December 1 1997 by C.J Prince
Strange days indeed. Three years ago, when young computer genius Marc Andreessen began giving away free copies of his handy invention-a graphical software tool for navigating the uncharted World Wide Web few imagined his bright idea would sprout into one of the fastest growing companies in history. Certainly nobody could have predicted the tiny operation would one day be regarded as a worthy foe-nay, a genuine threat-by an industry giant hundreds of times its size.
Netscape Communications’ meteoric rise to stardom was a surprise to many, not least of all to the man who, in large part, is credited with having made it happen. When Jim Barksdale left his CEO post at AT&T Wireless Services to run a no-name start-up with Jim Clark and Andreessen, many an observer thought him mad. Armed with just a single software product and a vision for becoming the Internet company, Barksdale entered an industry that, although in its infancy, was already teeming with well-established technology players-and growing more crowded by the day.
Fortunately for his company, however, the 54-yearold
To know that competition, and the ever-looming threat of defeat, serve to fire up Barksdale’s spirit, one need only look at the company’s performance.
Netscape’s revenues jumped from $85 million in ’95 to $346 million in ’96. And it’s added another $405 million in revenues to its coffers in the first three quarters of ’97. And this while having made six acquisitions, including Actra Business Systems, and several joint ventures, including Navio Communications.
Needless to say, innovating and building new products and services good enough to outpace the likes of Microsoft, while simultaneously managing enormous hyper-growth is a complex juggling act-but it’s a game Barksdale has played before. During his nine-year term as COO of Federal Express, the company grew from $1 billion to $7.7 billion. “So I know what it’s like to hire several thousand people a month,” he says. “I know what growth does to you and what it does for you.”
It was perhaps with this in mind that Barksdale remained vigilant from the start-some say paranoid-never pausing to celebrate Netscape’s dominant position in the browser market; rather he began using it immediately to shore up business on the server side, selling Netscape’s commerce, mail, and intranet server applications to big corporate customers. At the same time, the company has moved into Webcasting technology with the Netcaster push client, and has just unveiled a solution for free aggregated on-line content with Netcenter, which would draw more surfers to Netscape’s site.
The quick transformation from browser company to credible server company was a move “that earmarks Barksdale,” says Michael Goulde, senior consultant with The Seybold Group. “He’s very decisive and very quick. In the market he’s in, that’s absolutely critical.”
But though Netscape has expanded beyond the borders of browser fame, some say the company’s defensive position, vis-Ã -vis players such as Microsoft, may be hampering its ability to move forward-and to convince application developers to move with them. “That’s probably part of Microsoft’s strategy,” says IDC analyst Joan-Carol Brigham. “[Netscape]s so involved in watching their backs and staving off volleys, they’re not doing their long-term planning.”
Still others believe the company’s future success remains tied quite firmly to the success of the Navigator. “They downplay it because they’ve lost some share, but at some point, should critical mass occur for Microsoft, it becomes a real issue for them,” says GartnerGroup research director David Smith.
Hence, Barksdale’s understandably keen interest in the DoJ’s suit against Microsoft-and it’s no surprise who he’s rooting for. Microsoft’s Internet Explorer has already eaten into Navigator’s piece of the pie, which has dropped off to roughly 65 percent by most estimates. If Microsoft succeeds in its plans to integrate Explorer into the Windows desktop operating system, that number might fall further.
But while his company is moving at the speed of a man chased by the devil, Barks-dale’s own demeanor is one of remarkable, almost unnerving calm. From his view point, he explains, with the market exploding, and Navigator still growing at a healthy clip of one million customers a month, there isn’t much to panic about. “After three years and hundreds of millions of dollars Microsoft has spent promoting a free product, to only have garnered about a 30 share-most people would call that a huge failure,” he says simply. And, after all, there are more important things in life, like his wife of 31 years, Sally, their three children-and their first grandchild, due to arrive in May.
But self-assured posture notwithstanding, Barksdale knows there are many who doubt Netscape’s survivability in a field of giants. It’s a reasonable skepticism, given the competition in the markets Barksdale has targeted going forward: intranets, extranets, and electronic commerce. But if you ask, he’ll tell you, in his mild southern drawl, it’s all the more incentive to live on-and prove them wrong.
Why is the browser war important?
Because it will have a lot to do with the interface that developers build to. It will be the standards-defining product for user interface, and it’s very important that it stay an open-standard, cross-platform, cross-operating system kind of a software interface. It’s also the thing with which we have established our brand. Most people know Netscape because we were out there with 60-plus million Navigators. It’s the most prolific computer application ever sold. It allowed a company that was nonexistent three-and-a-half years ago to get a big presence in the world and establish its brand quickly. It’s also a good way of marketing and distributing other products. If you like my Navigator, you’ll probably download my other products over the Internet.
Then is Netscape’s success dependent on the Navigator?
No. I could show you my product suite with almost 100 different products. Certainly we want to have a large share of the browser market, and we will continue to have a large share. In poll after poll, people prefer our product because it is separate, it’s not encumbering, because they don’t have to do business with only one manufacturer. It gives them flexibility and choice, which is what the Justice Department is trying to preserve.
What happens if the DoJ loses?
We’ll do fine. There’s a high percentage of people who don’t want to bundle everything on the desktop. Corporate users deploy these things by the thousands if there’s a return on investment. If there’s no return on investment in upgrading to Windows98 and if you’re doing it only because it has an embedded browser, which is about all it has-that’s an $80 to $100 purchase for nothing. We don’t see that as a major deal. For almost two years they’ve been holding off developers and saying that any week now they’re going to integrate everything. So we think we’ll do fine. Like I tell people, I have a house and I have a boat-but that doesn’t mean I want a houseboat.
Why should CEOs care who wins?
First, from an overall architectural point of view, a CEO should care about IT because it’s one of the major tools they have to grow the top line and the bottom line of their business. Every CEO worth his salt knows that.
Within the context of that, one of the ways to ensure the maximum productivity and return on investment is to have as many alternative choices as possible. If a CEO’s given 75 cents of his desktop software dollar to Microsoft, he should want to give the other quarter to somebody else. Because everybody knows you have to have multiple sources if you’re going to be a good purchaser. If everybody gave the full dollar to one company, the value, capability, and functionality of these products would atrophy-like the spreadsheet area, word processing, and all the other products that went that way. It’s only in the competitive world that things get better.
As a CIO myself years ago, I probably bought and implemented more software than any software CEO in the world. I can tell you, it’s a terrible burden when you go to bed at night saying, “We just brought up 10,000 more lines of code today but it will only run on an Aardvark One.” Because the one conversation you know you’ll never have with the Aardvark company is price. And sooner or later Aardvark’s going to give you fewer new features and take more money from the bottom line. So if I were running a company spending money on IT, I would be wary of that and asking questions about it. And I wouldn’t want some CIO who’s just a sop or a shill or a Microsoft salesman working for me.
Are you concerned about Apple’s decision to make Explorer its default browser?
They’re still going to carry the Navigator on the Apple platform so that you can still click and use the Navigator. And Apple would have a relatively small market share-like maybe a tenth of a percent-going forward. I wish they hadn’t made it the default browser but then, they were paid $150 million dollars. Money talks.
Your R&D budget is $150 million; Microsoft’s is more than $2 billion. How do you compete with that?
We already have. We’re the fastest growing company in history. A lot of it has to do with how you focus your resources. Understand that R&D in the software business is the same as the manufacturing budget for a manufacturer. It’s not true research. It’s just the accounting category you call the engineers who build the code.
But how did we create this marvelous product with an even smaller R&D budget? How did we get known? How did we get this many customers? It’s because of the power and productivity of the Internet, as well as surrounding ourselves with every partner you can imagine, every software distributor, every systems integrator on this planet. They get out and sell and promote and build products. I can use all these distribution and development partners to create a much bigger product presence without any company having to do all of it.
Another way of looking at it is: forget all that. Just look at the products. I have the best products, the best technology, and the lowest cost of ownership. That’s what the guy should care about-not how many developers I have. Maybe I’m just smarter in how I use my budget. But in the final analysis, you have to deliver the goods and I think we unquestionably are in a leadership position. We win too many big accounts against tough competition to be taken lightly in this field.
How likely is it you’ll be merging with an IBM or an Oracle?
Any industry, since the dawn of the bow and arrow, goes through periods of innovation and consolidation. The software segment of the computer industry certainly is one of the most consolidating industries on the planet. We like doing acquisitions, and I think n’t want to comment on any specific type of acquisition. The story of WorldCom breaking out onto the scene shows that we shouldn’t assume that the consolidator is always the bigger company.
To what would you attribute Netscape’s success?
We were fortunate enough to find a hot market at the right time with the right product. But I also think it’s because we predicted that and sold it. Most people didn’t see us coming; we kind of sprung on the scene because we were in a new area and a new field. The story of Netscape is also verification of the power of the Internet as a marketing and distribution agent.
We also stay true to our core, that we’re the Internet company. We are the children of the cross-platform, cross-database, cross-operating systems, open standards that work so well. And that message has just exploded on the scene.
What are your goals for growing Netscape’s international business?
It’s currently about 20 percent of our business. I’d like to get it to be as much as half. We’ve already expanded; we’re in 13 countries. We distribute our product all over the world through the Internet and through our partners. Our international expansion strategy is heavily dependent on value-added resellers and distributors in other countries as well as an effective sales force that’s there for evangelizing and support. We also have a rapidly expanding worldwide professional services group to do consulting, to help people implement Internet projects, intranets, and extranets.
What’s your take on the NC/PC debate?
One of the first implementations of a network PC on the consumer end is Web TV, and what will be many derivatives of that coming out of the cable industry, that will be like upgraded cable set-top boxes. So from your home you would get a mixing, a blurring of television, as we know it, and information on a database accessed over the Internet to make it a more exciting medium. It won’t be called a network computer, but it’s the classic case of rather limited-function client, forward-function server, dependent on the network.
Will the NC displace the PC?
I think that argument is a bit early and probably short-sighted, because I don’t think it will. But let’s say by the end of two or three years, they’re easily shipping 100 million PC units a year and they’re shipping 15 million NCs or appliances that are not full PCs. Is that a successful product or an unsuccessful product? I’d say it’s very successful. Compared to PCs, it’s a relatively smaller niche but that doesn’t mean it hasn’t been successful. I don’t think anybody has implied it would take over the PC. Those pushing for the PC obviously want to imply that that’s the argument because everybody knows that isn’t true. There’s a possibility that within 10 years or so that the vast majority of things hooked to the Internet will not be PCs, as we know them today. I think the most immediate big success will be set-top boxes that will do a lot of the functions of a PC, including being your cable modem for your real PC at home.
Should CEOs rethink their business strategies around these new Internet-based technologies?
CEOs rethink their strategies probably daily if they’re good. In this area, they have now been given a new tool. There are some businesses that won’t be affected one wit by this, but most businesses now have an opportunity to improve their productivity, to improve their reach, to increase their volumes through this new medium that allows them better communications within their company. They should re-think how they do business with other businesses, their vendors, suppliers, distributors, whatever industry or business they’re in. And they probably ought to consider it because their competitors are using it. At Federal Express, we built a whole company around our IT strategy for almost 20 years, while a lot of others were just waking up to it.
You’ve been criticized for not having a long-term strategy. Is that true?
I think three years is pretty far to look out in this business. We’re only three years old. Like I tell people, they didn’t see Netscape coming. It’s unlikely they’re going to know where we’re going. Certainly we have a lot of product ideas we’re interested in, but we also believe in a sort of measured introduction of products. The great thing about the Web is, you can bring a product up on your site and if people hit on it, you call it a product and if they don’t, you call it market research.
Most people who say they’re experts on the Internet-if in fact they are-are only looking at the next 12 to 18 months. No one knows where all this is going. Certainly we have long-term goals and aspirations that go beyond three years, but we don’t spend a lot of time trying to forecast accurately five years out. That would be a futile effort. And we tend to not announce products much more than six months in advance. There’s a practice in the industry called “vaporware,” where people announce products they have no intention of building, just to keep others from entering that space. We don’t do that.
Was there one experience in your career that had a profound affect on you?
Once, I had worked a long time to sell a certain account, and I didn’t get the business. I lost to another company. I think I learned more from that loss than I’ve learned in all the wins in my life. I still think about it, try to remember how bad it hurts. But I also recognize that if you’re going to be in a competitive fight, every now and then you’re gonna get your rear end kicked. You just gotta pick yourself up again and play.
Who are your role models?
My brother Jack, the one who died. I wouldn’t say I was close with him, but I was far enough away where he was like an older model. Fred Smith of Federal Express-a marvelous model of leadership and determination and courage. Craig McCaw is a creative genius. And Jim Clark. I’m an admirer of a lot of a great business leaders. I’m an admirer of Bill Gates.
Can we can print that?
Sure. I wouldn’t be embarrassed at all to say that. Who would be? But at the same time, I love my brothers-but I didn’t let them eat my supper.