Microsoft has surprised nobody by appointing Satya Nadella as chief executive. The 22-year Microsoft veteran was tipped as the likely replacement for outgoing chief Steve Ballmer last week, and ticks all the boxes for the firm based on the traditional pattern it follows when filling executive slots:
Worked at Microsoft for more than a decade – check
Background in software – check
Background in enterprise – check
Male – check
Over 40 years of age – check
Nadella’s credentials all point towards the firm’s future direction as a software house. His most recent role was heading up the Cloud OS platform team at Microsoft, which is used to power all of the firm’s cloud services such as Office 365 and Dynamics, and also consumer services including Xbox Live and Skype.
But while the experience with products such as Skype and Xbox Live might indicate a consumer focus, Nadella is very much a corporate man. As executive vice president of Microsoft’s Cloud and Enterprise group, and before that vice president of the Microsoft Business Division, the new chief will have spent lots of his time focusing on how to keep business customers parting with their IT budgets.
The trouble is, the world has moved on from this model. The advent of bring your own device and cloud computing means that it’s the individual and not the business who holds the power over what software and products are used within a company – and Windows is no longer the operating system of choice. Firms are currently clinging on to some semblance of control over the apps and devices in use within the workplace, but many have already given up and are rushing to offer support for all the different products their employees are using anyway.
This shift is highlighted by Microsoft’s recent set of financial results for the period ending 31 December 2013, which show that consumer licensing is on the decline, as fewer individuals choose Windows over alternative options such as Android, iOS and Chrome.
So while Nadella might have been a smart choice as CEO five years ago, helping transition the company to the cloud, for where Microsoft needs to go now – further into the world of consumer and mobile – he has a lot to prove.
Apple and Samsung have both shown that there are billions to be made if you can develop covetable mobile products, but so far this objective has evaded Microsoft. The firm has its Windows Phone platform, which has seen some growth. It has also bought Nokia's devices business to benefit from its Lumia range, which has also seen some success – but the numbers are still far below those enjoyed by Apple and Samsung.
On the tablet side, Microsoft was keen to show off more than a doubling in revenues for its Surface product in its recent set of results – from $400m to $893m quarter by quarter. Sorry to rain on Redmond’s parade here, but it’s worth noting the $11.5bn in iPad sales Apple made over the same period; and Apple’s quarterly revenues at $58bn, compared with Microsoft’s $24.5bn.
The new CEO is clearly aware of the need to improve in mobile in order to get Microsoft back up there with the big guns of the tech world. In an email sent to staff on the back of his appointment, he noted: “As we look forward, we must zero in on what Microsoft can uniquely contribute to the world. The opportunity ahead will require us to reimagine a lot of what we have done in the past for a mobile and cloud-first world, and do new things.”
Nadella also focused on mobile during his briefing to customers and partners on Tuesday, telling them a key question for Microsoft is how the firm thrives and innovates in the mobile world.
But Nadella is not an obvious choice to head up Microsoft if it wants to transform for the mobile world we’re evolving into, and it’s difficult to understand what he’ll bring to the table that the firm hasn’t already thought of.
During his interview, Nadella said he sees mobile as everything connected through the cloud and software, part of the Internet of Everything phenomenon, rather than about mobile phones and devices. This indicates that the new CEO will be more focused on the software that runs on tablets and smartphones, whether made by Microsoft or third parties, rather than the Lumia and Surface business lines themselves.
But without a concerted mobile hardware and software push, Microsoft has no chance of catching up with mobile giants like Apple to counter its declining Windows revenues.
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