Nadella and Ballmer

It’s a Different Microsoft, and It Matters

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.

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Steve Wildstrom

Steve Wildstrom is veteran technology reporter, writer, and analyst based in the Washington, D.C. area. He created and wrote BusinessWeek’s Technology & You column for 15 years. Since leaving BusinessWeek in the fall of 2009, he has written his own blog, Wildstrom on Tech and has contributed to corporate blogs, including those of Cisco and AMD and also consults for major technology companies.

15 thoughts on “It’s a Different Microsoft, and It Matters”

  1. “Microsoft is not trying to leave a mystery about where it is heading.”

    As long as they keep making their own devices (ie: Surface and Lumia phones), in a way they are.

    1. When all the hardware is considered it is a rather small part of Microsoft’s business since neither phones nor Surfaces produced much revenue and together suffered a considerable loss.

      1. Yes but it stills beg the question of whether MS still want to work through OEMs, or would prefer to go it alone in the consumer market. Is Lumia+Surface purely a defensive move because no OEM wanted to play, or a harbinger of an Apple-like vertically integrated approach to Consumer ?

        1. I think you have to note the two cases as different. Surface is made by contractors and is aimed at a narrow part of the Windows market. It would not make a difference if Microsoft chose to get out. The company has a much deeper commitment to phones because of the purchase of Nokia and has a bigger market. Although Windows Phones has not done well in the U.S. or Asia, it has done reasonably well in Europe, traditionally Microsoft’s best phone market.

          1. Indeed. My question is not so much whether MS will choose to get out of Surface, but to build out from Surface ? Time will tell.

  2. Microsoft has a tough slog ahead. All the best to them, but they have to overcome decades of consumer experience with Microsoft products. I have yet to use anything from Microsoft that I enjoyed using, it has all been mediocre. I still have to use Office, and it is not a pleasure to use. So maybe now they’re doing better, but I’ve got what I need from vendors that aren’t Microsoft, and I suspect I’m not the only one. To woo me Microsoft has to be better than “surprisingly good”, they have to really wow me, knock my socks off. I’m not sure that’s even possible. Does Microsoft know how to delight consumers? I’m not convinced.

      1. Yes, they do seem headed in the right direction. I’ll keep an open mind, but it’s hard to work against such a long and consistent experience of mediocrity. Add to that Microsoft’s long history of shipping products that don’t come close to the cool demo, they are the Kings of Vaporware.

        1. I’m afraid to say that now Apple and Google seems to be following their old path when it come to software quality and user experience lately, let’s hope i’m wrong

    1. Having started with WordStar and 123, yes, MS could delight at one point, Word/Dos or /Windows and Excel were a breath of fresh air all things relative, only FrameWork came close. Even their mail client used to be quite good, comparatively (and it no longer is).

  3. I’m still unsure about MS.
    They seem to have understood that A) there’s free stuff out there that’s good enough for consumers, so either they give theirs away too or they lose their monopoly on Office formats and B) good looks and ease-of-use are now key. All that underpinned by the fact the C) consumer market is now standalone, not just spill-over from corp.
    I’m not sure A) they can actually make money off free stuff the way Google can, and B) they can make their Metro ecosystem gain traction. The idea is magnificent, with Metro apps running in Mobile *and desktop* (I’m using an Android VM right now to do just that), but they still need to have Metro the OS and Metro the ecosystem be enticing. Even simply price-wise, when Intel decides in a few quarters to stop buying market share for Atom, things will be more of a challenge, so the window (sorry !) of opportunity to make the OS competitive and the Ecosystem satisfying is quite small.

    1. “C) consumer market is now standalone, not just spill-over from corp.”

      This has tripped up most of the old guard PC world. But enterprise is still a substantial market. MS dilemma is figuring out how to marry the two worlds back together, if it is even possible, which I am not sure it is.

      “B) good looks and ease-of-use are now key”

      But I think this also trips up the old guard and even much of the new companies. Good looks as an integral part of use is what separates Apple and Nest from much of the herd. Not just how something looks, but how that affects user interaction.


  4. Steve, regarding your footnote: my memory is long enough to remember Multiplan for Macintosh which easily fit on a one-sided 400K floppy. Back then, Microsoft wrote some tight machine code! Of course, 400K discs forced the issue…

    Multiplan was the first software I ever bought. I got MS Word later that year when it was released. Print preview! I was in heaven.

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