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What does it mean that digital technologies are increasingly a part of...
Roger Cohen, The Quest to Belong
Next year’s Thanksgiving grace.
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.
I can reduce this Business Insider article to three charts and one sentence.
Instead of being the center of the personal computing world, in other words, the PC is becoming a specialized office-productivity device.
By the way, Blodgett never connects the dots, but it looks like Windows has only a few years before total obsolescence. IDC reported that PC shipments fell 11.4% in the second quarter of 2013, which looks like ~45% for the year.
Here’s the closing paragraphs of my weekly update at GigaOM Research. I started by looking at recent news about Zygna, Accenture, and Intel, who are all being whipsawed by the shift away from the PC and the rise of proximal devices (smartphones, tablets, and other ‘mobile’ devices). I finish with Microsoft:
Last fall, Microsoft CEO, Steve Ballmer, outlined his new vision for Microsoft in a letter to shareholders, and rumor has it that this week he will be announcing a major reorganization of the company to try to make that vision a reality. Bottom line: I think much of that reorganization will fail because he is still gambling on Windows and Surface to break through, and they won’t.
But what might emerge from the ashes of that house on fire could be a credible player in the very different world of enterprise IT coming down the pike. Let me characterize it:
100% Cloud — We are continuing to hear reasons why companies cannot move everything into the cloud, but in the final analysis they are quibbles disguised as prudence. Ultimately, anything that can be done on premise will be possible in the cloud, with the exception of physical on-site security (which is like pretending that your money is safer in the cookie jar under your bed than in a bank).
100% Proximal — There will be functionally zero stationary computing devices in just a few years, and people will be always on, wherever they are.
100% IT-less — The downturn in Accenture’s fortunes is the start of a collapse in enterprise IT consulting, and that will rapidly cascade across the industry. Why? The use of cloud-based enterprise software and proximal hardware cuts a huge hole out of the middle of what those consultants configure for their clients. Note that this won’t stop with outsourced IT staff: it means the end of IT internally, too. (Yes, companies will still own computing devices — on the factory floor, and in the hands of retail clerks. But increasingly they will be communicating with back office software running in the cloud.)
I am going to get a lot of flack for zooming ahead five years based on these trends, but I will stand by the prediction.
This is the deep background on the future of enterprise software in general, and specifically the form factor of future cowork (collaborative and cooperative) tools.
The enterprise software companies that will weather this sea change will be the ones that drop their efforts to stop the tide. They will have to make the change that Krzanich is making at Intel, betting on the future instead of fighting it.
One last prediction: Ballmer’s reorg this week — if it comes as expected — will be a hedge. The reorg that will indicate that Microsoft has turned the corner will be when Ballmer leaves the company, and a new CEO joins, shuts down the company’s hardware efforts, and deadpools Windows. I give Ballmer another year, at most, before the shareholders demand his head.
Windows is (nearly) dead, and we tumble into the post PC era, and they can’t get anyone to use their phones or tablets. But Microsoft still has opportunities in the enterprise software space, so long as the company doesn’t spend everything in an attempt to resuscitate the rapidly cooling carcass of that OS.
(via GigaOM Research)
Actually portends the future. People in the future might want to run old Windows software after Windows machines aren’t being made. Might do it on a Mac — or whatever Apple will be selling after Mac — because they’ll be around for decades, I bet.
Why do analysts make disruptive change sound like a dirge? Or is it just IDC, or just the decline of PC-based computing? Why do they consider an uptick in PC sales as an ‘improvement’? What would be improved if sales went up, aside from the topline of PC companies?
Worldwide PC shipments totaled 76.3 million units in the first quarter of 2013 (1Q13), down -13.9% compared to the same quarter in 2012 and worse than the forecast decline of -7.7%, according to the International Data Corporation (IDC)Worldwide Quarterly PC Tracker. The extent of the year-on-year contraction marked the worst quarter since IDC began tracking the PC market quarterly in 1994. The results also marked the fourth consecutive quarter of year-on-year shipment declines.
Despite some mild improvement in the economic environment and some new PC models offering Windows 8, PC shipments were down significantly across all regions compared to a year ago. Fading Mini Notebook shipments have taken a big chunk out of the low-end market while tablets and smartphones continue to divert consumer spending. PC industry efforts to offer touch capabilities and ultraslim systems have been hampered by traditional barriers of price and component supply, as well as a weak reception for Windows 8. The PC industry is struggling to identify innovations that differentiate PCs from other products and inspire consumers to buy, and instead is meeting significant resistance to changes perceived as cumbersome or costly.
"At this point, unfortunately, it seems clear that the Windows 8 launch not only failed to provide a positive boost to the PC market, but appears to have slowed the market," said Bob O’Donnell, IDC Program Vice President, Clients and Displays. “While some consumers appreciate the new form factors and touch capabilities of Windows 8, the radical changes to the UI, removal of the familiar Start button, and the costs associated with touch have made PCs a less attractive alternative to dedicated tablets and other competitive devices. Microsoft will have to make some very tough decisions moving forward if it wants to help reinvigorate the PC market.”
The impact of slow demand has been magnified by the restructuring and reorganizing efforts impacting HP and Dell. Lenovo remains a notable exception as it continues to execute on a solid “attack” strategy. Mid- and bottom-tier vendors are also struggling to identify growth markets within the U.S. Among the most vulnerable group of vendors are the whitebox system builders, which are undergoing consolidation that is affecting shipments as well as the distribution sector.
"Although the reduction in shipments was not a surprise, the magnitude of the contraction is both surprising and worrisome," said David Daoud, IDC Research Director, Personal Computing. “The industry is going through a critical crossroads, and strategic choices will have to be made as to how to compete with the proliferation of alternative devices and remain relevant to the consumer. Vendors will have to revisit their organizational structures and go to market strategies, as well as their supply chain, distribution, and product portfolios in the face of shrinking demand and looming consolidation.”
IDC analysts have been caught up in the moods of the PC manafacturers that this fall in the industry is ‘worrisome’ and the failure of Surface is ‘unfortunate’. The analysts’ purpose in life — and perhaps their livelihoods — is being threatened, I guess.
Personally, I think we should be cheering the transition to more convenient, lower-cost, gesture-based tablets. It’s not regrettable. But the IDC analysts are obviously rooting for the past, and we’re zooming into a future they don’t like much. I think they should side with the people shifting to tablets.
Don’t get me wrong, I am not advocating some soulless, robotic market analyst creed based on hyper ‘objectivity’. I am just surprised that they seem so sad about the coming demise of Windows-based PCs. But then again, the defining emotion of the postmodern era is nostalgia, and people get used to what they see everyday. They remind me of Julian Baggini who said
I can’t help but mourn the passing of my set of Britannicas.
As I wrote last month,
Nostalgia is one of the defining emotions of postmodernism. It’s wired into culture so completely that its hard not to feel nostalgia for anything in the past. Nostalgia will not define the postnormal, however. We will not paint a soft amber glow around every memory, or every movie clip, or every tattered object found behind our boots in a bedroom closet. Perhaps because the world has been filled with the trash from centuries of crazed overproduction and as part of the depletion of the Earth and its resources, we will more naturally look back with a sense of resigned investigation: we perceive old objects, old memories as evidence, proof of the insane ruination of everything that sets the stage for our time.
Our time will be defined by a bitter curiosity. We won’t mourn the passing of Windows PCs like these postmodern analysts do.
Microsoft’s share of the OS market is about to do the dead cat bounce.
Needham’s Charlie Wolf plots the death of Windows in education (called PCs in the graphic above), which he attributes to the growth of iPad in that sector:
In our view, the education market is the canary in the coal mine. The next market the iPad is likely to impact is the much larger U.S. home market.
Look at the sales of Mac in the business sector, too. Apple is crushing it, and Windows is dropping like a stone.
Philip Elmer-Dewitt via Fortune
In a chart posted on Twitpic Monday, Asymco’s Horace Dediu shows that the multiple of PCs sold to Apple (AAPL) Macs sold has been falling steadily since it peaked in 2004 and is approaching the ratio of 1985. (via 2004: The year the Windows PC to Apple Mac sales ratio peaked - Apple 2.0 - Fortune Tech)
if you extrapolate, around 2016 the lines converge. Of course, that’s a linear sort of thinking. My bet is that iPad and soon iTV could accelerate the curve. Also, if Microsoft stumbles with its rollout of new Windows 8 phones, they could fall very very fast on the PC side.
Marco Arment doesn’t actually say that Microsoft Surface or Windows 8 smartphones are doomed, but he cuts to the chase pretty fast: Microsoft is in real trouble because they are starting with next to zero apps, and app developers — like Marco — have migrated off Windows onto Mac:
Marco Arment via Marco.org
By 2005 or so, most of those developers were working on web apps. The web was the platform for that kind of work for most of that decade.2
And during that decade, almost every such developer I knew switched to the Mac if they weren’t already there, partly because it was better for developing web apps.3
That’s one of the biggest reasons there was so much pent-up developer interest in the iPhone before the App Store opened: these consumer-product developers were all using Macs already. As the dominant consumer platform shifted from the web to apps over the last four years, most talented consumer-product developers built products for their app platform of choice during that time: the Apple ecosystem.
Many Windows developers were upset that iOS development had to be done on a Mac, but it didn’t hurt Apple: the most important developers for iOS apps were already using Macs.
But the success of Windows 8 and Windows Phone in the consumer space requires many of those consumer-product developers, now entrenched in the Apple ecosystem, to care so much about Windows development that they want to use Windows to develop for it.
How likely is that?
Anything’s possible, but that’s going to be an uphill battle.
Actually, I don’t think that anything’s possible. But Microsoft might be able sway some developers by subsidizing development of critical apps, as reported by Bijan Sabet. I don’t think that will be enough.