The transition of power from Founder to Successor is never smooth. If there’s one company that planned it carefully and has been on the path of smooth execution, that’s Microsoft. Life-long friendship, 8-year-long transition – yet things got bumpy at times, especially in the early days. The Wall Street Journal runs a story with rare insight into some of the difficult times:

Things became so bitter that, on one occasion, Mr. Gates stormed out of a meeting in a huff after a shouting match in which Mr. Ballmer jumped to the defense of several colleagues…

The conflict between the two men paralyzed business-strategy decisions that the company still wrestles with today.

The two men clashed as Mr. Ballmer tried to assert himself in his new job. As the firm’s iconic leader, Mr. Gates still held sway that wasn’t tied to a title: In meetings Mr. Gates would interject with sarcasm, undermining Mr. Ballmer in front of other executives, Mr. Gates and other Microsoft executives say.

Two worked out their differences in 2001, when Founder Bill Gates realized he himself needed to change: having formally relinquished the CEO title to Steve Ballmer, he had to let him lead without constantly being challenged, overshadowed.

But let’s turn back to our angle here, how Microsoft could have been a very early SaaS pioneer:

In one case, two vice presidents clashed over the future of NetDocs, a promising effort to offer software programs such as word processing over the Internet. The issue: Because NetDocs risked cannibalizing sales of Microsoft’s cash-cow Office programs, some executives wanted NetDocs killed.

Messrs. Gates and Ballmer were unable to settle on a plan. First, NetDocs ballooned to a 400-person staff, then it got folded into the Office group in early 2001, where it died.

Fascinating. Eight years later web-based products still threaten to cannibalize Microsoft’s cash-cow, but they can no longer be ignored – largely because of Google and Zoho which now offer viable alternatives to users formerly “stuck” with Microsoft’s products. A costly debate, indeed.