COMPUTER NETWORKS WILL RESHAPE SMALL BUSINESSES.

Byline: Bill Gates

Q. What does the future hold for small businesses? What opportunities and threats do they face because of future technology?

Sandra Whynott, Alberta, Canada (xtrain3ccinet.ab.ca)

A. Small businesses will become more numerous and specialized, and the size of the average business will get smaller as computer networking allows easy, efficient collaboration between people regardless of where they work.

As the Internet changes the way business is done, companies won't need to have as many resources on hand as they do now. Companies of all sizes will focus on what they do well, their ``core competencies,'' and leave other tasks to specialists at outside companies.

Many companies, including Microsoft, already are moving in this direction. For years we've used contractors for a large number of tasks that are important but not central to what we do.

We recently agreed to sell our U.S. software packaging and disk-duplication facility to a company that specializes in manufacturing packaged software. We'll work hand-in-hand with the manufacturing company, but I want Microsoft to

focus on software creation, marketing and support - our core competencies.

As the boundaries that separate companies become less important, employees will readily get advice and share ideas or information with colleagues in outside companies. An engineer who used to consult with an in-house graphic designer or an in-house employee-benefits specialist will instead work just as closely with outside specialists - via the Internet.

Because the need for physical proximity between companies will become much less important, many kinds of businesses will have the ability to reach a wider potential client base than ever before.

By the same token, a company may find itself facing many more potential competitors - not from just across town but perhaps from around the world. The increased competition will accelerate the trend toward specialization as companies, eager to differentiate themselves, define themselves increasingly by what they do rather than by where they are.

Many opportunities will arise for small businesses to embrace the new possibilities afforded by the Internet. Real challenges will face some companies that ignore the trends for too long.

One small-business owner I know hopes, starting next year, to stop doing business with accountants, lawyers, consultants and other service suppliers who don't use the Internet routinely and comfortably. He's had a taste of how effective electronic collaboration between companies can be and says there's no turning back. If he can't persuade his suppliers to embrace the Internet, he plans to find new relationships with people and companies who do.

Many small businesses will eventually make similar decisions. Attorneys, consultants and others will reap rewards for using up-to-date business practices that attract customers and clients.

Some middlemen will be particularly challenged as the Internet breeds new, efficient competitors. Some retail stores, for example, may find that electronic commerce cuts into their business, forcing them to redefine themselves or the way they do business.

Even restaurants, which are among the smallest of businesses, will find advantages from using the Internet. It won't be long before an appreciable share of the people who regularly patronize restaurants will use the Internet to scan menus, make reservations or order food via the World Wide Web.

It's a new world, and small, innovative businesses will be at the heart of it.

Q. Is it true you work on a Mac?

Mario Melendez, Costa Rica (mario-melendezquorum.nacion.co.cr)

A. No, I don't use a Mac. I use a Windows-based laptop computer with docking stations at home and work.

The Apple Macintosh is a fine system, though.

Microsoft has invested heavily in developing software for it since before the first Mac was released back in 1984. Microsoft is doing as much Macintosh software development now as at any time in the past.

Q.Not all computer geniuses behave like nerds. Many are outgoing and blend right into the crowd - that's part of what makes them geniuses, naturally. Your interviews almost invariably portray computer people collectively as nerds. Have a heart, will ya?

Bryan McKinley (bmckinlebmc.com)

A. It's considered cool these days to be wired into the worlds of computers and communications, but I'm not sure anyone wants to be thought of as a ``nerd.''

If being a nerd means you're somebody who can enjoy exploring a computer for hours and hours late into the night, then the description fits me, and I don't think there's anything pejorative about it.

But here's the real test: I've never used a pocket protector, so I can't really be a nerd, can I?

MEMO: Bill Gates, chairman and co-founder of Microsoft Corp., writes a syndicated column twice a month for the New York Times News Service. Questions may be sent to Gates by electronic mail. The address is askbillmicrosoft.com. Or write to him care of The New York Times Syndicate, 122 E. 42nd St., 14th Floor, New York, N.Y. 10168.