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What does it mean that digital technologies are increasingly a part of...
Steve Ballmer, cited by Monica Langley in Steve Ballmer on His Retirement as Microsoft CEO
Ballmer might have used the Steve Macone quote: A tradition is a habit whose logic has faded. He created and managed over a long series of behaviors at Microsoft that are so embedded in the culture that it may take years to counter them, many of which have little logic to them anymore, if they ever did.
Getting rid of stack ranking is one such step, but the fastest way to make Microsoft competitive again is likely to involve selling off all the parts that are not essential — like Bing — and spinning off the consumer businesses: xBox, notably.
My bet is that won’t happen with the the next CEO, but perhaps the one after that. The next one will have a very difficult time to come in and make real changes given the half-completed reorg, the acquisition of Nokia’s handset business, and Chairman Bill and the other longtime board members that want a Microsoft that is fighting in all sectors, just doing it better.
People don’t want Word, Excel, and Powerpoint, per se. In fact, those apps are generally considered bloatware, with confusing, UX-challenged, and overwrought design. What people want is something that doesn’t exist, but which Google and Apple are moving toward. People want to be able to view, edit, and create documents that are largely compatible with the de facto core standard of Office documents, the basic 20% of the three apps. And they want those documents to be sharable with other people, no matter what solutions those other people are using.
The big shift here is that in this era, the hegemony of Office is not going to dictate hardware decisions. People won’t put up with the limitations of Windows-based tablets from Microsoft or Nokia because they are the only place to get full-fidelity Office. And the simple reason is that people don’t want full-fidelity office, really.
Our work communications have moved outside of the interior of documents. The pattern of reviewing a Word document with internal comments and tracking changes is being displaced by external comments — in a work media tool (Yammer, Chatter, etc.) or in a social editing tool like Quip (see I want a social editor, but Quip isn’t there quite yet) or Draft (see Draft is a small and simple co-editor). In the heyday of Office, email with attachments was state of the art. Microsoft has acquired Yammer and moved Office to the cloud with Office 365, but they haven’t seen the change that is going on the perimeter of their model of office work.
So Frank Shaw is saying that Microsoft — at least under this CEO — is still fighting the last war for office productivity, while the world has moved on to a new form factor for work, where the social interactions of people cooperating are not concealed inside documents, but are instead mediated outside of them. And, as a result, the documents themselves can be much simpler in their internal architecture. We are relying on social architecture, now, instead.
Jason Hiner suggests that Elop is not the frontrunner for Ballmer’s replacement. Why? First, he failed disastrously at Nokia losing billions and laying off 20,000. Second, Hiner says that the next CEO should be all about the enterprise.
Jason Hiner, The case against Stephen Elop as Microsoft CEO
Two Wall Street analysts — Ben Thompson and Benedict Evans — are already questioning whether Microsoft actually bought Nokia because Nokia was threatening to stop making Windows Phones, and not because Microsoft wanted Elop.
Just a quibble: If Elop and the Nokia board pulled that off, hats off to them. And don’t forget the remaining Nokia still has the right to make phones, so maybe they’ll start building Android phones now.
Another factor that works against Elop as CEO is that about 10 of Microsoft’s 16 separate billion dollar businesses are now enterprise businesses. The company needs an enterprise leader, as I wrote in the Monday Morning Opener. Elop has limited enterprise experience, other than a stint as a CIO earlier in his career and a one-year tour at Juniper Networks. He has mostly worked with end user applications at Lotus, Macromedia, and Microsoft, where he primarily oversaw Microsoft Office. Elop technically ran “business” software at Microsoft, but it was not the kind of back-end cloud infrastructure that is destined to dominate Microsoft’s future, mostly centered around Azure.
Officially, Microsoft announced Elop will now run the company’s Devices and Studios business unit, which will be beefed up with the addition of 32,000 Nokia employees. The question we should be asking is whether this move indicates that there is another shoe still waiting drop.
Yes, the other shoe would be making Elop CEO of Microsoft (or maybe President for a year, then CEO). That may be the board’s plan.
Is Microsoft planning to put its healthy, high-margin enterprise businesses at the center of the company and spin off its low-margin consumer businesses into a new venture? Making Elop the CEO of that spin-off (which would likely include phones, tablets, and Xbox) would at least make more sense than Elop as the CEO of the enterprise-heavy Microsoft as we know it today.
I think that the Azure cloud computing business at Microsoft is *not* the future for the business. That is a battleground with a bunch of other lumbering dinosaurs — HP, IBM, Cisco — chasing Amazon and never getting close. At present Azure is principally the platform used by Microsoft for its own cloud efforts, like Office 365.
The future of Microsoft is exactly the “end user” oriented enterprise software that Elop has experience with. I’m not arguing he is the best candidate, but wondering what the board is likely to do.
I maintain that spinning off the low margin consumer business would be a smart move, but I doubt the board is headed there. They are going to give another big push on the current devices and services business plan, and perhaps lose another $20B before whoever the new CEO is gets fired. Say it’s Elop, just as a strawman. Mid 2014, the board finally decides to give up on the consumer market after another year of mounting losses on Surface tablets and Nokia phones. That’s when they will finally become an enterprise software company, and spin off and shut down the rest.
The advantages to the store-as-fulfillment center plan are that Best Buy can deliver products faster and cheaply. The downside to that strategy is that Best Buy’s in-store inventory visibility isn’t good and the staff may not be as efficient as people in a distribution center.
The conventional wisdom would say that Best Buy’s stores are an albatross around their neck — much like they were for Blockbuster. But what if they can shift them into being more along the lines of warehouses — much like the ones Amazon is trying to build as quickly as possible — for fast local delivery? And what if only a small area of those warehouses were actually a storefront to show off their goods?
This would all take a lot of logistics (and possibly some re-zoning?) but it doesn’t sound like the craziest idea in the world. Again, what if your weakness is actually your strength?
Sounds like Joly might be onto something. But he can forget the ‘Microsoft Experience Stores’.
Microsoft needs to hire a new CEO with a vision to make the company the market leader in a new era of enterprise software and one who will avoid the entanglements of consumer devices. Ballmer made a huge gamble on consumer demand for Microsoft gadgets, and it’s just not there. The board could make a stupendous strategic error and continue to pour billions down the drain chasing that chimera, or instead it could get with the present. Instead, hire someone who will acquire Box or Dropbox and pull in promising startups like Asana. And who will spin off, shut down, or ramp down money losing sinkholes like Surface, Windows Phone, and, yes, even Windows itself. It should definitely spin out Xbox, so maybe Windows could go with that as a short-term source of cash.
Azure may have legs, but cloud computing infrastructure is going to be a tough, tough market, with a number of wounded dinosaurs hoping to play there, like HP, IBM, Cisco, and of course, the giants like Amazon and VMware.
We’ll see how far this past year’s crash has radicalized Microsoft’s board. I don’t know Qi Lu, who now heads up Applications and Services Engineering at Microsoft, which is the enterprise computing heart of the company. He may not be the guy for this cycle at Microsoft, but it should be someone who sees that group as the future for the company. Perhaps David Sacks, the founder of Yammer. He’s a visionary, anyway, and so is Adam Pisoni, the Yammer CTO.
I still think there is a future for Microsoft, as I laid out in “Microsoft will rise from the ashes of Windows and Surface failures,” but it’s not the future Ballmer gambled on: It’s the enterprise.
Hardly any touch screen PCs are being bought, so the world is breaking into a small number of successes: growing number of touch-oriented smartphones and tablets, stable numbers of keyboard + touchpad laptops, and a falling number of keyboard + mouse desktops. Strangely, PC manufacturers continue to over estimate people’s desire for oddball hybrids and touch laptops.
from the article
Acer and Asustek this week said touchscreen laptops championed by Microsoft Corp. haven’t made as a big a splash with consumers as previously estimated.
"Our first wave of Vivobooks was not a success," said Asustek CEO Jerry Shen at an investor conference Friday, referring to the company’s line of touch notebooks. "We are working very closely with Microsoft and Intelin an effort develop game-changing devices to launch in September.”
Mr. Shen said Asustek also plans to “attack” the nontouch notebook segment in coming months, as many customers still aren’t willing to pay extra for a touchscreen.
Acer and Asustek have pushed heavily into the low-cost tablet market this year to try to counteract the consumer preference shift away from laptops, but so far it isn’t clear whether sales of their Android tablets, which sell for less than $200, can offset the sales decline of more-expensive laptops.
Acer Chairman J.T. Wang said the company is shifting its product mix away from the traditional Windows system “as soon as possible,” with its percentage of devices running Google Inc.’s Android or Chrome operating systems to grow from about 10% this year to as much as 30% next year.
Asustek, which sells under the brand Asus, had up until this spring managed a better performance than many PC industry peers, partly because of a partnership with Google to make the popular Nexus 7 tablet. The sales helped boost Asustek ahead of Kindle-maker Amazon.com to become the No. 3 tablet maker behind Apple Inc. and Samsung Electronics Co.
But even with the success of the Nexus 7, Asustek is now struggling. After the release of the second-generation Nexus tablet, Asustek was hit by a crush of inventory of the first generation, as well as poorer-than-expected sales of Windows RT tablets, analysts said. Windows RT is a version of Windows 8 geared to work with ARM mobile-device processors.
Touchscreen laptops, which PC makers initially saw as their defense against threat from the mobile advance, haven’t taken off.
I expect that we’ll see a huge surge in Android and Chrome laptops, and the near-term collapse of Windows. It will be Apple OS X and iOS v Google Chrome and Android, and maybe Ubuntu as a distant third, starting with smartphones.
Lydia Dishman’s sub-headline says it all:
STEVE BALLMER WANTS MICROSOFT TO GET NIMBLE. SO LIKE ANY LEAN-THINKING EXECUTIVE, HE TYPED UP A 2,720-WORD MEMO.
Nick Wingfield, Microsoft Overhauls, the Apple Way
Actually, Gasseé is wrong. The Microsoft reorg does ‘answer’ that question. As Windows OS sales go down, the Windows engineering team can shrink, and the company’s sales and marketing resources can be shifted toward enterprise products.
But that’s not really the issue. this reorg does not equal uniting many Microsofts into one Microsoft, as Ballmer claims. It has consolidated many fiefdoms into four independent engineering teams, and consolidated sales and marketing at the corporate level. What is unanswered is user experience. As I wrote the other day at GigaOM Research,
The new Microsoft has no place for a Jonny Ive controlling user experience.
Stowe Boyd via GigaOM Research
We’ve already see the push in Office 365 to make Yammer the default user experience in Sharepoint (see Yammer is becoming the social UX for Microsoft). They are going to enlarge what Yammer is, and make it the social stream for the passage of all sorts of newly socialized information.
The missing piece of the puzzle for me — along the lines of Sullivan’s comments about ads and social having no owner — is this question: Who owns the mobile experience at Microsoft, now? The new Microsoft has no place for a Jonny Ive controlling user experience.
The simple and wrong answer is Julie Larson-Green, who is building devices like tablets and smartphones. Another wrong answer is Terry Myerson, who is building the Windows software that runs on those devices. These are both wrong — and especially wrong in the enterprise area — because many Microsoft customers are having their primary interaction with Microsoft software through the browser, or on non-Microsoft devices. And if the trend lines are to be believed, in the near future those proportions will continue to rise. So, already today the most important user experience to consider is in the browser, and soon it is likely to also include mobile apps running on hardware not produced by Microsoft. And I don’t mean Internet Explorer, either.
Yes, I know that Ballmer, Qi LU, and anyone else in authority at Microsoft will have to publicly stick to the party line — “Windows will continue to be a dominant operating platform for decades to come, we are turning the corner with Microsoft smartphones and tablets, yada yada yada” — but the numbers say different. Ballmer’s memo only mentioned PC four times, and mostly in retrospect, phone only three, and Internet Explorer zero. (I noticed that Surface’s price was dropped today by around $100. Too little, too late?)
However, behind the scenes, Qi Lu and his colleagues must be planning for a transformation to a very different operating model: a leading enterprise software company, integrating a collection of tools necessary for the functioning of business in the past decade, right up to the business of today. But the battle now is to contrive the software platform for the emergent company of next year, and the decade that follows. Qi Lu, with the people at Yammer, Office 365, Sharepoint, Exchange, and Skype, will have to connect the dots in a way that transitions to a very different tomorrow while delivering value at every today along the way.
[Go read the whole thing, if you’d like.]
So the Microsoft reorg is coming, and it looks like, as expected, Ballmer is structuring the company to play defense:
Microsoft Restructuring Set for Thursday - Kara Swisher - AllThingsD
The effort, said many insiders who have talked to Ballmer and other involved, is to create something that is being called “functional coherence” at the company, although it is not among Microsoft’s talking points when the restructuring will be made public. That also includes putting more wood behind fewer efforts and eliminating overlapping functions.
In theory, it also presumably means things going where they belong in product cycle. In practice, which is a lot messier, that means moving a lot of important people around.
That includes a new cloud computing and business-focused products unit headed by current Servers and Tools head Satya Nadella; Online Services leader Qi Lu could add Microsoft Office and other apps to his portfolio that already includes the Bing search service; Julie Larson-Green, who now co-heads Windows efforts, is in line to be in charge of all devices from Surface tablet to Xbox game player, as well as music and TV services; and Windows Phone chief Terry Myerson is expected to take over Windows engineering and platforms.
Meanwhile, Windows CFO and CMO Tami Reller is expected to have a larger marketing job; and current Skype president Tony Bates gets purview over all of business development, corporate strategy and M&A, playing the role of outside guy to Silicon Valley and developers (complete with a giant checkbook for acquisitions and other investments).
It’s not clear where Microsoft Office president Kurt DelBene or Microsoft Business Solutions president Kirill Tatarinov could land in the new set-up, but presumably either out the door or under new units headed by Qi Lu (DelBene) and Satya Nadella (Tatarinov), respectively.
As to the fate of COO Kevin Turner, sources expect he’ll stay (at least until he is offered a tasty and big operationally-heavy CEO job outside the company).
Current CFO Amy Hood — who was just appointed — is also stay in place, as will HR head Lisa Brummel, who has played a key role in this reorg effort. Chief lawyer Brad Smith also seems safely away from the hubbub.
The key phrase for me is ‘putting more wood behind fewer efforts and eliminating overlapping functions’ which translates into 1/ closing down some products and services, and 2/ consolidating control of the remaining products and services into the hands of a small number of actors.
This can be good for Microsoft customers, potentially, although it’s been pointed out that people buy products not organizations.
Consolidation of all Windows operating platforms makes real sense, even if it is a business line with a seriously precarious future, or near-term collapse, depending on how pessimistic you are. (I’m very.)
Some things are still head-scratchers though, like putting Microsoft Office and other apps together with Bing.
Mostly I’m interested in the final disposition of enterprise services and products. I’ll wait for the dust to clear, and I’ll write something in more detail after the formal announcement is made, over at GigaOM Research.
One comment: Looks like Tony Bates won’t be heading up Skype anymore, and that is likely to be consolidated into Qi Lu’s Office + apps + Bing world? And Bates new role — biz dev, strategy, M&A — could be read as either a sidelining while looking for a new CEO job or operating as Ballmer’s lieutenant, looking to buy new startups to reboot Microsoft’s future. We’ll have to see.