Off Line -- Microsoft Stumbles With At Work Program

Here's proof that even mighty Microsoft can slip on a banana peel.

Remember Microsoft At Work?

In 1993, company Chairman Bill Gates summoned the nation's media to New York to announce software technology that would control several office devices - printers, fax machines, cellular phones and regular phones - from a desktop personal computer.

What an idea - the first real step toward the paperless digital office.

Using Microsoft At Work, one person could easily ship formatted documents, sound or images into a network of PCs, into a fax machine for encrypted transmission or into a global, electronic-mail service - a feat that techies call binary file transfer.

Microsoft At Work promised to boost office efficiency, speed communications and cut costs. The program attracted the biggest names in office products, including Toshiba, Xerox, Hewlett-Packard, McCaw Cellular Communications, Ricoh and Canon.

But At Work has stumbled:

-- A slew of products for At Work that had been promised for delivery by now haven't arrived. Only a small number of At Work printers is available.

-- The development kit for creating software for At Work fax machines is only now shipping, six months late.

-- After a restructuring at Microsoft, some At Work partners are confused about the direction of the program and the company's commitment to it. A logo program to promote At Work has been de-emphasized.

"We've had some ups and downs and made some mistakes," says Dan Steele, general manager of the At Work group at Microsoft. "This is a high-velocity program. We're trying to make changes to accelerate the program. Whenever you make changes, you create confusion."

What happened is a lesson for anyone who follows Microsoft. Just because Gates pushes a product doesn't mean it will be easy or even happen, at least not as soon as promised. Sometimes another company's declaration of support for a Microsoft program can be little more than a news release. And there are limits to just how fast and far Microsoft can push the business world.

Microsoft has about 200 people working on At Work software. The company says that the basic vision for the program is unchanged and that new pieces of the program are being rolled out, including this month's release of a development kit for fax machines that would use the At Work operating-system software. A development kit is a set of tools to adapt or create software.

Yet for all the bullishness inside Microsoft, the At Work partners have some doubts.

"We still support the At Work program to the degree it still exists," says Bob Ratliffe, spokesman for McCaw Cellular Communications, now the wireless division of AT&T Corp. McCaw was developing wireless services to be integrated with At Work. "There's not a lot going on with it at Microsoft."

Josef Zankowicz, spokesman for Toronto-based Delrina Corp., a leading maker of fax software and an original partner in At Work, agrees. "There's a cloud around this," he says. "There hasn't been a lot of moving forward."

Part of the problem was Microsoft's ambition.

Microsoft had set the standard for personal computers. At Work was its attempt to repeat that trick for office products and thus give Microsoft a steady sip of a huge revenue stream that last year totaled more than $17 billion for fax machines, copiers and printers, according to Data Quest, a San Jose, Calif., market research company. Pieces of At Work software would be installed in phones, fax machines and other devices in offices worldwide.

The effort began in 1992 or earlier, when Gates personally persuaded hardware and software companies to participate. Typically brash, Gates saw At Work as proof of his business acumen.

"All these pieces of (office) equipment grew up independently," Gates told The New York Times in 1993. "Nobody was thinking too much about how they worked together. Nobody's really tried to bridge the gap. I figured there had to be an opportunity for somebody smart."

His deal to equipment makers was simple: You pay us a fee for our software, which makes your product more attractive to consumers, and everybody makes money. Although the deal made an At Work product potentially more costly, Microsoft said it would help promote the products so consumers knew they were getting added value.

The 70 or so companies that signed up faced another unspoken inducement. If they didn't sign up, their competitors might do so - and the business graveyard is full of companies that failed to join a Microsoft parade.

Nonetheless, not everyone was enthusiastic about tying themselves to Microsoft, which always wants a slice of revenue and uses its standard-setting clout to benefit its overall product line.

"They want money. They want to control your development, and that's the problem," Zankowicz says.

Microsoft declines to detail its licensing arrangements, but Richard Grigonis, technical editor of New York City-based Computer Telephony magazine, says many of the original At Work partners dropped out after being informed of licensing and royalty costs.

Microsoft says the fees were not out of line. The fees were "very reasonable, given the effort Microsoft put into it," group general manager Steele says. "If they don't like the value, they don't have to license it."

The program met other difficulties.

Writing the software took longer than expected. Companies complained that Microsoft wanted them to pay for functionality that was at least partly available for free elsewhere and that made their products more expensive in a price-sensitive market.

And because the concept involved a new blend of computers and traditional office products, Microsoft had to sell its concept to people who don't think of themselves as buyers of computer products.

Lexmark International of Lexington, Ky., was the first company to ship an At Work product - a printer. Lexmark remains enthusiastic about the At Work program, but Charles McNulty, vice president of marketing and sales, acknowledges that Microsoft briefly had problems communicating to partners.

"They couldn't tell their (partners) until they got their feet back on the path," he says.

The confusion arose when Microsoft went through a restructuring of its Digital Office Systems group in December and moved some of the At Work development team into the Windows 95 division. Telephone-related software went into Windows, and the remaining three groups were restructured as two groups.

Microsoft insiders saw the changes as a boost for At Work technology because Windows is the company's strategic product. Separating hand-held technology from printers and fax machines helped partners better understand what Microsoft was doing, they say.

"It's pretty nice," says Suzan Fine, At Work group product manager. "We have a clean, focused mission. Now we can be much more articulate about what we're doing."

Nonetheless, some At Work partners became alarmed by the changes, thinking Microsoft had abandoned or de-emphasized the program. Much speculation focused on the departure of Karen Hargrove, senior general manager of Digital Office Systems and a key leader of the At Work program. Some partners wondered if she had left the company.

Fine says Hargrove has moved to a new project, reporting directly to Executive Vice President Mike Maples. Hargrove was traveling out of town and could not be reached for comment.

The shifts at Microsoft do not concern SkyTel Corp., the national paging company based in Jackson, Miss.

Jennifer O'Mahony, SkyTel's public relations manager, says the work her company did with Microsoft is "core technology" that works with several Microsoft products: Windows 95, Microsoft At Work and Microsoft Exchange, a new messaging program.

Microsoft also has changed its message about the Microsoft At Work logo.

The company now tells its At Work partners that they can continue to use the At Work logo, but the big push will be for Windows 95, which will have a "Designed for Windows 95" logo. A November news release on Windows-compatible printers didn't even mention Microsoft At Work - a mistake, Microsoft says, but it again left people guessing about At Work's status.

Some At Work partners have interpreted these signals to mean that Microsoft is dropping the At Work logo, which Microsoft denies. Lexmark executives, however, say they don't mind the emphasis going to Windows 95 because it will be getting a huge marketing campaign.

Other elements of At Work have lost momentum.

In 1993, Dow Jones & Co. said it would launch this year a news service called Personal Journal that would be beamed to a new generation of wireless devices using Microsoft's WinPad software. Dow Jones owns The Wall Street Journal.

Steele says watching Apple Computer struggle with its hand-held Newton convinced Microsoft to spend more time on WinPad, a code name that is being changed. The goal is to produce a device cheaper and smaller than the Newton by next year, he says.

For all the difficulties, there are concrete signs of progress. Microsoft recently demonstrated a new At Work fax machine that also works as a scanner and as a printer for a series of PCs linked on a network.

The Ricoh machine comes with a touch screen with a set of icons, representing various commands. The machine allows people to enter passwords, save a fax to disk or route it to an electronic mailbox, or delay sending a fax to save toll charges.

The touch screen adds about $30 to $50 to the cost of the machine, says Michael Ahern, a Microsoft product manager. Ricoh has not announced a price for the product. An NEC fax-printer is also due for release soon.

Meanwhile, the At Work idea is being pursued by IBM and Novell, which are promoting their software to link office machines. IBM said it was talking with potential partners in Japan about establishing a standard that would be an alternative to At Work's approach. Novell said its Cosair software would work with the IBM standard.

Steele of Microsoft says still another problem for At Work was expectations. People should recognize that writing a new operating system and solving other problems is no small job. It's often impossible to predict how long the process will take, he says.

"There's still a part of software development that's imperfect," he says.