The tech giant should abandon the notion that it is a Windows-only company

Going by the champagne popping and chest-thumping surrounding Satya Nadella’s anointment as next CEO of Microsoft, it’s almost as if the events that lead to former CEO Steve Ballmer’s hasty resignation and the unduly prolonged CEO search never happened.

The current narrative being spun now is one of change. Reports highlight the smallest of differences between Ballmer and Nadella; starting with their families and ending with their interests in sports.

Something stinks

While Nadella is by all accounts a seasoned executive and by no means a bad choice, it does nothing to take away from the inherent dysfunction that is crippling Microsoft’s board of directors. Soliciting the help of an outside, executive recruiter to find the next CEO carries a profoundly bad aroma; especially for a large and established company such as Microsoft.

The protracted search and the outside recruiter tell us that the board failed at one of its most important duties: putting in place an appropriate succession plan.

Behind this first failure lurks a second one: did the board give the previous CEO a free reign in promoting and firing subordinates in a way that prevented successors from emerging?  (One needs to look no farther than the ugly departures of Windows czars Steven Sinofsky and Ray Ozzie to get an answer.)

An untenable position

It is telling that no external CEO candidate stepped up—after all, who would want Bill Gates and his pal Steve Ballmer hovering over future decisions?

Or, more importantly, how long would an outsider last before unhappy members of the old guard staged a coup?

It is also clear that Bill and Steve have no intention of leaving—not in the short-term anyway.

And thus, what remains is an altogether curious power structure: with Nadella taking care of the time-consuming aspects of being the CEO, Gates slipping into the role of the product visionary yet again, and Ballmer taking care of the ‘Office of Second Guessing’ at the back of the boardroom.

Indeed, it seems as if Gates has taken a page out of Steve Jobs’ book. Stepping down as Chairman is an act of smoke and mirrors; designed to deceive and distract the simple-minded. If one takes into account that Gates was a driving force in speeding up Ballmer’s departure, it is difficult to escape the conclusion that Gates is back in a positively Jobs-ian move.

Pirates and legends

To be sure, the conditions and landscape that confronted Steve Jobs and Apple in the early 90s were radically different from those facing Gates and Nadella right now. Take Microsoft’s current business model, which has brought home fabulous profit over the last twenty years.

It sells the software that runs most of the world’s PC, sells productivity software that runs on those PCs, and then sells enterprise data centre software that serves those PCs. To put it simply, the company’s business model is ‘PC-Windows + Microsoft Office + Server’.  It doesn’t take a genius to realize that with replacement cycles getting longer and with PCs being relegated by more accessible devices such as the iPad, this model no longer works.

What is required is a re-think of how Microsoft’s role in the world of technology should play out. It should abandon the notion that is still first and foremost an ‘operating software (OS)’ company, and instead speed up the spread of services like Office 365 on all devices —including that of Apple’s and Google’s.

The company’s new model, therefore, should look like this: any device + Office 365 + Azure.

It is in pursuit of this goal that Gates may prove to be a hindrance—much of the company’s current ailments stem from his obsession with a Windows-focused Microsoft. He and Ballmer are the chief proponents of spreading Windows everywhere; an ambition that manifests in misguided decisions like Windows 8 and the Nokia acquisition.

This new strategy or whichever one Microsoft chooses to embark on will also necessitate a significant restructuring and thousands of lay-offs. A growing and future-ready Microsoft is also a small(er) Microsoft.

How much authority Nadella chooses to exert will likely decide the success of his tenure. While there is little doubt that Nadella is best poised to drive change, even here there is some soul-searching to do.

Much of Nadella’s experience and success as the person in charge of Microsoft’s Enterprise and Cloud group can be traced back to the enterprise part, which is more intimately linked to the company’s old business model.

In fact, Azure and Office 365 compete with many of Microsoft’s own server products—a fact that makes the initial success of Azure all the more impressive. Will Nadella have the guts to pull the plug, and, indeed, render unnecessary much of his old team? Will Gates, who in all likelihood did not sign up for this, stand by him when he does?

With Nadella and Gates, Microsoft has chosen to cling to its past sins—and sinners. But perhaps that’s for the best; after all, true redemption comes from within.

anuj.s@thehindu.co.in