It’s a Different Microsoft, and It Matters

on March 25, 2015

Nadella and Ballmer

Back in the days of Microsoft’s glories, the company lived on one simple approach to the world: Every decision the company made was to promote Windows. In a period when PCs were the only thing that mattered and Windows’ control was close to absolute, this was a simple formula to building market and profits.

The nature of the industry began changing quite a while ago, but business stayed pretty good for Microsoft and there was little reason to redo things. But having finally been hit by huge changes–especially the realization that the PC, Windows or otherwise, no longer completely dominated the market–Microsoft is going through a major rearrangement that finds Apple and Android as important as Windows.

It’s been just over a year since Steve Ballmer turned over the CEO post to Satya Nadella. A great deal of change was probably underway while Ballmer was still in charge. But being the boss of the new environment gives Nadella the credit. He would be given it in any case, seeing as he goes for the change with more enthusiasm than Ballmer ever could, as the heir to Gates and executive of Windows.

office-tweetThe change in thinking is the decision that Microsoft’s critical software should be available on any device that makes sense. For years, Windows and Office (( For those of with long enough memories, you may remember Office was actually invented as a way to package Word with the popular Excel for the Mac. This was in an era when most PCs still ran MS-DOS, Lotus 1-2-3, and WordPerfect. )) leaned against each other as the center of Microsoft’s business.

The success of this past has been to make make Office applications, particularly Word and Excel, indispensable for those who must work, at least from time to time, with text or numbers. Enterprise ran their work on Office and people needed the software to work with both office and personal content at home. While it was possible to at least read Office documents on other devices going back to the Palm, Microsoft never made much of an effort for non-Windows competitors. For example, despite their years of experience, Office components on Macs long have been inferior to Windows versions. And Microsoft programs for iPhones or Android were largely non-existent. The goal was Office for Windows and Windows for Office.

Chris CaposselaIn a presentation at Convergence 2015, Microsoft Chief Marketing Officer Chris Capossela came with a presence that would have been unimaginable a couple of years ago. “We have pockets of real strength around the world, but we have some areas where our products just have not become important enough compared to what we would like them to be.” he said. And what is behind it is a fundamental change in how Microsoft, which claims has earned $25 billion a year from Office, will make money in applications from both consumers and enterprise customers: “We have a history of making money on Windows licenses that OEMs pay us on Enterprise Agreements, on EAs, if you will, and we’re changing that dramatically, and we’re moving to a model that we talk about as freemium innovation.”

One of the more obvious changes is Office 2016 for the Mac, available now as a beta, and reasonably close to finished for use with Yosemite. I have worked with both Word and Excel and they are considerable improvement over the applications in Office 2011 in both appearance and performance. The current version of Outlook was developed ahead of the new Office and it still needs works. It looks good, but it a pain to set up with accounts on anything but Exchange.

A bigger move is the deployment of Office to users of iPhones, iPads, or Android devices. Office is now available free. And it is surprisingly good. I recently wrote an article of length on Word on my iPad with a keyboard and found it about the best writing experience I had on the device. (I found an iPhone 6 too small for anything but reading a document, though iPhone 6 Plus might be big enough to work.) And Outlook for iOS is an excellent mail client, especially for–of all things–Gmail on an iPhone or iPad.

microsoft-johnsonMicrosoft is not trying to leave a mystery about where it is heading. Peggy Johnson, who came aboard as executive vice president for business development last October, said in a company blog post that it is going ahead with its effort to get device manufacturers to install Microsoft applications on PCs, phones, and tablets. She wrote: “Now we see an opportunity to turn our focus to our device partners—easing mobile access to great apps and services for customers by pre-installing them directly on the device.”

The names of Samsung and Dell are hardly surprises. But other participants are regional device makers including TrekStor, JP Sa Couto, Datamatic, DEXP, Hipstreet, QMobile, Tecmo, and Casper, along with Pegatron, a Chinese contract manufacturer (for whatever it may mean, Apple is a major customer of theirs).

“For OEMs, these deals will increase the value of and enrich people’s experiences on Android devices,” wrote Johnson. “Original device manufacturers are important because they extend Microsoft services to the ecosystem. More specifically, they help to reach a greater number of other device manufacturers, resulting in even more choice for customers around the world. And for Microsoft, this is part of the company’s mobile-first, cloud-first vision. It is addressing consumer demand for top services by making them already available on a device, instead of requiring consumers to download them separately.”

For this to succeed as a business, Microsoft has to find a way of creating lucrative services for the user of apps and a large variety of devices. But Microsoft knows how to run a back end and how to support enterprises. It’s going to take effort but there’s a chance they can deliver well for the future.