There’s a palpable sense of excitement that pervades the London office of Microsoft Ltd, the British arm of Bill Gates’ all-conquering software giant.

The location (the building is sandwiched between the refined elegance of Regent Street and the cultural swirl that is Soho) no doubt contributes to the daily thrills, but generating the greatest buzz is the simple fact that there is change afoot at every level within this still growing empire.

The next six months will see the launch of Windows Vista, the newest (and very much delayed) version of the world’s number one computer operating system, and the equally anticipated release of Microsoft Office 2007 – not to mention the difficult challenges to be faced in the search engine, browser, software-on-demand and gaming sectors, to name but a few.

After a quick tour of different departments, I am led to a small, insubstantial room to meet the man who has led the UK arm of Microsoft for the past two years, Alistair Baker.

He is ensconced on one of the three chairs that fill the compact and bijou space and, after exchanging pleasantries, quickly launches into the topics and ideas that occupy him most – how his company is preparing to benefit from the next great turn of the technology cycle, the way to best manage change, the elusive game that is grasping opportunities, and how Microsoft needs to harness the expertise of those at every level.

Early successes

Baker joined Microsoft via a somewhat circuitous route. An IBM graduate trainee, he proceeded to spend nine years at Hewlett Packard before being persuaded to join an upstart venture called Morse Computers, which is now a successful pan-European technology integrator.

He recalls, ‘It was a fascinating time. I spotted an opening in the Scottish market for an open system reseller and integrator and I went to Morse and told them I could help them out. They provided the infrastructure and support and I provided the people and leadership skills. In six months we went from zero to revenues of £16 million.

‘In many respects [Morse] taught me a lot about entrepreneurialism and expansion into difficult markets and that your capabilities can be amplified by your ability to take on managed risk.

‘We made the right call based on our product expertise and by sticking to our guns we were not phased when problems occurred. It was all about an opportunity and getting the right people on board [to exploit it].’

Gates comes calling

In 1996, flush with the Morse success, he says, Microsoft ‘approached me, courted me and finally persuaded me to join’.

His first job was as country manager for Scotland with a brief to establish and extend the business presence.

‘When I joined, Microsoft was still only really about the desktop. It wanted more – to be in the business server, LAN, WAN, government markets,’ and no doubt much else besides.

He remembers the challenge of driving public relations, brand identity and the overall market for the products within his sphere in Scotland, and is rightly lauded by the company for his role in the successful outcome of several strategic projects ‘in the enterprise and public sectors, including the IT programme to support the formation of the Scottish Parliament’.

His keen understanding of how to launch into new markets and manage scale (a key skill in his business world view) landed him back in England as the UK group director of Microsoft Services Organisation.

Under his guidance, this division grew from 100 people to 550 and its revenues lifted from £10 million to £65 million. Growth has continued since – in all its different guises this arm ensures over 700 businesses and partners ‘fully exploit Microsoft’s enterprise server technologies’. The Government’s Gateway project – the ambitious online venture that enables individuals, organisations and businesses to register for government services – is one of the notable developments Baker led.

In 2002 he made the move to general manager of Small and Mid-market Solutions and Partners (SMS&P), where again he worked his magic to ensure the mighty Microsoft was able to reach the four million-odd SMEs in the UK.

‘This department had always been the second class citizen to the ‘business’ side of the group,’ he says, ‘but we just did our thing, breaking into new areas by carefully considering our marketing strategy and thinking hard. When we came in, it was all about licensing. But licensing is actually the end state. Of more importance is to understand who you’re working with to ensure you sell a solution and a strategy that supports the growth and efficiency of that end user.’

Pastures new for Baker

It was from his position as head of SMS&P that he ascended to the hot seat in the UK, a post he will leave at the end of this month for an as-yet unannounced position within the organisation. He will leave many legacies from his short time in charge, with the reinvigoration of the entire UK Microsoft Partner Programme and the array of innovations in the SME space in the UK likely to stand out.

For those unaware, the ‘partners’ in this programme are the third parties who actually sell the Microsoft product. Says Baker, ‘We architectured the whole programme to ensure there were high barriers to entry. Partners must satisfy customers, they must be clever and they must have deep knowledge.’ Of course, Microsoft works with them to improve their ‘skills’ to ensure opportunities open up and sales improve to the mutual benefit of both. There are around 30,000 partners in the UK, of which 2,300 are certified. At the top of the scale is an elite 400 that have attained a gold certificated status.

Another invigorating programme at the SME level that Baker is keen to flag up is Microsoft’s small company incubation interests. Just recently the group announced two new intellectual property agreements with British companies – Skinkers and Vimio. These ventures, he says, ‘will bring major innovations to the market through the use of Microsoft’s cutting-edge intellectual property’. They are the first spin-offs of Microsoft research developed in a European lab and are apparently ‘a major step forward in Microsoft’s strategy of sharing its R&D with talented entrepreneurs throughout Europe’.

Pastures new for Microsoft

Of course, the above schemes and strategies take a back seat when measured against the importance of the launch of the new operating system, Vista, which replaces Windows XP.

As you might expect, Baker waves away questions about the delays of this project, preferring instead to focus on what he believes will be its strengths.

‘We are trying to get places and Vista will help us get there. It will be more robust, providing a much higher level of security and will take advantage of dual cell processors. The experience of managing and finding information will be great. Business processes will work much better together – the user interface will be richer.’

Baker is equal enthusiastic – perhaps justifiably so – about the likely success of Office 2007.

There’s a slight change of mood though when questioned about Google, the ubiquitous search engine whose online success – according to the critics – is a serious threat to Microsoft’s current hegemony in the online world.

‘Google has a good brand and a good engine,’ he admits, adding rather defiantly, ‘but we are putting a lot of money into search and our advertising and search revenues are increasing.’

Fighting on all fronts

Of course, as well as in the search engine world, Microsoft is battling for dominance in the browser market, the gaming space (Sony’s new console will be launched soon enough), as well as having to come to terms with developments in IPTV (internet protocol television) and VoIP (voice-over internet protocol). Then there is software-on-demand, the online hosted services solution that poses many questions about how businesses and consumers will buy software in the future.

As you might expect, Baker reckons Microsoft has the flair and entrepreneurial zeal to meet these challenges head on.

‘There are many interesting models for hosted services, and a number of those are based on a Windows platform. The key issue is this: the more functionality we bring to the Microsoft product, the more people will come to us. We will be in the hosted marketplace. Our partners will have capabilities. It’s a very easy migration path.’ At present, he says, ‘certain areas are reacting and certain areas blazing,’ before adding, ‘it’s very rare you see total replacement. We reckon some areas will be hosted and some will be what we have.’ Rather ominously for his opponents, though, he adds, ‘we will be using the power of our technology, the power of our brand and that of our distribution network [to compete in this area].’

For Baker, staying competitive and winning is about risk management and ‘in the game of risk-taking and risk management you need smart people. I joined Microsoft because it has a philosophy of innovation at its core. Remaining competitive is about looking at all possibilities, trying to stay ahead of the curve and… the ceaseless search for new products and new markets.’

Perhaps that’s why he reminded me that Microsoft has a $7 billion R&D budget before bidding me goodbye.