when the economy recovers.

Microsoft Surface – A small product with promise.

Xbox – Although Xbox lost a lot of money for years, it reportedly is profitable now. It seems too successful now to cut. But Microsoft should be careful how much it invests in Xbox and give up on casual games. Stop trying to compete against the Wii and position Xbox as a great family gaming system. It’s not and never will be. The Xbox is all about Halo and other violent shooting games and racing games played by teens and young men.

It would help, too, if Microsoft would respect its customers and support the Xbox better.  Look for a sad story about this from me soon.

 Zune — Many people say Microsoft should give up on Zune, but I think Microsoft should keep its Zune software and hardware and work to merge Zune with Windows Mobile, perhaps forcing Apple toward a music subscription model.

Windows Mobile – I think Windows Mobile is too promising to cut, even though Microsoft has screwed it up by being extremely late with its long-promised Windows Mobile 7 touch-screen update, now not due out until mid-2010. A lot of carriers still sell Windows Mobile phones, which are popular with business people.  Heck, the future of personal computing IS mobile.

Have you noticed I didn’t mention any of Microsoft’s languages?  I have long felt that these should be spun-off as a group.  This is controversial, I know, but if Microsoft was forced to use third-party languages we’d see a lot fewer undocumented APIs and other nasty surprises.  And I think it would get the Europeans off Microsoft’s back entirely.

And there you go – 30,000-50,000 heads later Microsoft would be smaller but stronger, more focused, agile, and better able to compete on a level playing field.  Call it the Cringely Plan.  Ballmer can implement it, drive Microsoft stock to $150 and then retire a gazillionaire, leaving the Bentonville Mafia to spend the next decade doing what they do best, optimizing processes.

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My promised restructuring of Microsoft will conclude tomorrow but today I want to cover a news announcement from Google that I think is very important, yet that importance seems to have been missed by the mainstream and technical press alike.  My subject is the Google PowerMeter, which is far more strategic than Google is letting-on.

Not that the official PowerMeter story isn’t a good one.  Google has invented these devices that will be distributed to users to measure the electricity consumption of their homes or apartments in real time, encouraging residents to conserve power, which is good for everyone.  I’d love to have one of these gizmos, which in most cases won’t only report to the residents but also to the electric utility.  And eventually that utility may be able to directly control electric heating and cooling systems through the PowerMeters, turning them up or down as needed to reduce total demand during high-use periods, perhaps in exchange for lower electric rates for the consumer.

This power consumption shaping would be very similar to programs already in place with many industrial users, the idea being that if maximum consumption can be kept down below a certain level then the utility won’t have to fire-up expensive gas turbine generators that are often used for peak additional power.  And in extreme cases utilities might be able to forego entire power plants, saving in the case of nuclear plans, up to $3 billion in construction costs.  It’s a heck of a deal.

So this is Google doing its bit for the environment in exchange for which they learn even more about our behavior, right?

Wrong.  It’s much more than that.

Google’s PowerMeter is a Trojan horse – a way to become a de facto Internet Service Provider for potentially millions of homes.

Several years ago Google made a $100 million investment in a suburban Washington, DC company called Current Technologies, which is America’s leading provider of both smart electric metering services (that’s what the Google PowerMeter is supposed to be) AND power line Internet service based in part on the HomePlug networking standard.

Current’s business model was simple.  They’d give participating utilities a way to both measure and control local power consumption pretty much as described above.  Oh and, by the way, the meter connection could also be used to provide Internet service, potentially to 100 percent of a neighborhood since pretty much everyone buys electric power.  Throw Internet on the power bill, then maybe digital cable service, too.  Eventually the power companies would take on the cable and telephone companies to fight for broadband hegemony.

Only it isn’t really happening that way.  Current is doing deals with utilities, but most of those utilities AREN’T going so far as to offer broadband Internet.  They are just reading meters, thank you, which isn’t bad unless your profit is supposed to come from the Internet and cable competitor side.  So Current Technologies is struggling somewhat and Google’s investment in that company hasn’t grown as much as either company would like.

Enter the Google PowerMeter, which is both an intelligent power meter AND an Internet gateway, just like the original vision at Current Technologies.

Electric utilities are enthusiastically installing backbone capability to serve these smart meters.  And contrary to popular belief, the network on the power company’s side of that medium-voltage transformer on your telephone pole is usually optical fiber, NOT Broadband over Power Lines (BPL) which amateur radio operators hate so much.  The fact is that BPL has real distance limitations and it is just easier to string fiber alongside the medium and high-voltage lines.

So the utilities partner with Google to install these boxes, ideally in every home.  They install enough fiber for gigabit service to the medium voltage transformer with HomePlug or WiFi into the home.  And the whole thing interfaces to Google at the power company’s data center where Google will install proxy servers and routers and connect to the Internet backbone.

Eventually Google — not the electric utility — throws the switch on consumer Internet access, IP TV, and VoIP phones, which the electric companies could have done – should have done – on their own but generally couldn’t be bothered to.

Ideally Google lights the whole town with Internet with the utility happily picking-up most of the infrastructure costs yet with Google becoming the ISP.

Now THAT’s a heck of a deal.

Prove to me I’m wrong.

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This post first ran on January 29th on my mortgage blog.  It got some traction there and  a  few mentions in the press so, lazy bastard that I am, I’m reproducing it here in a slightly improved form that corrects my own math error.

Take a look at this chart that someone sent to me a couple days ago.  I’m making it big so you can see as much detail as possible.  Have a look and then come back, okay?

Pretty scary, eh?  It’s a chart showing the deterioration of major bank market caps since 2007.  Prepared by someone at JP Morgan based on data from Bloomberg, this chart flashed across Wall Street and the financial world a few days ago, filling thousands of e-mail in boxes.  Putting a face on the current banking crisis it really brought home to many people on Wall Street the critical position the financial industry finds itself in.

Too bad the chart is wrong.

It’s a simple error, really.  The bubbles are two-dimensional so they imply that the way to see change is by comparing AREAS of the bubbles.  But if you look at the numbers themselves you can see that’s not the case.

Take CitiGroup, for example.  The CITI market cap dropped from $255 billion to $19 billion — a difference of 13.4X.  If we’re really comparing the areas of the bubbles, that means 13.4 of those tiny CitiGroup-of-today bubbles should precisely fill the big CitiGroup-of-the-good-old-days bubble.  Only they won’t.  As a matter of fact it would take about 13.4 times as many little bubbles to fill the big bubble as the chart preparer thought or 179.64 little bubbles.  Pi r squared, remember?  This is because the intended comparison wasn’t two-dimensional but one-dimensional — the chart maker was intending we compare the DIAMETERS of the bubbles, not their areas.

So it’s a typo: no big deal, right?  Yeah, but what a typo!  It got past Bloomberg and JP Morgan and pretty much all of Wall Street before someone said, “Hey, this makes no sense!”

And who was that someone? Me!  A nobody.  Or at least someone unimportant enough not to be asking for a Federal bailout.

How could this be?  It’s because Wall Street doesn’t work the way we think it does — the way we are led to believe it does.  Wall Street is a marketplace, a selling ground where everything from ideas to stocks and bonds are on sale every day.  And there is nobody easier to sell to than a salesman. Come up with a good chart that’s ALMOST within an order of magnitude of reality, put a disclaimer on the bottom, and let ‘er rip.

No wonder we’re in a global financial crisis.

The people we count on to understand what’s going on can’t even read a chart.

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My last column was all about the culture of Microsoft and how it makes real change difficult for the company.  It’s not just at Microsoft that these things happen, by the way: nearly all mature organizations get into similar ruts.  And if, like Microsoft, they are spectacularly profitable ruts, well then it isn’t surprising that things stay more or less permanently dysfunctional.

I said last time that a second column would follow with my specific suggestions for restructuring Microsoft, but now that I am really into it I think we might be looking at a total of three columns, not two.  But then I’ll be finished with Microsoft for a few months.

Setting out to rebuild Microsoft for the next 30 years it is tempting simply to throw away the parts of the company that don’t make money, which is to say almost everything except Windows, Office, and MAYBE the xBox.  Most parts of Microsoft lose money. But those parts that are profitable are SO profitable that they more than make up for all the losers, as I have explained ad nauseum before.

The part of Microsoft that it would initially make sense to dump is easy — everything related to MSN, including MSNBC, the MSN home page, and the many MSN websites. Even though some MSN sites are relatively successful, such as MSN Money, Microsoft should never have gone into the content business and stayed there so long. It’s not Microsoft’s core business, and MSN has cost the company billions of dollars over the years.

But I said it would INITIALLY make sense to dump MSN, not that I still believe that completely.  After all, wasn’t it MSN that Microsoft intended to augment by attempting to buy Yahoo for $44 billion?  How could Microsoft be so stupid to throw another $44 billion into a toilet that already contained close to $10 billion in cumulative MSN losses over the years?  Yet CEO Steve Ballmer seemed very intent on doing just that.

The arguments for dumping MSN are that it never made money and never felt like the rest of Microsoft.  The arguments for keeping MSN are that in many ways it is the future of PC technology and Yahoo has shown it is possible to make a pretty good living in the content business.  Just because MSN hasn’t made money doesn’t mean MSN COULDN’T have made money if that was an important goal.

One could argue, in fact, that someday the Windows and Office franchises will start to fade so Microsoft needs to learn how to build new and successful lines of business.  Yes MSN, so far, has been a failure.  It is a management failure and to be successful well into the future, Microsoft needs to fix this problem.

Yet there is big money still to be made online as Google and Yahoo have shown and it is something Microsoft should somehow do.  Microsoft needs several new lines of business that can each generate billions in profits.  “Online” has the potential to do that.  There are big bucks to be made there and Microsoft needs to be in the game.

The problem, though, is that the folks in Redmond don’t know how to build an online business, which is a big reason why they wanted to buy Yahoo.  Ballmer suggested, remember, that Yahoo’s DNA, not MSN’s would be perpetuated in the combined online business.  This is a nice argument, but who can believe that Microsoft would spend $44 billion and then not take an active and probably destructive role in managing that business?  I can’t. Worse still, it can be argued Yahoo has forgotten how to manage an online business, too, for reasons I have written about in the past.  But Microsoft was willing to take that risk, or so they said.  There was a good foundation for an online business at Yahoo and it could be obtained at a bargain basement price.

Only it wouldn’t work.  Microsoft would meddle and screw it up while Yahoo might just as easily self-destruct.

The only answer to optimizing the online operations of both companies, then, would be for YAHOO TO BUY MSN.

This actually makes some sense in a weird way.  The only way to keep Microsoft from screwing-up Yahoo is by making Microsoft a minority partner in the operation.  The only way to push Yahoo management into being less boneheaded in its own way is by having a demanding minority owner.  And you can be sure Ballmer would be demanding.

Let’s put a value of MSN at $10 billion giving the combined companies a worth of $29 billion and Microsoft a 34 percent ownership of Yahoo, perhaps with warrants to buy the rest at some later date under certain conditions.

Yahoo, for all its problems, knows how to make money on the Internet.  It could use Hotmail and other parts of MSN to increase economies of scale and become even more successful.  Yahoo still wouldn’t defeat Google but it would be a much stronger number two and even number one in certain areas.  Because Microsoft couldn’t control Yahoo it couldn’t impose Microsoft culture on it.  Because Microsoft was a big enough minority owner, it COULD push Yahoo into being more logical, less emotional, and probably more profitable – something Microsoft could never force MSN to do itself.

And Microsoft, suddenly unburdened by MSN losses would look better to Wall Street, which would appreciate, too, any option to recapture Yahoo at a later date, but only if it made sense then to do so.

Unlike Microsoft buying Yahoo or even Yahoo remaining completely independent as it is now, this plan actually makes some sense, at least to me.  But then you know me…

Next column we’ll deal with the rest of Microsoft, chopping those 20,000 to 50,000 heads.

New Kindle?

A few hours from when I’m writing this Amazon will reportedly introduce the second-generation Kindle ebook reader.  A lot of money has been lost on ebooks over the years and I have my doubts that the Kindle is yet profitable.  Still, if any company can make a go of eBooks it is probably Amazon.  As for what’s in the new Kindle I’ll take a chance and guess right here.

It will be thinner, have a better user interface and probably a touch screen of sorts.  Also I shot some interviews last year at E-Ink near Boston and got some idea of where that technology, which is used in the Kindle, is headed.  Last spring I saw full color video running on an E-Ink display, so I’m guessing that will be a part of the next Kindle, too.  But that’s as far as my guessing goes.

Update –The Kindle 2 has now been announced.  As predicted it is lighter, thinner, and faster, but it doesn’t have a color screen — 16-level grayscale instead.  That color model must be the Kindle 3. –Bob

All Bob All the Time!

Now some news about me.  Sometime this spring I will start a weekly online video show in cooperation with the Computer History Museum in Mountain View, California.  Think of this as a follow on and an improvement to NerdTV.  It will be 52 weeks per year and unlike anything you’ve seen to date on the Internet, even from me.

This spring I will also start writing a blog about the global financial crisis with my friend of 25 years Adam Smith, author of The Money Game, Super Money, Paper Money, etc. and for 14 years the managing editor of Adam Smith’s Money World on PBS.  I’m definitely the junior partner in this operation, which will be done as a co-production with a major New York publisher.

My reasons for mentioning these two projects are entirely self-serving: we need sponsors.  If we can bring in a launch advertiser for the blog, especially, we can grandfather that arrangement at a lower CPM before the New York guys get a chance to mess with it.  So give me a call if you or your company are seriously interested.

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Program Manager Syndrome, that is.

A few days ago I called for Microsoft to slash not 5,000 jobs but 50,000 to make the company lean and focused once more. Readers responded by asking which 50,000 Microsoft heads I’d like to see cut off? Wow, what a great question! So great, in fact, that it inspired this column and probably the one after. Because it’s not that simple to just fire half a company. It’s remarkably easy, in fact, to fire the WRONG half.

Restructuring Microsoft has to have a point beyond simply improving profitability, which was pretty darned good to start with. It requires first identifying the systemic problems inside the company that ought to be addressed by thoughtful, if brutal, change.

But people don’t gchange. That kid you knew in high school who was a weasel-rat, well he’s probably a fat and balding weasel-rat today. People are sometimes changed by life- or career-threatening experiences, but generally not even then, which is why organizations that try to change hardly ever succeed.

So you have to cut deep – very deep – to make change stick. One approach to show management is serious about change is to attack the big identity aspects of the concern like its name, where it is based, and who is running the show. Remember Boeing moved its corporate headquarters to Chicago in an attempt to show the world it was a different company. ValuJet merged with a smaller company and changed its name to AirTran. If Microsoft is going to successfully change it will have to make similar moves, at least for some divisions.

Current top management, of course, should go.

Microsoft has several systemic problems holding it back. Like many big, proud, older, successful-if-fading-somewhat companies, Microsoft’s problems are seen by some as the reasons for the company’s past success, which they may well be. It’s just that Microsoft has outgrown those old ways of doing things (or the market has) only they haven’t figured that out yet.

Ignoring completely the company’s anti-trust issues, Microsoft’s primary failing is technical arrogance. Some of this is native and some is a vestige of Redmond’s long association with IBM. Taking the IBM connection first, let’s look at something current Microsoft CEO Steve Ballmer said in my 1996 PBS documentary, Triumph of the Nerds:

“In IBM there’s a religion in software that says you have to count KLOCs (pronounced KAY-lock), and a KLOC is a thousand lines of code. How big a project is it? Oh, it’s sort of a 10 KLOC project. This is a 20 KLOCer. And this is 5O KLOCs. And IBM wanted to sort of make it the religion about how we got paid. How much money we made off OS/2, how much they did. How many KLOCs did you do? And we kept trying to convince them – hey, if we have – a developer’s got a good idea and he can get something done in 4 KLOCs instead of 20K-LOCs, should we make less money? Because he’s made something smaller and faster, less KLOCs. KLOCs, KLOCs, that’s the methodology. Ugh!”

While Microsoft learned a lot from IBM, this whole KLOC-orientation and associated ass-backward reward scheme repulsed them because it led to bloated code. So just like a child who grows to ultimately emulate or rebel against parental examples, Microsoft shunned the KLOC and embraced the power of tight code. And though it might surprise you from looking at their current product lines, they still do.

The way a company that prides itself on tight code can build something as floppy (in every sense) as Windows Vista is because Vista is simply too big for any one Microsoft executive or engineer to understand in detail. So they embrace the idea that piling lots of chunks of tight code somehow won’t turn into a huge steaming mass of not-very-tight product. But it does.

But wait, there’s more! Somehow this mistaking fat for muscle became institutionalized at Microsoft through a unique group of people called Program Managers or PMs. This is a Microsoft invention intended to make their products more useful and elegant, yet in practice the PMs do just the opposite.

Program Managers at Microsoft are the advocates for software usability. They link (or are supposed to link) to the rest of the company development, usability and testing. They write specs and try to optimize the user experience, though with only limited success.

The bloated development, test, and PM teams across the company are a sign of Microsoft’s obsession with technology and all things technical. There aren’t nearly enough usability engineers, designers, writers, editors, and other people who worry about how usable the software actually is. In other words, like the people who run the feature teams at Apple.

A Microsoft designer once said that the biggest difference between Apple and Microsoft was that at Apple designers usually owned the product features, while at Microsoft, PMs always own the features. And most of the PMs at Microsoft are highly technical, often with computer science degrees. This is considered a good thing, by the way, but it isn’t good at all. It means the PMs tend to lean in favor of the developers just as management leans in favor of the developers, too. So in most cases where usability goes head-to-head with development, usability loses. And so do users.

The answer for Microsoft is not to blindly copy Apple because Microsoft will never BE Apple and will never have a Steve Jobs as boss. The answer is to adopt a similar product design philosophy to Apple’s with the focus squarely on usability.

This will not happen EVER with the present culture at Microsoft.

The first head of usability at Microsoft was a woman named Mary Dieli whom I met at Apple in the early 1980s when she was an intern there. Mary, who went on to get her PhD at Carnegie Mellon, ran usability for Adobe Systems and then was lured to Microsoft around the time of Windows 3.0. We used to talk, she and I, about her frustration at Microsoft and how difficult it was to be the champion of something that was considered non-technical, even effete, like usability. Mary could never break into the boys club that runs Microsoft. It’s not just that she was a woman, though, it’s that her field got only lip service, not respect.

At Microsoft the PMs and development managers have the power to control product features, not the usability researchers and designers, who are overworked and without real authority. Microsoft needs to somehow shift its corporate culture away from an obsessive focus on technology and engineering toward creating software that’s much more user-friendly. Until it does this, the company will continue to be slammed for its products.

Next time we’ll consider exactly what sort of tough love will be required to make Microsoft in the 21^st century the kind of success it was in the 20^th.

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Last week a story broke about a former Fannie Mae IT contractor accused of planting malicious code that would have taken down systems and destroyed data right at the epicenter of today’s global financial crisis. The accused former employee has since surfaced claiming innocence so I prefer not to go into that specific case but rather use it to consider the likelihood that similar crimes could take place in other companies.

Well of course the probability is 100 percent simply because similar crimes HAVE taken place in other companies. It happens all the time at an annual cost of BILLIONS.

IT crimes go grossly under-reported because they are so embarrassing to their victims who convince themselves that saying something will only embolden the bad guys and lead to further losses. In one sense this is true, but in another it creates a false sense of safety. This is one area where we really SHOULD feel vulnerable yet most companies don’t and have lax procedures as a result.

So just in case you are interested in this topic or have some influence in data security, here are my overkill ideas on how to lock things down. It is doubtful that any company or agency would do all these things, but doing at least some of them makes good sense to me.

Many years ago good business practice was to put all critical systems on an internal, isolated network that did not have a path to the Internet. This would prevent someone from the Internet accessing a bank’s ATM network, or a chemical company’s process control system, or a power utility, etc. Recently I’ve been amazed to find how many firms are not doing this anymore and worse, they don’t understand why they should even try.

So here are my recommendations to avoid those nasty logic bombs. Your mileage may vary.

1) Route admin access to all systems through a logging proxy server. Each administrator must be authenticated by the proxy server and their access to systems logged. Keep the logs and check them on a regular basis.

2) All admin personnel will be assigned two user IDs. One will be a normal, non-privileged ID they will use for routine things like email and office applications. The other ID will be privileged and include a special character, maybe a “$.” You can’t check your email or run a business application with this ID. All admin access is done with the special ID. Use of generic root or administrator accounts is not allowed after the system is set up and running.

3) Scripts are run on each server (or domain) to check user IDs. All privileged IDs must have the special character and the right rules. All non-privileged IDs must not have the special character. Logs are checked for login by generic root or admin accounts. All deviations from policy are flagged and investigated. Scripts automatically disable all out-of-policy accounts.

4) After a system is set up, install a script to reset weekly the generic root or admin password. No one is supposed to use this account and no one knows the password. If you need access to the generic system ID, then run a tool that will tell the password of the week. This is a logged event too.

5) All admin access to a system should be logged and recorded in the change control system. If you fixed something or changed something, you need to note it by editing the record of your access (you can’t delete the record, only add to it.). On important systems run a trip-wire tool and post its report in change control too.

6) Privileged IDs must have their passwords changed at least once a month. Longer password expirations are acceptable for non-privileged IDs. There are password rules on content and length. Manage all IDs with LDAP.

7) HR manages user IDs. In the case of a departure or termination, the user’s IDs are disabled. The passwords are changed. Their managers are given access to the IDs and new passwords. All IDs are maintained in a database. When each system is checked, the IDs on it are checked against the HR database. Exceptions are flagged and investigated. When someone leaves the company for any reason, reports are created showing all their system access and changes.

Now would these seven steps stop a determined and talented former employee or contractor? Nah. And that’s the part that’s really distressing, because I am sure we have built into our IT overhead 5-10 percent simply to cover sabotage – a crime we otherwise try never to mention.