So, Microsoft has settled on the successor to Steve Ballmer, and it is Satya Nadella, who was most recently the president of Microsoft’s Server and Tools Division. Microsoft was once the greatest and most influential software company on the planet, and Nadella has both the opportunity and the mandate to restore Microsoft to some semblance of its former position in the industry.
A Bit of Personal History
I joined the computer industry straight out of graduate school in 1980, three years before IBM launched the PC with Microsoft’s first OS (DOS). I was working for Datapoint, a company that had desktop computers, a LAN (ARCNET), and servers. Ethernet came on the scene (the first Ethernet cables resembled garden hoses), and within a few years the combination of Intel desktops, Intel servers, DOS, and Novel NetWare had wiped out Datapoint and most of its direct competitors (DEC, Data General, Wang, Prime) and put a severe dent in the second-tier mainframe vendors known as the BUNCH (Burroughs, UNIVAC, NCR, Control Data, and Honeywell). The revolution fueled by Moore’s law and easier to develop, easier to use software had started, and of course that revolution is happening again today with the cloud and mobile devices.
In the early 1990s, I was still foolish enough to care about IBM Systems Network Architecture (SNA), and I invented an OS/2 SNA communications server for what was then Microsoft OS/2 LAN Manager. IBM and Microsoft were both selling OS/2, but IBM had its Extended Edition, which included SNA connectivity, a database, and LAN connectivity. Microsoft partnered with the company that I was working for, DCA, for the SNA connectivity; with Ashton-Tate and then Sybase for the database; and with 3Com for the Microsoft LAN Manger.
Microsoft soon switched gears to Windows NT, and all of the partners switched along with it. We ended up in a very complex joint development process with Microsoft and a company in England, which included Bob Muglia (who would later run the Windows Division for a number of years) as program manager. I developed a deep respect for what then appeared to me to be the smartest and most committed people in the computer industry.
I moved on to become the Intel systems software analyst for Gartner in 1993, and from that vantage point it seemed that Microsoft could do no wrong. Microsoft and Intel together pretty much destroyed the proprietary chip and Unix businesses of HP, IBM, and Sun. On the desktop side, Windows kept getting better, and although Apple had a huge initial lead in PC shipments and usability, Microsoft quickly overtook Apple as a share leader. The model of one OS and many hardware vendors simply overwhelmed Apple’s ability to keep up. We are seeing Google do the exact same thing to Apple on the phone and tablet platforms that Microsoft did to Apple in desktop computers.
On the application side, Microsoft bundled Excel, Word, and PowerPoint into Office, and basically took the spreadsheet, word processing, and presentation graphics businesses away from Lotus, WordPerfect, and Harvard Graphics. On the server side, Microsoft bundled SQL Server, Exchange Server, the file server, and the domain server into BackOffice and did to server-based application vendors like Oracle what it had done to the PC application vendors (took the volume share position away from them).
Again, at that time it seemed that Microsoft could do no wrong. Even when it started behind in a market, as it did with network operating systems (vs. Novell) or browsers (Netscape) it focused like a laser on those competitors, waited for one little stumble, and then pounced.
And Then the World Changed
The world changed in August of 2004, when Google went public. The first cloud service (search) was born, as was a new way of making money in the software business (through advertising associated with content). The fact that Google was not reliant upon license revenues from its software made its software appear free to the end users and gave Google a powerful advantage, which it parlayed into a dominant position in search. This advantage also allowed it to fund building out a long list of cloud services (Google Apps, YouTube, Gmail), as well as to fund entering the business of providing software for smartphones and tablets.
Apple reinvented itself around the smartphone and the tablet, and pioneered what are now the two fastest-growing computing platforms in the history of the computing business. Apple and Google together dominate the smartphone and tablet software businesses to the detriment of Microsoft, which is in a distant third-place position.
VMware reinvented data center management software with what is now vSphere and its associated management add-ons; it is now arguably the most important software vendor in the modern enterprise data center. While Microsoft has made progress with Hyper-V, it has by no stretch of the imagination come close to unseating vSphere as the virtualization platform for applications that matter.
Amazon and public cloud computing came along as well and started to grow at an incredible pace. Again, Microsoft was left at the starting gate, late to the party and with a very hard path to reach significant momentum. Of all of these late starts, Microsoft has done the best job in the cloud space with Azure, but it still lags behind Amazon in functionality and customer base.
In summary, Microsoft has missed every one of the recent and significant shifts in the industry: search, smartphones, tablets, data center virtualization, and cloud computing.
The To Do List for Satya Nadella, new Microsoft CEO
So, from the perspective of someone who has personally seen Microsoft at its best and watched the last several years with dismay, here is my suggested to do list for Mr. Nadella, the new CEO of Microsoft:
- Foster a culture of innovation. Right now, product teams at Microsoft compete for resources, and they compete for those resources quite ferociously. This causes a tremendous amount of energy to be spent on competition within Microsoft—energy (and time) that could be used much more productively to innovate and compete in the marketplace.
- Make the on-ramp to Azure seamless for the customer with on-premises Windows servers. Microsoft is reported to have over 2.5 million business customers. Cloud computing is at a state of maturity such that it probably does not make sense for anyone other than the largest ten thousand enterprises in the world to have any on-premises servers at all. Since Microsoft owns directory services on-premises with Active Directory, and with Azure Active Directory as well, it should be possible to make the migration of workloads (especially Hyper-V VMs) into a transparent and seamless exercise for both the Windows administrator and the users.
- Related to the point above, seriously leverage the fact that none of Microsoft’s competitors can match its position with complete ownership of a system software stack that both has a substantial (the world’s largest) on-premises installed base and is the basis of a very credible public cloud offering. Google and Amazon have no presence in on-premises systems software. VMware does not have a credible public cloud offering. Microsoft is the only system software vendor on the planet with both a credible public cloud offering and the world’s largest installed base of on-premises system software. This is an asset and a position that Microsoft simply must leverage.
- Leverage Microsoft’s user and server application assets. This means turning the Office and Back Office groups loose to support whatever platforms makes sense. Microsoft Office for Android and IOS would be a world-beating product, as it would allow millions of people who rely upon Office on Windows to be able to stop using clones that have poor file compatibility and limited feature sets. The same goes for the server applications. There is no reason why Microsoft should not compete for the database server (SQL Server), mail server (Exchange), and document server (SharePoint) businesses on Linux.
- Turn Windows into a serious competitor to VMware and Red Hat. How? Open-source it while standing behind the official Microsoft distribution and supporting it as a piece of officially supported Microsoft enterprise software. Open-sourcing it does not mean giving it away. It merely means leveraging the community of open-source developers in order to accelerate the pace of innovation so as to quickly close the gap with, in particular, VMware and maybe even outrun VMware. Look at it this way: after a number of years of Microsoft’s trying very hard with Hyper-V on its own, VMware still has a dominant position. It’s time to try a different approach.
- Figure out a big data strategy. This is a classic opportunity for Microsoft. Someone is going to disrupt and destroy the proprietary SQL database business of Oracle. Considering that Oracle does not have customers, only hostages, Microsoft would earn the eternal gratitude of large enterprises worldwide if it could rescue those enterprises from the hooks that Oracle has dug into them. The amount of innovation going on in the open-source database world is astounding, and all Microsoft has to to is pick the right horse and complement it with the right team and the right amount of money, and a significant portion of the large enterprise market would welcome the rescue.
- Implement a modern management software strategy. We have written at length and on numerous occasions that frameworks have failed and will be replaced with ecosystems of vendors anchored by a common big data back end, with Splunk being the first commercially successful example of this concept. At this point, the suite of Microsoft management solutions is not quite as moldy as legacy frameworks from IBM, BMC, HP, and CA, but that suite can by no stretch of the imagination be characterized as a modern set of virtualization-aware and cloud-focused solutions. Microsoft brings a huge asset to the table in this endeavor: an organization-wide understanding of how to partner with other vendors, something which completely eludes ninety percent of the major vendors in the management software business. Therefore, from a corporate DNA perspective, Microsoft is ideally suited to be a vendor of a management platform that many other vendors plug into. Again, this is an asset that Microsoft would be foolish not to leverage.
Having worked personally with Microsoft during some of its best years, I am hopeful that Microsoft can recapture some of the glory that the company enjoyed in years past. Doing so will to require a combination of innovation and capitalizing on existing assets. Mr. Nadella is a product executive with deep experience in building and commercializing software products and services. From a background perspective, he is probably the best choice for the job. I hope he succeeds.
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