A New Mobile Microsoft

By Lori Castle, Editor in Chief — July 29, 2014

Microsoft CEO Satya Nadella was appointed in February and laid out the edict that it's a new world at the company—a mobile and cloud-first world—where it will build experiences with the understanding of the rich context of an individual at work and in life to help them organize and accomplish things with ease.

His first big news was Office for iPad. They also released an enterprise mobility suite, Cortana and Surface Pro 3. In March he added and subtracted a few executives.

He expanded on the vision in his first earnings call in April saying, "We think about users and their experiences spanning a variety of devices. So it's not about any one form factor that may have some share position today, but as we look to the future, what are the set of experiences across devices, some ours and some not ours, that we can power through experiences and that we can create uniquely."

In May at the company's annual TechEd conference, Brad Anderson, corporate vice president of Microsoft's Cloud & Enterprise Division, said, "Mobility and cloud are the future of business, and the future is now."

At Computex, in June Microsoft and its hardware partners announced new designs, price points and markets for Windows devices. Parker had nearly 40 brand-new devices on stage, including all-in-ones, laptops, 2-in-1s, tablets and smartphones.

As the second half of the year hits, July has seen almost more action and change.

Bold Ambition
"We'll use the month of July to have a dialogue about this bold ambition and our core focus," Nadella wrote in a July 10 memo to the entire company. He referred to a synthesis of "strategic direction and massive opportunity."

Microsoft was founded on the goal of putting a PC on every desk and in every home. More recently, the company referred to itself in the context of "devices and services," but Nadella wrote that it was time for more in the transformation of the organization. "We will reinvent productivity to empower every person and every organization on the planet to do more and achieve more."

With the dual user in mind and addressing the needs of the enterprise, the "platform mindset" going forward will meet the demand to get stuff done with technology—through new cloud-powered applications, collaboration, meeting, search and research services, all with better security and privacy control.

Nadella vowed to "obsess over reinventing productivity and platforms" with relentless focus on and building great digital work and life experiences.

David Krebs, EVP, Enterprise Mobility and AIDC at VDC Research Group, blogged, "One clear message from the email was a renewed focus on the enterprise customer, while not completely ignoring the consumer, especially in acknowledging the dual-use personas increasingly prevalent in the way we adopt mobile technology. "

Krebs pointed out that "productivity" was mentioned 20 times in the email. "From an enterprise mobility perspective, workforce productivity enhancement remains the number one investment driver and priority," according to Krebs.

Evolving the Obsession
A week later, in another memo, and with the promise of transparency, he explained how the company would do this, starting with a workforce reduction of 18,000 jobs over the course of a year.
 
Of that total, Nokia Devices and Services is expected to account for about 12,500 jobs—both professional and manufacturing positions. The company will also add roles in certain areas.
 
451 Research VP Carl Howe said, "Ever since Microsoft's acquisition of Nokia closed, I think most within Nokia have been waiting for the other shoe to drop regarding how the acquisition would affect them. "
 
He called the move the continuing the "Windows Everywhere" strategy begun by Bill Gates and continued under Steve Ballmer. This will be supported by a flatter organization, also started in Ballmer's time where Microsoft consolidated its divisions into hardware, software and services and streamlining by function.
 
"In addition, our business processes and support models will be more lean and efficient with greater trust between teams. The overall result of these changes will be more productive, impactful teams across Microsoft. These changes will affect both the Microsoft workforce and our vendor staff," Nadella wrote.
 
In integrating the Nokia Devices and Services teams into Microsoft, the first-party phone portfolio will align to Microsoft's strategic direction. However, to win in the higher price tiers—ergo the enterprise—the company will focus on breakthrough innovation. Nokia X product designs will become Lumia products running Windows.
 
Earnings and Ahead
Microsoft reported revenue of $23.38 billion for the quarter ended June 30, 2014; devices and consumer revenue grew 12% to $8.30 billion; commercial revenue grew 7% to $12.23 billion.
 
Nadella said on the call that "mobile and cloud opportunity views informs our decisions on what to build and where to invest." 
 
They use three principles to guide investments. First, focus investments on the core, productivity experiences and platform investments will prioritize across engineering, sales, marketing as well as M&A. Second, consolidate overlapping efforts. This means one operating system that covers all screen sizes and consolidated dual use productivity services that cross life and work. Third, run all businesses in an economically sound way.
 
There's that word again—productivity. Going forward, addressing the enterprise with such language will be key to a more mobile Microsoft. Krebs said that like other vendors who attempted to emulate Apple in the consumer space, Microsoft fell into a trap that often left them "exposed"— "a losing proposition."
 
Past CEO's readily admit to a mistake in the company's approach to mobile. The fix seems to be in. "Focusing on developing solutions that support containerization or dual-use scenarios addressed by Natella is one way of bridging the gap or blurring the lines between enterprise and consumer use," said Krebs.

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