There are many more unsung people who haven't been mentioned in this book. But since this isn't an encyclopedia on all things XBox, they haven't been mentioned. The Xbox in the end is their reward. If it prevails, they will have succeeded in rewiring the minds of a whole generation.

From the Epilogue of Opening the Xbox by Dean Takahashi

The year after I graduated college, Tracy Kidder's The Soul of a New Machine was published. The book tells the story of a group of engineers at a deceased company called Data General who designed and built a minicomputer. Data General was a relatively small company, trying to compete with the stronger (now also deceased) Digital Equipment Corporation. Two groups within Data General were competing to design what would be the next generation system which the company would rely on for its future. The Soul of a New Machine tells the story of how this group of engineers designed and built the Data General Eclipse minicomputer. This was a computer system designed from the ground up and included new operating system software. A number of the engineers who worked on the Eclipse went on to do other notable work, including Steve Wallach who co-founded Convex Computer Corp., yet another deceased company which made "mini-supercomputers".

At the time I read A Soul of a New Machine I was working on the software for a desk top system which had computing power that was comparable to the Eclipse. For me A Soul of a New Machine was an inspiring story, although it was also bittersweet in many ways. I thought that in a small way I was doing the sort of work described in this book. After the project I was working on was finished I went on to work on high performance parallel processors for a number of years.

Opening the Xbox might be seen as The Soul of a New Machine, set at Microsoft. The book is the story of how Microsoft developed and marketed the Xbox. Dean Takahashi is a compelling writer and this tale is meant to be an epic story of an underdog group going into a market already dominated by Sony and Nintendo. The Xbox group, according to Takahashi, set out to build the ultimate game machine.

The story is presented as that of a group of visionary software engineers, board level hardware designers and game developers. For a moment let us step back and consider what they actually did. Like most Microsoft products, the Xbox is not innovative, but derivative. The Xbox is built from components which are either off-the-self, like the Xbox Intel microprocessor, or custom designed by companies other than Microsoft, like the Nvidia 3D graphics chip. Other commodity components include memory, a hard disk, a CD-ROM and an Ethernet interface. The software run on the Xbox is a stripped down version of the Windows 2000 operating system. The Xbox uses Microsoft's directX 3D graphics API for games, which was originally developed for the Windows operating system.

In contrast to the engineering of the Eclipse or the Nvidia 3D graphics chip, the engineering behind the Xbox amounts to nothing more than system integration. The designers needed to make sure the components would work together and not fail because of system level issues like of overheating or power supply problems. Where Data General was betting the company on the Eclipse, the Xbox was developed and marketed by Microsoft which had a cash hoard of something like $40 billion. If the Xbox failed it might have ended the Microsoft careers of those who backed it. But failure of the Xbox would be unlikey to have any effect on Microsoft itself.

The core story in Opening the Xbox is not a story of engineering, but rather a story of how a group of engineers and game designers, principle among them Seamus Blackley, succeeded in getting Microsoft to bet a few billion on the Xbox. As Takahashi points out at the start of the book, there were already forces at play that favored this outcome. Microsoft is constantly looking for new markets that are sufficiently large to warrant its attentions. Home entertainment was on the radar screen of Gates, Ballmer and Co. before Seamus Blackley joined Microsoft after a failed game venture for Steven Spielberg. Microsoft had purchased WebTV in an attempt to build a foothold for future home entertainment domination. By the time Seamus Blackley started his campaign within Microsoft to get the company to fund a game console project, WebTV was struggling. A game console promised a new front in this campaign.

The description of the corporate culture and those who work at Microsoft makes the most interesting reading in Opening the Xbox. One side fact that I found interesting is that Rick Rashid, who was famous for leading the group at Carnegie Mellon University that developed the Mach operating system, became a Microsoft Vice President, in charge of Microsoft Research.

The domination of Microsoft by a core group of executives, primarily Gates and Ballmer, who hold large equity stakes means that Microsoft moves rapidly for a large company. But the decision making process is still convoluted and Takahashi notes that "decisions are never final at Microsoft". Projects and positions must constantly be defended, allies must be lined up before each corporate review. The Xbox team was in competition with the WebTV group and in at least two meetings went head-to-head with the WebTV group in presenting home entertainment proposals.

The Xbox was heavily marketed in an attempt to grab as much of Sony's market share as possible. In places Opening the Xbox recounts the marketing machinations and campaigns behind the Xbox. Perhaps to a marketeer these parts of the book would be the most interesting. For me they were nothing but a bore and I skipped them.

Although Takahashi is a talented writer and journalist, Opening the Xbox is a mediocre book. Takahashi attempts to set the story in heroic terms, painting the Xbox team as a group fighting an uphill struggle to bring the ultimate game platform to market. Unfortunately for Takahashi, the basic facts of the story fight this structure. The only real struggle was getting Microsoft to make a multibillion dollar bet, which they were already predisposed to make. This is not the story of the Data General Eclipse or the IBM 360, where the company's future was wagered on new technology. The worst that could happen is that Microsoft will blow a few billion from its mountain of cash. If they succeed, it will be yet another market for the monopolists in Redmond. The deciding factors in Microsoft's success involve marketing and the financial fundamentals of game consoles, not technology developed by Microsoft (although Microsoft does rely on innovative technology developed by companies like Nvidia).

The central character in the story, Seamus Blackley got to manage a great team and do something that meant a lot to him. Although it is only foreshadowed in the book, Blackley later left Microsoft to return to game development. Blackley was one of the driving forces behind the Xbox and the project consumed his life until the product launch. His reward consisted of the experience, since he left no richer than he arrived. A number of other people who played an important part in the development of the Xbox left Microsoft as well. Many were burned out by the constant internal battles. All that remains is Microsoft, which is now a force in the game console market. If history is any indication, Microsoft can be expected to expand this foothold. Recent articles have suggested that the Xbox may support Microsoft's Internet Explorer in the future, with more Microsoft software to come. Microsoft's position as a hardware vendor is not without peril. If companies like Dell see Microsoft as a competitor that controls the software platform and sells hardware, they may move as strongly as possible toward Linux in an attempt to break Microsoft's monopoly.

Links

• Xbox division's loss doubles, Reuters, May 13, 2003, republished on Cnet news.com

  This article reports that the Xbox division lost $190 million in the quarter ending March 31, 2003. Quarterly revenue fell by almost 50%.

  This article also gives the profit margins for the desktop, server and "Office" divisions, which is eye popping. The desktop and Office divisions have profit margins of about 76%. Even in the server market, where Solaris, Linux and the BSD derived operating systems have a foothold, Microsoft is reporting a respectable 26% profit margin. With this kind of cash flow from its other divisions it is clear that Microsoft can easily manage the Xbox losses, as long as they eventually deliver profits in the long run.

  Although most companies would love to have Microsoft's margins, even in the server business, it is interesting to note the difference in margin between the markets where Microsoft has no competition (desktop and Office) and the markets where they actually compete (server).

Ian Kaplan
May 2003
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