What is Satya Nadella's strategy for Microsoft?
6th Feb 2014 | 15:21
How the new man at the top will be different from Ballmer
New Microsoft CEO Satya Nadella doesn't sound like he's backing down on the Microsoft 'devices and services' mantra, and we don't think he's going to satisfy the activist shareholders by selling off Xbox or Bing (which he used to run).
As he said when his new job was announced; "our job is to ensure that Microsoft thrives in a mobile and cloud-first world."
In fact, One Microsoft is the way Nadella has been thinking about Microsoft for a long time. He's has been articulating the principles behind One Microsoft since before it was even announced; that devices and services and all the different products Microsoft produces have to be interconnected and built to make sense together from the get go rather than being connected up afterwards.
At Build last year he summed up why Microsoft is in the devices and services business by pointing out that they're interconnected. "We're well and truly into the world of devices and services;there is not a device or a sensor that is not connected back to a cloud service."
Speaking at the launch of Windows Server 2012 R2 (and all its related services) last year, he was clearly enthusiastic. "This one Microsoft reorg is fantastic in not having any of these notions of who controls what." And he put that into practice (and showed a very CEO-like grasp of how Microsoft fits together) at the Financial Analysts Meeting last year.
As well as taking questions on his own areas of the business, he also jumped in to make comments on a question to MS Executive Vice President Qi Lu about bringing Office to iPad and Android to mention other Microsoft products that support multiple platforms, to back up Terry Myerson talking about bringing more apps to the different Windows platforms by pointing out the importance of cloud and Office 365
He also wanted to emphasise that Dynamics is a great way of selling Microsoft infrastructure products when Dynamics head Kirill Tatarinov was asked about profits. If you were wondering who might be the new CEO, that performance put Nadella firmly on your radar.
Not just business
It's easy to look at Nadella's past remarks and see him as purely an enterprise leader who might minimise Microsoft's consumer or device businesses.
But that's mostly because as head of the enterprise services business, Nadella's been talking about his own products; when he said at the Financial Analysts Meeting in 2011 "our mission is to cloud optimise every business," that doesn't mean he thinks Microsoft should only be in enterprise cloud. In fact even for cloud, he's always said the strength of Azure is how many workloads it runs.
"What makes the [Microsoft] services we run so useful, from Xbox to Bing to Skype, is diversity. I keeps us honest, keeps us from getting hijacked by just one architecture pattern. Having worked on Bing, I know you can optimise for just one architecture pattern – but patterns are diverse and they change from industry to industry."
In fact, the point of One Microsoft is very much that it's increasingly one market. "Categories are going to rapidly shift; what is a developer product, what is an IT product, what Is an end user product – they all have to be rethought. We think about this as one unified engineering effort and one unified go to market effort. And especially with consumerisation that becomes even more important."
That sounds like a vote of confidence in Surface and Windows Phone and Bing and Office and Xbox and the breadth of Microsoft products to us.
It's also unlikely that Bill Gates transitioning from chairman of the board to founder and technology advisor signals less of a position for him at Microsoft or less influence on the new CEO.
Nadella asked Gates to "devote additional time to the company, focused on technology and products" and Gates has said he'll make over a third of his time available to meet with product groups. (While chairman is more than an honorary role, owning 357 million shares in Microsoft conveys its own authority, and Ballmer gets a role on the board too.)
The Microsoft opportunity
What Gates said about the opportunities for Microsoft in his comments on Nadella's announcement is reminiscent of what Steve Ballmer talked about when he announced the One Microsoft reorg; "taking Office and bringing it to interactive documents, letting you find your information in rich ways, secure your information in rich ways or even building a cloud platform that connects to all sorts of different devices."
But developing those into the future of Microsoft (a future in which Office is everywhere and Windows is just another platform) needs all the different resources Microsoft has, including the ones some shareholders and analysts have suggested selling off.
As Ballmer put it, a company that can create the next big thing will "have to understand natural user interface and hardware. Hardware and software will need to kind of evolve together.
Whether it's wearables or what's going on with screen or input technology, without the right hardware and software skills, without the right machine learning and cloud infrastructure, without the right focus on applications and platforms, without the right appreciation of consumer and enterprise, I think it's hard to do."
Nadella is talking in very similar terms when he says that "over the next decade, computing will become even more ubiquitous and intelligence will become ambient", referring to "the coevolution of software and new hardware form factors" (which sounds like wearables and natural interfaces and wall computing and all the things Microsoft Research has been working on) and "an ever-growing network of connected devices, incredible computing capacity from the cloud, insights from big data and intelligence from machine learning."
In other words, Nadella's strategy as CEO isn't to rip out the One Microsoft reorg the way an outside candidate might have done; it's to make it work in all the ways that bullish, bombastic Ballmer found it hard to do.
From Dynamics, to Bing to Azure, Nadella has made a habit of taking on products where Microsoft has major competition and taking a different direction that plays to Microsoft's strengths – and also not giving up even when it's taken those products time to become successful.
He's been clear about not letting the successes of the past turn into anchors that hold the company back. "I feel what is important for us is to see these new things and not just be beholden to what we had in the past but to really do the innovation."
He also pointed out "the tech business is all about being able to get the concept right before its conventional wisdom and then having the perseverance to see it through."
That sounds like what Microsoft needs, more than a new direction or a fire sale. Picking an insider as CEO means the board gets someone who doesn't have to take time to get up to speed, but it's also a compliment to Ballmer and Gates that the board has chosen someone who's going to execute their vision, but in his own way.