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By Steven Levy
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What's Ray Ozzie doing? That's been the question high-tech rubberneckers have been asking for three years now, ever since the 44-year-old software cult hero set up shop at a former shoe factory in Beverly, Mass., and refused to tell anybody what the hell he was up to. Amazingly, almost nobody knew until last week, when Ozzie and fellow executives at his new company publicly unveiled Groove, an Internet-based program that allows close, secure and flexible collaboration in small groups. It's a deceptively simple system that may one day, says the normally discreet silver-haired engineer, "be as big as the Web," with tens of millions of people teaming up in Groove-space to use specially designed tools. The tools will let people do everything from team financial planning and product design to winning Ben Stein's money in sync with the TV show. Better yet, Groove does its tricks by way of the hottest trend in nerddom today: the "peer to peer" technology that's made Napster the toast of the Net and the bane of copyright holders.
The Napster comparisons, however, are misleading. To understand what Groove is--and what it might become--it's best to see how it came about, a story that can finally be told.
It began, of course, with Ozzie, a PC- industry legend best known for Lotus Notes, the group-communications software that boasts 60 million users and was the reason that IBM purchased Lotus in 1995. "Except for Steve Jobs, myself and Ray, very few people have stuck with the vision of personal computing for so long," says admirer Bill Gates. In 1997, Ozzie was looking for a new challenge. "My passion is using technology to [help people] work together," he explains, so he began looking for a significantly better way to fulfill that goal.
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He found it in his living room. His son Neil, then 15, was playing Quake online, using a home-brewed "capture the flag" variation that banded gamers into teams. As Neil played, he typed in chatter to his compatriots, who might have been playing in New Zealand cafes or their dens down the block. To Ozzie, the revelation was the idea of people using Net-based applications in unison. He knew from his Notes experience that the most compelling uses of the program were applications custom-made for specific tasks. So why not build a new platform for Internet groupware--allowing people to harness the power of the computer while collaborating with the ease of the telephone?
He gathered a tiny team of former colleagues, including his brother Jack. "He pulled me aside at a family get-together and explained it as he walked on the shoreline," says Jack Ozzie. "I got so excited that I couldn't sleep." Funded by Ray's personal bankroll, the five-person team began mapping out its goals. The first big decision was choosing peer-to-peer, an approach that wouldn't reach buzzword status until Napster came out two years later. It was a risky choice, but a canny one. By avoiding the congestion of central servers and allowing participants direct contact with each other, Groove could be used by millions of people at once. The only question was, could it work smoothly, bypassing firewalls and communications glitches? For five months the team worked at the problem, finally coming up with a magic bullet known as a synchronization algorithm that broke the problem's back.
From there, the system evolved. People would access Groove through an interface called a "transceiver." (It's to Groove what a browser is to the Web.) You start a "workspace" by simply inviting people to join you, most commonly through e-mail. (If the people you invite don't have Groove, they can download it free from the company.) Pretty soon you have a group assembled that can work on a specific program or just hang out together. The system supports instant messaging and even direct voice contact. Everything in the virtual workspace is protected by superstrong encryption, so snoops can't get at it. Anyone in the group can bring in tools to address a specific task--basic ones include a sketchpad, notepad and browser--and people can work simultaneously or go offline and work. When you come back online, your workspace is automatically updated.
How will the company make money? Developers making tools for the program will pay license fees to Groove. The company will sell special services to make the Groove experience easier and speedier. And many users will pay to upgrade from the basic free transceivers to more powerful ones that the company will charge for. "If you create an ecosystem of companies that make money from your technology, there are ample ways to get revenue to flow back to your company," says Ozzie.
In October 1998, Ozzie showed Groove to his former benefactor Mitch Kapor. The Lotus founder was thrilled with the idea, and kicked in money as an "angel investor." A few months later, Kapor joined the Accel venture-capital firm and introduced Ozzie to partner Jim Breyer, who was blown away by Ozzie's briefing. He hounded Ozzie to take Accel's money, increasing the investment to $50 million--before a more recent $10 million marker from Intel's VC wing.
With funding nailed down, the company grew (it's now 150 people and counting). Mum was the word. It advertised jobs on the Web site, but didn't tell prospective hires what the company did until they actually came on board. "It was 'You just have to trust me'," says Ozzie. So that competitors wouldn't use the job notices to figure out what Groove was, there were descriptions for wacky non-existent positions, like mathematical graphics experts and teleprompter analysts.
In April 2000, Ozzie and his team finally began courting actual customers. "Some of them got it in the first 50 seconds," says Michael Matthews, hired a year ago as executive VP for sales. Groove is already putting companies together with tool developers. Wal-Mart became interested because it felt that some items could be sold more effectively to self-forming Groove affinity groups. A major television network is exploring a process by which groups of friends, or guys at a frat house, can play along with quiz shows. A bank is arranging a system where customers can work with financial advisers, accountants and lawyers for wealth planning. And Ray Ozzie's son Neil, whose passion had moved from Quake to Everquest, used the software to create a "guild" for fellow gamers.
The next question: how would Microsoft react? After all, Groove is in the category of "middleware"--software that runs on top of Windows (or other platforms) and allows outsider developers to build on it. It was Microsoft's response to the middleware known as Netscape that fueled the government antitrust case against the Redmondites. Ozzie e-mailed Gates directly to arrange a meeting. On Oct. 5, he went to Redmond to show his work to a Softie squad including Gates and CEO Steve Ballmer, who "dove into it," he says. Scheduled for 90 minutes, the meeting went almost three hours. "I was very excited," says Gates. "This idea fits into [Microsoft's new initiative] dot-Net in a very strong way." (Incidentally, Gates adds, "The dot-Net vision has us putting peer-to-peer capabilities in Windows.") Does Gates see competition in Groove's ambitions as a middleware platform? "Yes, there will be an overlap," he says. "But there's plenty of room for incredible success for us and Groove." (Translation: Defcon 4.) Would Gates consider investing in or buying Groove? After a long silence, he says, "It's a great Windows application." (Translation: how much?)
Groove, though, isn't on the block, but on an eventual IPO track. Breyer and Kapor, who with Ozzie make up the company's board, both say that they wouldn't move it for a billion dollars. Not bad for a company that won't be profitable for years--and that's if things go well.
Win or lose, Groove is now on the public stage. Last Tuesday in a small auditorium in the old Altman building in New York City, a confident Ray Ozzie ended the stealth era. By the end of the week, he was exhausted and pleased. "People seem to be getting it," he says. Meanwhile the Groove Web site is already apologizing to "preview" adopters for some maiden-voyage bugs. "We'll have this fixed in a jiffy," it promises. But only the long term will tell if Ray Ozzie has truly hit the groove.
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