Microsofts new CEO. Saviour or the same?

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The board of Microsoft has appointed a new CEO. When Steve Balmer announced stepping down from one of the worlds most influential companies for the last 3 decades the search began. You can say from Microsoft what you want but it has been the company that not only brought computing to the home but also created an entire industry around it. I think there is not a company in the world that has created so many jobs in such a vast variety of businesses, governments, education and numerous other market segments than the computer giant from Seattle. The ubiquity of its products is seen everywhere and has been untouchable for a long time. There have been cracks in its structure though. The company hasn’t been able to make tablets a success even though they announced this technology way before Apple has a crack at it. The handheld PC in the form of a phone has never been a success. Windows was able to hook consumers as it had done on the desktop and laptop. They are trying again now that they’ve bought Nokia. (See here).

The success of Microsoft and its rise to mount Olympus of the computing industry was due to lack of competition and a more than brilliant marketing department. Early versions of Windows up until XP were a disaster from a security perspective. Due to rigorous security guidelines and rule enforcement’s that has improved significantly however its not done yet. The fabulous move to step away from the DOS architecture via Windows NT and the ability to hook this up via the network in a server version gave them a clear path right into many datacenters bypassing the vastly more expensive Unix systems like SCO, Solaris, Irix, DEC Unix and mini computer systems like NSK, VAX-VMS etc.

The aggressive acquisition strategy also paid off on the application front. Individual desktop applications were bought from competitors or, in case the competitor did not want to sell, MS just bought the entire company. By strategically combining these applications into a suite model the MS Office Suite was born. This entire suite communicated seamlessly with their ever so important back-end systems like MS-SQL and MS-Exchange.

As I mentioned before there have been some cracks in Zeus’s chair where competitors were filling the gaps that MS could not quick enough. As mentioned the tablet and phone industry as pretty much taken by Android and iOS. The virtualisation stack has been pulled very successfully by VMware and now the open-source cloudstacks keep hacking splinters, or even branches, of the MS tree. MS has its own public cloud platform (Azure) but this observes stiff competition from the ubercloud called Amazon. From the other side it also fights against the, somewhat smaller, cloud providers in the likes of Rackspace etc.

As to date the goose with the golden eggs is still the Office Suite and this shows YoY a staggering profit. Its a bit like the inktank of HP printer division and the oil of Shell. The biggest problem with it is that most customers don;t want to pay any more than they already do now so MS is, or will be soon, unable to grow the revenue stream by adding more and more features and functions to an already bloated piece of software of which 98% of functions is never used by the majority of the customer base. The obvious way to go is to provide the Office suite as a PAYG model where you pay for features and functionality on a per time or subscription basis. The Office 365 is the web-based version and could play a significant role in the subscription based model but as I explained here there are significant obstacles with regards to US-based policies and legislation especially in the wake of the Snowden outcome.

If Satya Nadella wishes to succeed he needs to bring a very cohesive action plan together which enables people around the world to use MS technology in a day-to-day fashion. They will need to seek cooperation with consumer goods companies like Miele, Samsung etc to be able to hook up a Windows phone to the fridge to have a look whats in there. Very handy in the supermarket. Other forms of home automation need the ability to be hooked up. Google recently bought Nest and I guess they have the same thoughts already. I wouldn’t have done it that way but hey, I’m not the billionaire here. 🙂




Another option is the auto industry. If I step into my car I want the car to adapt to me, hight of the seats, airco/heating to be automatically adjusted, transmission being set into sport mode and my favourite radio channels programmed into the radio. Obviously when my wife drives the car her settings need to apply. (Unless I need to sit next to her when she’s driving, I need the ability to override the radio. :-)).

The best way forward for MS (IMHO) is to have multiple lines open towards the consumer via open methods I would provide an open API which these companies could use for these kind of purposes. this would allow them to use the MS infrastructure to aggregate generic day-to-day consumer services as described above all tightly coupled to achieve a great experience.

On the business-end MS could provide the other end of these services whereby companies can leverage this intelligence to adjust their go-to-market models, ad campaigns etc. One thing that REALLY needs to be taken into consideration is privacy policies and security. In one of these fail, once is enough, this model could backfire significantly but hey, MS has shown to be flexible enough to makea bad product look very good and rise from these ashes. 🙂

I wish Satya all the best and success in his new role. We’re all anxious to see what he will bring.

Cheers,

Erwin

 

About Erwin van Londen

Master Technical Analyst at Hitachi Data Systems

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