Legacy IT vendors transform to survive the mobile, cloud evolution
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In his final presentation before Wall Street analysts this week, outgoing Microsoft CEO Steve Ballmer admitted that his company missed a huge opportunity years ago to be more competitive in the now lavishly successful mobile market.
Not only did Ballmer express regret for not being more aggressive in investing on mobile technologies back in 2007 when Apple delivered its first iPhone, he also acknowledged that he compounded that strategic error by investing heavily in Windows Vista, which proved to be the biggest failure a Windows operating system experienced.
Ballmer then proceeded to build a case for why he thinks Microsoft can still be a major player there.
"We have almost no share in the mobile market," Ballmer said. "I don't know whether to say that with enthusiasm or with a kind of uncomfortable tension. But I'm an optimistic guy. Anything we have low market share in sounds like an upside opportunity to me."
Microsoft hopes to improve its position in the mobile device market -- where the company is a distant third behind Apple and Google with both tablets and smartphones -- by sticking with its focus as a devices and services company despite the slow acceptance of its Surface tablets and Windows smartphones.
The company has committed to competing aggressively in both the enterprise and consumer markets with Microsoft mobile devices.
"We are going to make our services available with our devices, and we will make our services available on other people's devices, both to consumers and to the enterprise," Ballmer said. "Those services have to find their way onto non-Microsoft devices, and we have to support that without religious bias," he said.
These remarks indicate a new ecumenical spirit to deliver some of Microsoft's bread-and-butter products to competing mobile platforms. However, there was no mention if Microsoft would deliver a full-blown version of Office for Apple's iPad or Google's Android tablets.
Meanwhile, Office users have become more comfortable with alternative productivity suites for iPads and other tablets.
Some industry observers have criticized the company for failing to deliver an Office app for non-Windows tablets, believing Microsoft has missed a huge financial opportunity over the past year or two. Microsoft reportedly has held back for fear it would hamper the chances of its own Windows 8-based Surface devices, which bundles Office 2013, along with the fact Apple wanted too high a royalty payment to sell an iOS version of the suite through its stores.
There is enormous pressure on Microsoft to transition from a developer of packaged software to a devices and services company as both large corporate users and shareholders watch. Ballmer expressed hope that Microsoft's recent reorganization and its acquisition of Nokia will ease the transition.
"The reorganization was more than just moving some people around. It was a fundamental shift from running a set of separate business units, where we tried to make connection points, to running a company that is essentially one integrated entity," Ballmer said. "If you want us more agile and more focused and in a sense simplify, this [reorganization] really forces that."
If Microsoft is to remain competitive in the coming years, it has to be successful in four areas: Windows-based PCs, smartphones and tablets, innovating in what Ballmer described as "high-value" opportunities, and Office 365 and its Azure cloud.
"Our ability to deliver on-premises private cloud and public cloud is very important, as is delivering value-added Azure services to those who primarily buy Windows services," Ballmer said. "Frankly, our competitors are not very active in this game. Amazon has been all about the public cloud, and even there, we have been handing it to them resoundingly in the larger accounts."
Ballmer, who will retire next year, did not directly address questions about how the search for his replacement was going or when such a candidate would be chosen. He did admit that picking the right executive is critical to the successful execution of company's devices and services strategy.
"The new CEO will have a lot to say about how the execution of all this goes. Our board is in the process of evaluating candidates from within and outside of Microsoft and is being open-minded. Whether it ends up being one of our people or somebody from the outside, we want this to be an incredibly thoughtful process," Ballmer said.