CXO

2016: The year Microsoft regained its mojo

2016 marked a turnaround for software stalwart Microsoft. Once again, it's a company worth following by IT leaders.

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Image: iStock/SunflowerEY

I've long had mixed feelings about Microsoft. Part of me loves the company, as its MS-DOS operating system, and later Windows, got me started in computing when a dull beige box with a monochrome green screen appeared on my father's desk in the late 1980s. Today, Microsoft Outlook and Word are my constant companions, and I continue to be amazed by the Xbox gaming platform, despite being "fragged" and subsequently insulted by squeaky-voiced pre-teens whenever I get a chance to play an online match. I've also long been frustrated by Microsoft, as they pioneered several innovations, only to release a half-baked product that was never updated and eventually died, like the innovative and ultimately ill-fated Palm PC/PocketPC/Windows Mobile.

The year 2016 seems to mark a resurgence of the software company, driven by new CEO Satya Nadella. Here are some of the signs of a resurgent Microsoft, and what it means for IT leaders.

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Microsoft loses its religion

The early 2000s were marked by a Microsoft following a "Windows Everywhere" strategy as the company attempted to expand beyond the desktop. Mobile was obviously a key element of that strategy, but at one point Microsoft envisioned Windows on everything from car dashboards to industrial systems, years before Apple brought CarPlay to market. In this monolithic "Windows World" IT leaders would have to come to Microsoft for everything from management tools to software, creating a Windows-powered Trojan Horse that would ultimately sell more of everything Microsoft.

This strategy obviously failed, the tombstone on the effort being a nearly $8 billion write-off of Microsoft's high-profile acquisition of Nokia as a means of catching up in mobile. Mr. Nadella seems to have taken the best elements of "Windows Everywhere," like common development tools and integration between Microsoft devices, and abandoned the dogma of Microsoft devices, running a Microsoft OS underneath Microsoft software. MS Office runs well on an iPad, and Linux-based applications happily reside in the Microsoft cloud. No longer must IT leaders commit wholeheartedly to a Microsoft ecosystem, a smart move as operating systems become an increasingly costly commodity.

SEE: Microsoft woos open source developers by joining the Linux Foundation

From catchup to leapfrog

Microsoft missed several key technology trends, notably dismissing the value of the Internet in the early 1990s, only to focus the entire company on destroying Netscape in a battle for browser supremacy. The capitulation of Netscape was followed by successful attacks on the gaming front with Xbox, and a string of failures in mobile, from the ill-fated Zune iPod competitor to Windows Phone and the Nokia write-off. The Microsoft of this era seemed more like a bully waiting to pounce on any successful upstart than an innovator.

More recently, Microsoft has refocused resources on innovation, with products ranging from the HoloLens Augmented and Virtual Reality platform, to a "virtual assistant" that's tightly integrated with the desktop, to business-focused collaboration tools.

SEE: Microsoft's universal translator uses AI to translate face-to-face conversations in real time

From "enterprise" to getting things done

Another frustration with Microsoft was its strange attempts to segment market. Perhaps the worst manifestation of this was the Office suite, which in the 2007 edition had no fewer than eight different versions ranging from Basic to Ultimate. Buyers were forced to fit themselves into Microsoft's licensing paradigm rather than being able to easily select the tools they needed to get a job done. Smaller businesses might have access to a well-priced "Small Business Edition," but suddenly find their licensing costs increasing exponentially if they wanted a feature or two in the "Enterprise" version.

The resurgent Microsoft seems to have refocused on getting work done, providing a buffet of productivity software as part of their Office 365 suite. Rather than convoluted licensing schemes and restrictions, someone at Microsoft seems to have actually studied how individuals and companies use their software, and made it far easier for individuals and IT leaders to select the tools they need without needing to study a complex matrix of licensing options.

In a similar vein, a Microsoft that once seemed to view the world two-dimensionally as consumers and enterprise customers now recognizes freelancers, unconventional workers, and others who benefit from "enterprise grade" tools but don't need the associated management suites, account reps, and enterprise overhead.

SEE: Here's how Microsoft will integrate LinkedIn into its products

What's next for Microsoft?

Thus far, Microsoft seems to be carving a new and unique path in the technology industry. With companies like Apple and Google focused squarely on consumers and expanding their footprints into everything from cars to wind farms, Microsoft is carving out a compelling niche of cross-platform infrastructure, enterprise apps, integrated productivity tools, and a vision of helping individuals get work done, whether they're employed by a Fortune 10 or they've invested their "fortune" in a one-person venture.

For IT leaders, these are changes that should be welcomed; however, there's a significant risk of Microsoft returning to old behaviors. As their tools gain traction, it will be tempting to try to "lock in" customers with reduced compatibility or unfavorable licensing terms. In some ways, success for the "new Microsoft" creates an increased risk of returning to some version of "Windows Everywhere." Similarly, Mr. Nadella must contend with a history of focusing on large enterprises and promoting Office running on Windows at the expense of innovation and experimentation. Perhaps the best news for IT leaders is that they no longer must commit mind and soul to being a "Microsoft shop," and can look to the company for platforms, tools, and innovation, rather than as a Faustian bargain that they'll come to regret.

Similarly, IT leaders can learn from Microsoft's apparent transformation. Microsoft under Steve Ballmer was the consummate sales organization, and consistently generated respectable revenues through the "Windows Everywhere" strategy that served as a vehicle to sell MS Office licenses. It can be uncomfortable to abandon what works for an uncertain future, but the times clearly were dictating a move away from single-platform IT shops and a technology world dominated by the desktop. Like Mr. Nadella, examine your assumptions and long-standing beliefs. Perhaps you too can spur a resurgence of your IT organization.


Also see:
Windows Server 2016: The smart person's guide
Windows 10: Ten missing and highly anticipated features due in 2017
Microsoft partners with OpenAI to advance AI research with Azure
Microsoft Power BI: The smart person's guide

About Patrick Gray

Patrick Gray works for a global Fortune 500 consulting and IT services company and is the author of Breakthrough IT: Supercharging Organizational Value through Technology as well as the companion e-book The Breakthrough CIO's Companion. He has spent ...

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