Microsoft Israel looks to emulate Intel

New general manager Yoram Yaacovi wants to expand R&D operations into an independent source of profit for company.

By SHMULIK SHELAH/GLOBES
Office 311 (photo credit: Courtesy)
Office 311
(photo credit: Courtesy)
A visitor to Microsoft Israel’s R&D center in Herzliya Pituah gets the impression that it’s business as usual. The center’s new general manager, Yoram Yaacovi, who took up his post on July 1, walks around in jeans and a T-shirt. His predecessor, Moshe Lichtman, can still be seen in the hallways and manager’s office.
In his first interview in his new job, Yaacovi told Globes, “My replacement of Lichtman was the less important change in June.” Yaacovi will manage a staff of 600 to become the strongman on the Israeli scene after serving for three-and-ahalf years as the R&D center’s CTO. As far as he is concerned, he is simply moving offices at a company that he knows well. He previously worked for Microsoft Israel in 1993-2004, before moving to Amdocs Ltd. He has now closed the circle.
Microsoft Corporation’s search for new ideas resulted in a change of attitude towards its strategic R&D centers in China, India, and Israel. “I never saw the company treat its R&D centers as it treats them now,” says Yaacovi. “If finding human capital that is not available in the US is why it is operating R&D centers around the world, then it is necessary to attract these workers with the most interesting things.”
The list of interesting things in Israel includes core operations, such as the Windows InTunes operating system, which aims to provide infrastructure for computing resources of cloud computing enterprise customers, which Microsoft launched a few months ago. The Israeli center also works on business intelligence. Both these projects reached Israel six months ago and occupy 100 employees.
Microsoft Israel’s focus on these two projects follows a period of uncertainty. In October 2010, Microsoft cancelled a large telecom project that employed 100 people in Israel. There was concern that some of them could lose their jobs, but most of them ultimately joined the new venture for which the company hired 20-30 new employees. Some of the employees on the Microsoft Gansos project moved to work on online projects, such as location-based services and advertising.
Yaacovi prefers to look at the glass as half full. “We present this to the company as our competitive advantage. It proves that we pick up and continue after a setback. We want to handle projects on the newest things, even if they are liable to fail and be closed down. We’re built precisely for this; we’re the start-up nation. As far as I’m concerned, it’s perfectly fine a project is closed down and we move the people on to something else.”
Microsoft is currently dealing with a computing environment that it has barely ever touched, and is working intensively on internet infrastructures and computing components for smartphones, tablets, and other devices. It is also dealing with a new interests map that includes changes in its collaboration on PCs with Intel Corporation. Online operations and Microsoft’s search make it difficult to compensate for losses of revenue, and the company is chalking up heavy losses in these fields.
Microsoft’s R&D centers are supposed to provide the answers to make the company the industry leader in the next five years in a world in which the computer experience will be totally different from what it has been. Microsoft’s crossroads may serve the interests of Microsoft Israel.
“We invest a lot of time in thinking about in what to invest to move the industry and company forward,” says Yaacovi. “How you create opportunities for the local development center and don’t just let things happen.”
Microsoft’s model is Intel, which turned its Haifa R&D center into a strategic asset. Intel Israel’s general managers in the 2000s, David Perlmutter and Muli Eden, gambled on the energy-saving Centrino processor while Intel was urging stronger and faster processors. Perlmutter’s success helped him become Intel EVP and general manager of the Intel Architecture Group, and his name has been mentioned as a possible successor to CEO Paul Otellini.
“Intel’s corporate politics would not have allowed the Centrino processor to be developed at the Israeli development center if their idea was company demand,” says Yaacovi. Microsoft Israel learned the lesson from Intel. “We’re looking for our Centrino,” he declares, and he wants to expand R&D operations into an independent source of profit with a substantial presence in Microsoft’s global operations.
To achieve this goal, Lichtman and Yaacovi expanded the Israeli R&D operations, which recently became part of Microsoft Research, which gives the Israeli center access to early-stage technologies that are not yet core technologies at Microsoft. These include social media marketing, which could become a future growth engine for Microsoft Israel and the entire company.
Lichtman’s retirement after 20 years surprised many at Microsoft. He was considered Microsoft Israel’s primary ambassador at headquarters in Redmond. Several top Microsoft executives have also left the company in the past years, including Microsoft Entertainment & Devices Division president Robbie Bach, who represented Microsoft Israel at headquarters. In January, Satya Nadella replaced Robert Muglia as president of the Server and Tools Division.
Nadella now represents Microsoft Israel at headquarters. As the man in charge of cloud computing and infrastructures, he is more in tune with the Israeli R&D center’s interests than Bach was. “I feel safer than before about the center’s activity because we’re in safe hands,” says Yaacovi.