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Microsoft's Latin Connection.

How Latin Americans will make Microsoft's new. Net strategy work.

DURING ORLANDO AYALA'S Interview with Microsoft, the Colombian executive asked to whom he would report. "We told him that the position still hadn't been filled," recalls Mike Creamer, human resources director for Latin America at the time. "He said, 'I want that job.'" Ayala got it--and more.

A decade has passed and 44-year-old Ayala, Microsoft's head of global US$23 billion sales, leads the meteoric rise of Latin Americans into the top echelon of the world's No. 1 software company. Latin American executives hit the fast track because they helped guide Microsoft's global expansion. They managed rapid growth and severe crises.

Overwhelmingly concentrated in sales and marketing, Latin executives now play a pivotal role in selling .Net, Microsoft's new bet-the-company strategy. The Redmond, Washington-based company is seeking to extend its dominance of the PC desktop to the Internet through products and services built to communicate with any software and any device.

From pagers and cell phones to laptops and mainframes, individual and corporate users desperately need to make information available on any piece of equipment. With every new gadget, the complexity of simply getting a phone number or an e-mail address seems to increase exponentially. "Billions have been invested to install information systems, but 90% of that information is still not readily available," says Ayala.

Heading into battle, Microsoft's forces run deep with Latin American executive talent. Mauricio Santillan, from Mexico, heads the Intercontinental Region--Australia, New Zealand, Canada, Latin America and the Caribbean. Eugenio Beaufrand, a Venezuelan, is vice president for the southern region of United States.

Argentine Eduardo Rossini serves as general manager for home entertainment products in the United States. And Colombian Carlos Ignacio Robledo runs the partners program for New England. The list goes on and on.

Just another commodity. Microsoft is nowhere near disappearing. The company boasts a $388 billion market capitalization, posting profits of $2.5 billion on first quarter sales of $6.5 billion--with sales up 15%. It also has an estimated $30 billion in cash. Strategically, however, the company is attacking an important shift in the market--from software makers to an Internet-driven world where software maybe just another commodity.

The new strategy is a gamble, and it touches every aspect of Microsoft. Boxed software once sold at profit margins as high as 90% will be rented, instead, via the Web. Also, Microsoft will move the core focus of its business to non-desktop software and services used by big companies rather than individuals. This segment currently represents only 20% of software sales for the firm, says Merrill Lynch.

Latin America itself might not be on the front lines of this revolution, but young executives from the region nevertheless lead the global corporate charge.

"Latin America exports talent within Microsoft because we have always lived with crisis," says Alessandro Annoscia, a Venezuelan who directs business strategy for the Intercontinental Region. "It's the only thing we know."

He speaks with first-hand experience. Just weeks before Annoscia's 1990 wedding in Brazil, then President Fernando Color de Melo froze bank accounts for 18 months in an effort to stop runaway inflation. Annosica had only $50 available. "I sold my car, I borrowed from friends and I got married he says.

Crisis bravado. On the job at Microsoft, savvy crisis management paid off when the Mexican peso collapsed, at the end of 1994. Annoscia was running the recently formed software consulting group. Small projects were dying, medium-sized projects were stalled and big projects were hanging in the balance in January 1995. "1 took a pragmatic decision: I would rather have my people working for nothing than sitting around doing nothing," Annoscia says. The gamble paid off. By March, Microsoft landed its single largest customer, Bancomer, and by July the consulting group was operating in the black, even as the Mexican economy plunged more than 7% that year.

"After living through that, you think I'm afraid of an economic slowdown?" asks Annoscia.

Along with crises, Microsoft's Latin executives know how to manage growth. When Ayala joined the organization in 1991, Microsoft Latin America had fewer than 100 people in the region. Ten years later, the company employs more than 1,000. This rapid rise helped propel executives into leadership roles simply because so much needed to be done.

Ivette de Reubens, 32, joined the company in 1992 in the sales area of the Mexican subsidiary. Within two years, the Mexican executive was director of the distribution channel. By 1996, she was in London helping Microsoft open Africa and the Middle East. "These regions were facing many of the same challenges we had in Mexico," de Reubens says.

After just two years in London, the company was ready to take her out of the "comfort zone" again. De Reubens passed on an opportunity to go to Singapore, returning instead to Mexico to work on Latin American marketing. "I didn't think they'd ever take me out of there," she says. But when she started a pilot program for customer satisfaction for the region in 1998, she found that headquarters was working on similar problems. "They stole me," says de Reubens, now director of worldwide customer and partner loyalty in Redmond.

Moving on up. The corporate fast track at Microsoft follows global expansion and rapid growth in Latin America, but it also hinges on the managerial style of key execs in the region. Intercontinental Director Santillan, for example, has established a leadership training program that includes putting young managers into a hotel room and asking them to solve a real life corporate problem in 48 hours. "If Santillan likes the idea, he sends the manager to present it to work groups within Microsoft that are working on the problem," says Cesar Aguirre, who heads organizational readiness for Latin America.

Ignacio E. Davila a manager with the global network solutions group, found the brainstorming environment of Microsoft, along with guidance from top managers like Santillan, helped him develop key solutions. "Mauricio has always been the same since I met him. He always wants a little bit more," says Davila, who is Mexican.

Outspoken, affable and dressed-down, Mauro Muratorio is very much a Brazilian Bill Gates. Only 42, he joined Microsoft 16 years ago, eager to see the world after working in his uncle's plant, Sharp do Brasil. He eats and breathes Microsoft, and talks of changing people's lives at home and at work and of releasing "human potential" through Microsoft's latest Internet and software applications.

Muratorio worked alongside Beaufrand, Santillan and Felipe Sanchez, the current general director of Microsoft in Mexico, as a tester as when company took its products into Spanish and Portuguese. He stayed with the project for four years until deciding to give back his U.S. green card and return to Brazil to open Microsoft operations there in September 1989. A U.S. immigration official couldn't believe Muratorio wanted to leave. "He asked whether someone was forcing me to go, he recalls." I said, 'No, I'm Brazilian.'"

Conquering Brazil is a bigger challenge than sitting in Redmond, says Muratorio. "The best position in Microsoft is being a general manager. You're involved in all the businesses, starting them from scratch, transferring knowledge," he says. "I'm a workhorse for the field, not headquarters. You've got to improvise, be flexible and agile."

Curiously enough, global sales chief Ayala is hoping the new .Net strategy will allow Microsoft as well as its customers to become just as deft as its field offices. Ayala loves to talk about how being always connected to information from any apparatus allows him to stay plugged into the business, even on one of his many flights. "The possibility of responding right away allowed me to help one of our saleswomen in California close a $20 million deal," he says. "The most productive time is between 10,000 feet and the gate."

A trained pilot, Ayala knows well the risks of flight. Business strategy, like flying, sometimes leaves little margin for error. As .Net takes off, it may take all of Microsoft's Latin American brainpower to keep it aloft.

with Raymond Colitt in Sao Paulo

Senor Presidente

MICROSOFT CEO STEVE BALLMER runs a company that had a market capitalization of US$388 billion in mid-June, more than the gross domestic product of any Latin American country except Brazil and Mexico. Like many leaders in the region, he is trying to affect radical change to make his company more competitive. In an exclusive interview with LATIN TRADE, Up Front Editor Mary Dempsey offered Ballmer a chance to leave the corporate world and try his hand at government.

If you were the president of a mid-sized country in Latin America, what steps would you take to bring your country up to an appropriate technology level?

No. 1, I would discourage anything that stands in the way of the free flow of capital and labor. That means let the private market do the job. If there's not enough telecommunications capacity, make sure you have a correctly deregulated telecommunications market so there's competition and the correct flow of capital. If you're worried about power, power problems also tend to get solved if there's a good capitalistic policy that lets talent and capital flow work.

Will it cost your government anything to take such action?

I don't think so. It probably increases the size of the economy and brings in more tax revenue.

What else would you do?

The second thing I would do [is] to make sure to do a really good job in enforcing intellectual property rights on software. Because, if you don't, it takes all the incentive out of any local companies that want to get in the software business.

How would you accomplish that?

Have a good law and enforce it.

What next?

It's often helpful for government as a thought leader to itself be a leader in terms of how it operates. To have a few showcase applications that the population needs to use. I think it does a lot for [computer] literacy, for a general sense that this stuff is good and important.

Give us examples.

All the applications for new licenses and permits, are they done online? Are you encouraged to pay your taxes online? The Israeli parliament put all of the discussion of new laws online for citizens to participate in.

Would your Latin American country put all government services online?

"All" is a funny word. The most important thing is to have a few showcase applications that a lot of people use. And, whether they use them from a PC at home or from a library or wherever it is, it helps encourage people to get [computer] literate and involved and creative.

What about education?

The government should take a proactive view of funding the schools correctly, to be able to have computers to educate kids, to let kids have exposure to computers even if they're not going to get it, in some cases, in their homes. There's a program in Mexico where the government is trying to make it easier for elementary teachers to buy a PC for their own home. The government is contributing some money in addition to the teachers contributing some money. It's part of how we get computers to be a basic part of the way that kids grow up in schools.

That's very expensive.

It costs money. But you can do it on a lesser level or a greater level.

Should the technology industry be treated any differently than other industries? No. Not better and not worse. You don't want anything distorted to happen.

Would your government encourage technology investment?

Would I give a tax credit to businesses to provide technology as opposed to investing in something else? As a Microsoft share-holder, sure. I'm not if I was being a citizen of the world, though.

What about regulation of technology?

I would make sure I had my regulations about privacy and taxation on the Internet well described. It's not even so important what they are. It's much more important that they be well known so businesses don't live with uncertainty about what's legal and appropriate and what's not.

Describe the private sector's role under your government.

The private sector's going to invest. Industry should behave according to the capitalist motive. Do I think it should a top priority of say, Disco, a retailer in Argentina, to somehow contribute to computers? No. They should do what makes sense to be a good retailer. I'm sure they want to sell more computers and offer good value. That should be their priority. They should use technology to improve their own operations.

Are governments holding up PC use and Internet penetration in Latin America?

The No. 1 problem is sort of obvious: household income. But the governments have done some things and the banks have done very aggressive things. Governments can do a lot and it's always appreciated by the technology industry. But the most important thing is to make sure the market works.

What's in your crystal ball?

Do I see a reason why the economically active population couldn't have 40% or 50% or 60% household penetration of PCs in Brazil, for example, in the next five years? No, I don't. A PC only costs $600. And a PC will be able to be, in that period of time, your VCR and your TV and your PC. That's a pretty good value if you can do all that for $500 or $600.

Why don't Latin Americans use PCs like that now?

All those things aren't simple today with a PC. It's not easy to know how to replace your CD player [and] your VCR with a PC. There will be a day in my lifetime when people will not think about getting the TV and VCR, they'll just get the darn PC. It will have the screen, it will have the DVD player, it will store everything. Whatever you want to do, it will do for you.

Do Latin Americans use computers differently than people elsewhere?

Not end users. The businesses are more likely to use a PC-based system as proposed to mainframe and mini-computer systems than businesses in some other parts of the world. But if I was to look at the way the average user at work or home uses the PC, it's pretty common.

Does everybody need a computer?

I think it is a great thing. I can't imagine not having a computer myself. I'm the father of three little boys and I can't imagine them growing up without computers. On the other hand, can people live fine lives without them? I suppose so. I just think it's such an incredible productivity aid, it's hard for me to imagine. So, yes, I think everybody should have a computer, but it's not realistic. The digital divide, the economic conditions in the United States, between countries, won't permit it in my lifetime. I can't say it's like food or shelter, it's not as fundamental as that. But I think it's a pretty important aid.

But are PCs essential?

The telephone is a source of valuable information that lets people work smarter. I think the PC is the Year 2000 equivalent to the telephone.
COPYRIGHT 2001 Freedom Magazines, Inc.
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Copyright 2001, Gale Group. All rights reserved. Gale Group is a Thomson Corporation Company.

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Author:Colitt, Raymond
Publication:Latin Trade
Date:Aug 1, 2001
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