MGMT-237: MANAGEMENT OF TECHNOLOGY

Vermeer Technologies

Hyung Soo Byun

4/8/2010
MGMT-237 Management of Technology April 8, 2010
Hyung Soo Byun

Out of all the options available in entering the web publishing market, Microsoft chose to acquire
Vermeer as it saw a value creation opportunity, despite the multi-dimensional uncertainties that existed.
With the emergence of the internet, market growth potential for web authoring tools played a significant
role, as reflected in the markets push towards the internet millions of productivity applications users
wanted an easier way to participate in the excitement and enhanced productivity of the web. Vermeer had
been a market pioneer in developing its product, and Microsoft believed leveraging its complementary
capabilities would enable FrontPage to emerge as the dominant design and capture the market. Moreover,
FrontPage would address the wide gap between simple HTML page editors and Microsofts current
product offerings, serving as a complementary product, increasing the value its Office suite would
provide to end users. Finally, FrontPage would propel Microsofts strategy to embrace and extend web,
as it was a discontinuous technology that would redefine the software industry. Through the acquisition of
FrontPage, Microsoft hoped to gain access to the enabling technology required to support its aggressive
internet strategy. With Microsofts strengths existing in product innovation, it was crucial to tap into the
tacit knowledge of Vermeer. This significantly reduced the time and effort Microsoft would invest in
entering the emerging market, but would also enhance Microsofts innovative capacity on the internet.

Despite the rosy picture Vermeers acquisition drew, multiple complexities existed, notably in
organizational integration. Technical uncertainties had been largely addressed by Vermeer before
integration began to take place, with the successful launch of FrontPage 1.0 - Vermeers vision in
developing web publishing software had materialized. With Vermeers engineers moving to Redmond to
continue to develop iterative versions, technical uncertainty was further reduced. Similarly, the market
uncertainty was not a significant barrier, as the market wanted to take advantage of the web. As no
technology particularly targeted the web publishing software market, it was Microsofts interest to pursue
the opportunity quickly to gain first mover advantages and emerge as the dominant design, as it had in
many of the other markets in productivity software.
With relatively low technological and market uncertainty, organizational complexity appeared to
be the greatest and least addressed problem. Vermeers employees were largely concerned with
organizational integration, with the misperception that Microsofts culture would differ greatly from
theirs. For instance, the group expressed unease with the potential divergence of the two firms cultures,
possible rivalry with Microsofts Blackbird group, and drastic differences in the employee profile.
Despite the increase in bureaucracy and specialization of roles and initial concerns over the role of the
Product Manager (PM), Microsoft succeeded in integrating Vermeers employees who were the most
valuable assets gained through the acquisition into the firm, making itself compelling enough to stay.

Microsoft placed heavy focus on organizational integration and process adoption. Microsoft had
successfully become an ambidextrous organization, with many of the operational and back office
activities centralized and shared, and product groups were enabled to focus their concentration on
entrepreneurial innovation capabilities, aligned with Microsofts overarching strategies. Strategic
decision-making and operational-level processes abided to the Microsoft Way. From the beginning,

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MGMT-237 Management of Technology April 8, 2010
Hyung Soo Byun

Microsoft required Vermeers employees to move Redmond, and significant preparations were placed to
smooth the organizational integration. Concurrently, back-office duplicity was removed, leveraging
Microsofts existent sales and marketing force to promote product. Aggressive measures of formalization
and emphasis on organizational and process integration gradually removed the expected uncertainties that
existed in these dimensions. Particularly, appropriate staffing in managerial roles and specifying the tasks
of the developers enabled FrontPage to quickly pick up momentum.
Interestingly, little effort was placed on product knowledge sharing outside of the group. This
enabled the product engineers to focus their efforts in product innovation and delivering future versions of
FrontPage, which had proven to be largely successful in the market. This provided greater flexibility,
allowing the group to work in internet time, significantly reducing the product development lifecycle
and ensuring that any further disruptions would be minimized in the integrative process and address the
evolving demands of the market and other phases of integration .

Microsofts acquisition of Vermeer has largely been a great success, yet looming uncertainties in
the environment and integrative complexity have posed a challenge in sustaining its innovation.
Microsoft should also take into consideration the input from the engineers, so that they can have
greater influence across the lifecycle of the product. Whilst Microsofts great technocratic culture
had ensured its innovation, the rigidity with which design specifications and process is abided to
may hinder the agility and responsiveness to the market characterized by increased dynamism.
Much of the exogenous environment within which the product competes has changed. Moreover,
with competition on the rise, it is crucial that Microsoft reconsider the design specification and
development process to address these changes.
a. The nature of innovation has transformed since Vermeers acquisition the first iteration
of FrontPage had been a disruptive innovation, with later iterations more incremental.
b. Furthermore, the market had changed. With FrontPage having successfully emerged as a
dominant design and successful proliferation of the internet, the market Microsoft and the
FrontPage group was addressing had gone through a dramatic change.
c. Competition began to emerge in the technological landscape, with small and agile firms
becoming a notable threat in the technological landscape, it is necessary for Microsoft to
strengthen its product ecosystem.
Greater efforts must be placed to facilitate knowledge sharing within Microsoft is crucial. With
the growing discontent amongst Vermeer engineers and their stock options vesting, Microsoft
may be exposed to greater technological risk. Providing more financial incentives may only
create perverse incentives and even cause organizational friction. Thus, it is crucial that as an
innovative organization, Microsoft will need to successfully internalize the tacit knowledge from
the acquisition to make it a core competency, and hence ensure sustainable innovation. With this
effort, Microsofts investment in Vermeer will yield greater returns, as the knowledge propagates
and influences innovation taking place in other product groups.

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