Satya Nadella's brave new strategy: Can Microsoft execute?

Summary:Six months into his tenure as CEO, Satya Nadella is already having a significant impact on Redmond's complacency. We debate the prospects for Nadella's Microsoft.

Ed Bott

Ed Bott

Yes

or

No

Steven J. Vaughan-Nichols

Steven J. Vaughan-Nichols

Best Argument: No

66%
34%

Audience Favored: Yes (66%)

The moderator has delivered a final verdict.

Opening Statements

They’ve already begun executing

Ed Bott: As I write this, Satya Nadella is still a few days short of his six-month anniversary as Microsoft CEO. During that time, he’s made some significant progress and shaken up a company that had grown complacent.

The challenge now is to transform Microsoft’s business and its culture.

So let’s review that brave new strategy:

  • Cloud-based services are firing on all cylinders. Under Nadella’s leadership, Azure has become a model for continuous development.
  • Mobile apps are everywhere. Office 365, OneDrive, Skype, and the rest of Microsoft’s app portfolio are on every platform that matters and continually improving.
  • Enterprise software is a solid legacy business that can fund a lot of improvement.

The jury’s still out on Surface and Lumia. But overall the company is capable of paying for some serious transformation. With Azure and Bing, Microsoft has proven it can be agile. The next step is to transfer that culture to the rest of the company. 

See also:

Beyond Nadella's grasp

Steven J. Vaughan-Nichols: I think Satya Nadella was the right choice for Microsoft. Ballmer was long past his "fire me" date. But, to make " Microsoft … the productivity and platform company for  the mobile-first and cloud-first world " assumes that Microsoft can become a mobile and cloud powerhouse.

Why should we believe that?

By Strategy Analytics' numbers, Android was on 85 percent of smartphones sold in the last quarter. Windows Phone? It dropped to under 3 percent.

In the cloud space, Gartner thinks Azure is doing OK , but Amazon Web Services (AWS) is still the 800-pound gorilla of the cloud.  Now, Azure is good, but good enough to overcome AWS -- and the boundless enthusiasm for the OpenStack cloud from VMware, Oracle, Red Hat, and a host of other companies?

No.

Despite Windows 8.x's market failure , I'm sure Microsoft will still dominate the desktop throughout the 20-teens, but keeping control of that moribund market isn't the goal. Microsoft's new goals seem beyond Nadella's grasp.

See also:

The Rebuttal

  • Great Debate Moderator

    Are my debaters standing by?

    We'll be starting this live debate promptly at 11am ET/8am PT.

    Welcome, readers: As soon as the debate does start, this page will refresh automatically whenver a new question or answer is posted.

    Posted by Larry Dignan

    Ready here


    Ed Bott

    I am for Yes

    All set here


    Steven J. Vaughan-Nichols

    I am for No

  • Great Debate Moderator

    OK, first question:

    Microsoft's new strategy revolves around platforms and productivity. What do you see as the key assets for Microsoft?

    Posted by Larry Dignan

    Enterprise, Office, and the cloud

    Microsoft's greatest asset, of course, is the long-term loyalty of enterprise customers, who pay billions to run Microsoft software on their servers and desktop PCs. The revenue from Windows and Office volume licensing is like an annuity capable of funding a lot of investments in future products.

    Next, there’s Office itself, which is an amazingly valuable collection of products and a powerful brand. It’s been more of a cash cow in recent years than Windows. Bringing Office to the iPad earlier this year was a big deal and a key part of the company’s transformation to integrated services (OneDrive and Office together, for example) that work on every important platform.

    Finally, there are a decade (or more) of investments in cloud infrastructure worldwide. Microsoft’s infrastructure, best known through its Azure brand, is an enormous competitive advantage, one that can only be matched by an elite group of competitors.

     

    Ed Bott

    I am for Yes

    Microsoft is only one of many

    On the plus side, Microsoft has Azure for cloud. Microsoft bringing its applications to other mobile platforms may be a smart move. Enterprise software remains strong.

    Each advantage faces a challenge. With Azure, Microsoft faces strong opposition from Oracle, VMware, Amazon.  Microsoft is only one of many.

    Microsoft's own mobile platforms have failed to gain traction. So, while Microsoft is supporting Office 365, OneDrive, and Skype on Android and iOS devices, Microsoft faces strong competition from Google and others. Mobile is not the Windows space where Microsoft has a built-in audience.

    As for the enterprise Dan Frommer, Quartz's tech editor, observed, Google "has been coming on strong for years with lower-priced, cloud-based services such as email and calendars, productivity apps, video hangouts, and storage." Frommer argued that "Google is capturing Microsoft’s future customer base." He's right. Google makes money from search, it doesn't need to profit from enterprise services. Microsoft does.

     

    Steven J. Vaughan-Nichols

    I am for No

  • Great Debate Moderator

    Is Microsoft's mantra too vague to actually execute?


    Posted by Larry Dignan

    Forget the mantras; concentrate on the plans

    Unless you work for Microsoft—I don’t, and neither does my esteemed opponent—then we don’t really know what the detailed marching orders are, nor what the plans for the future look like.

    We’ve seen the public letters. We’ve heard catchphrases like “Mobile first, cloud first.” But those public statements are aimed at investors and consumers. They’re intentionally optimistic and often made from platitudes and corporate bafflegab.

    There’s a lot more happening inside the company. And knowing Nadella’s reputation as an engineer, I am confident it’s a plan, not a vague set of directions.


    And let’s make sure we agree on what this debate is about. Even if Microsoft has a diabolically smart strategy and executes it perfectly, there’s no guarantee that they’ll win. Ask the Yankees.

    But can Satya Nadella’s Microsoft succeed? Yes.

    Ed Bott

    I am for Yes

    It doesn't seem vague to me

    I mean, Microsoft is the company that gave us the term "vaporware." I don't see Nadella going down that road.

    Instead, I see him laying out a clear strategic plan. Sure saying that Microsoft " will reinvent productivity " is hyperbole, but everyone does some some of that in grand vision statements.

    No, the real question will be whether Microsoft can execute the plan.

     

    Steven J. Vaughan-Nichols

    I am for No

  • Great Debate Moderator

    Biggest challenges?

    Nadella has hit a steady cadence outlining the company's big picture. What do you see as the biggest challenges to making it happen?

    Posted by Larry Dignan

    Complacency and competition

    Like any big company, Microsoft has its own unique culture, which both defines its working style and dictates its internal politics. The worst impediments to change come from people who have mastered the art of maintaining their power, even at the cost of the organization’s health. Replacing them is a challenge.

    And then there are competitive challenges from big rivals, like Google and Apple and Samsung, and even more importantly from startups and small firms that can disrupt the competitive landscape. Microsoft has historically been slow to respond to those competitive challenges. So that’s a challenge.

     

    Ed Bott

    I am for Yes

    Competition, competition, and, oh did I mention, competition?

    On the PC, Microsoft had it all its own way. The company's now facing off against powerful cloud vendors, already established mobile super-powers, and would-be enterprise software vendors, such as Google, that don't require a profit from their enterprise efforts. Microsoft hasn't had to face off against equal, never mind superior, rivals in a generation.

    He also has to shake up all the development teams. They've been stuck going in circles for much too long.

    Simultaneously, Microsoft sees new engineering talent to support its cloud and mobile plans. Developers who spent the last five years work on Windows 8.x aren't going to help cloud development and mobile apps.

    Integrating these new people into an old, fat organization won't be easy!

     

    Steven J. Vaughan-Nichols

    I am for No

  • Great Debate Moderator

    What does Microsoft have to do to speed up product development?


    Posted by Larry Dignan

    They’re already doing that

    If you haven’t noticed the faster cadence at Microsoft, you haven’t been paying attention. Services like Azure, OneDrive, and Office 365 get new back-end features several times a year. The Office 365 client software gets an update every month.

    Even desktop Windows is getting in on the act. It used to be that Windows got a major upgrade every three years or so. Since Windows 8 was released less than two years ago, there have been two major updates, with significant new features and major architectural improvements. Another update is due this fall.

    As Windows 8.1 proves, these changes are being driven by customer feedback. What about enterprise customers, who can’t cope with the pace? I predict Microsoft will adopt a model similar to Ubuntu and Mozilla, with rapid updates for consumers and enthusiasts, and more stable Long Term Support versions so enterprise customers can roll out big changes annually, not monthly.

     

    Ed Bott

    I am for Yes

    Nadella gets it

    As I just said, they need new people who can handle the cloud and mobile applications. For example, Azure "DevOps" (Short for Developer Operations) is still coming together. Meanwhile, rival cloud offerings have multiple DevOps solutions, such as Puppet, Chef, and Juju. Microsoft has a lot of catching up to do.

    They also need to rid themselves of the internal developer battles. Microsoft can't afford another war between the Windows team and Microsoft's Developer Division.

    Nadella gets it. As he said in his memo, "We will streamline the engineering process and reduce the amount of time and energy it takes to get things done. You can expect to have fewer processes but more focused and measurable outcomes. You will see fewer people get involved in decisions and more emphasis on accountability." That's a great start.

     

    Steven J. Vaughan-Nichols

    I am for No

  • Great Debate Moderator

    How to modernize engineering?

    Nadella said Microsoft "will modernize our engineering processes to be customer-obsessed, data-driven, speed-oriented and quality-focused." What would you recommend Nadella do to modernize engineering?

    Posted by Larry Dignan

    Out with the old

    I would not presume to tell someone with Nadella’s engineering experience what he should or shouldn’t do.

    The most important goal is to become much more agile, delivering regular improvements, the kind that delight customers, without sacrificing security or reliability. Nadella’s direction involves letting go of old development models that aren’t appropriate for the current fast-paced competitive landscape, and adopting more modern ways.

    This kind of change requires genuine leadership. When Nadella led the Azure team, he and his team built the kind of organization that can serve as a model for the new Microsoft.

     

    Ed Bott

    I am for Yes

    Nadella already is working on modernizing engineering.

    He continued in his memo, "will see investments in two new or combined functions: Data and Applied Science and Software Engineering. Each engineering group will have Data and Applied Science resources that will focus on measurable outcomes for our products and predictive analysis of market trends, which will allow us to innovate more effectively. Software Engineering will evolve so that information can travel more quickly, with fewer breakpoints between the envisioning of a product or service and a quality delivery to customers. In making these changes we are getting closer to the customer and pushing more accountability throughout the organization."

    It all sounds good to me. But, can they do it? That's the multi-billion dollar question.

     

    Steven J. Vaughan-Nichols

    I am for No

  • Great Debate Moderator

    Culture change?

    Where does culture fit into the plan and can Nadella really change a company as massive as Microsoft?

    Posted by Larry Dignan

    It’s Job One

    Changing the culture is huge. It’s crucial to the success of the strategy and the speed of the change in direction.

    It’s also difficult.

    Nadella’s background as an engineer is his biggest asset here. He speaks fluent geek.

    And the fact that Microsoft’s biggest competitors are succeeding with a different, more agile way of working is the best motivation of all.

     

    Ed Bott

    I am for Yes

    Culture is everything.

    For over a decade, Microsoft has been mired in projects -- such as Vista, Windows 8, and Windows Phone -- that went nowhere. In large part that was because of a development process that paid little attention to what customers or partners wanted.

    Microsoft has also had a siloed developer culture where one team wouldn't pick up the phone to talk to another. This cannot continue. They must learn to work together.

    As a result, staunch Microsoft supporters like Paul Thurrott, said "Windows 8 is a disaster in every sense of the word."

    Microsoft must clean out its ears and listen to what both customers and partners want.

    I don't know if Nadella can change the course of a company as big as Microsoft. Monster companies, like IBM has shifted their paths before. Most giants, however --Compaq and DEC spring to mind -- can't.

     

    Steven J. Vaughan-Nichols

    I am for No

  • Great Debate Moderator

    Will layoffs help or hamper?

    How do you think Microsoft's recent layoffs will help or hamper the company's ability to deliver on Nadella's strategy?

    Posted by Larry Dignan

    Mostly they will help

    Forget the Nokia layoffs, which were expected as part of the integration of the two companies. The ones that matter are those 5,000 or so employees at Microsoft itself. And most of those job were eliminated as part of a change in the way the company builds products.

    The risk, of course, is that those layoffs will have a negative impact on morale, which in turn drags down productivity in a spiral. But assuming that these cuts were deep, quick, and not repeated, there’s time for recovery.

     

    Ed Bott

    I am for Yes

    A wash

    Internally, Microsoft made an extraordinarily smart move by finally axing its hated stack ranking employee rating system . On the other hand, while we know the former Nokia staff have taken the brunt of Microsoft's layoffs , there's still more layoffs to come  and it appears they'll be happening over time. That's never good for morale.

    On the other hand, we have experts such as Michael Cusumano, a professor at MIT’s Sloan School of Management, telling the Financial Times,  “Microsoft has been bloated for 20 years, they have way more people in their product groups than they need. There’s still a long way to go even after these cuts. Reductions of as much as 80 percent are needed to end the feature-creep and complexity that have hurt the company’s products."

    I see it as a wash myself.

     

    Steven J. Vaughan-Nichols

    I am for No

  • Great Debate Moderator

    Simplify and move faster?

    Nadella said: "Every team across Microsoft must find ways to simplify and move faster, more efficiently. We will increase the fluidity of information and ideas by taking actions to flatten the organization and develop leaner business processes." How long will that chore take?

    Posted by Larry Dignan

    Welcome to nonstop change

    I don't think that the process of developing leaner, smarter ways of doing business should ever stop.

    The old Microsoft would have switched from an old, inefficient model to a new, more efficient one and then institutionalized it. The new Microsoft, if it wants to compete with some very powerful and aggressive rivals, needs to maintain a continuous improvement not just in its products but in the way it designs and builds those products.

    There is a big change that's happening now, accelerated by recent layoffs and major changes in the relationship among product management, developers, and test. If Nadella can't point to results from that set of changes by this time next year, then someone's not keeping up.

    Ed Bott

    I am for Yes

    Two years to transform Microsoft

    Well, for starters, he needs to hire better writers! OK, taking this to mean that he wants to make a leaner, meaner Microsoft. I see Nadella having two years to transform Microsoft. That's it.

    By 2016, we'll know if Microsoft is truly transforming itself into a 21st century company or if it's a declining giant.

    Can he, or anyone else, do it in that length of time? I doubt it. I think Microsoft stuck with Ballmer for much too long.

    Microsoft will remain a power for years to come. But, to be a leading power, I see their moment of opportunity closing quickly.

     

    Steven J. Vaughan-Nichols

    I am for No

  • Great Debate Moderator

    What are the top three reasons Microsoft will fail to execute on Nadella's strategy?


    Posted by Larry Dignan

    Connecting with consumers, competing with Google

    There are three worst-case scenarios in Microsoft's future.

    • If they can't connect with consumers... In that case, Microsoft gets to survive as a boring legacy company that runs servers for Big Businesses. Solid business, growth potential, but more Oracle than Apple.

    • If they can't connect with next-generation businesses... Over the next few years, a new generation of management will move into executive suites in the Fortune 50 and Big Business in general. They’ve been raised on Apple hardware and Google services. If they’re willing to drop Microsoft's core products, Redmond has a big problem.

    • If they can't compete against Google's search monopoly... Google's willing to tie its search services to Android is a formidable advantage. And there’s no guarantee antitrust regulators will help out.

    Remember, the question in this debate is not whether Microsoft will succeed, but rather whether they can succeed. Of that, there’s no question in my mind.

    Ed Bott

    I am for Yes

    Three reasons...

    A) Microsoft's programming culture simply won't change fast enough. Corporate inertia is a terrible thing.

    B) Microsoft won't pick up new staffers with the right skills fast enough. Face it, ASP.NET is fine for Windows Server, but it's not going to get you too far on the cloud or in iPhones.

    C) Disorganization in the ranks. Remember, it's not just Nadella. Microsoft also has a new chairman, John Thompson ; a relatively new corporate organization ; and, by the way, Bill Gates is now Microsoft's Technology Advisor . If they can't work together in harmony, bad, bad times are ahead for Microsoft.

    Steven J. Vaughan-Nichols

    I am for No

  • Great Debate Moderator

    What are the top three reasons Microsoft will succeed?


    Posted by Larry Dignan

    Powerful momentum can pay for a lot of future change

    First, there's execution. Say what you will about Steve Ballmer, but he left Satya Nadella with a company that ships product on time and gets paid well for it. Their ability to deliver new versions of core products is exceptional. The last failure of execution was Windows Vista, and the team that created that mess was replaced more than eight years ago. (Windows 8’s problems are in design and evolution of the ecosystem.)

    Second, cloud leadership. Back in 2007, I remember talking to Microsoft engineers who were working on top-secret projects that became what we now know as Office 365. The company has invested billions of dollars in software and infrastructure, and those investments are due to begin paying off.

    And finally there’s enterprise loyalty. Enterprise customers might grumble, but when all is said and done they keep signing contracts, because Microsoft’s core products work.

     

    Ed Bott

    I am for Yes

    Three reasons...

    A) The developer teams hit the ground running and make Microsoft relevant in cloud and mobile.

    B) The programmers work together smoothly instead of feuding with each other and create new, innovative products quickly.

    C) Everyone unites behind Nadella and his vision instead of playing political games.

    Steven J. Vaughan-Nichols

    I am for No

  • Great Debate Moderator

    Azure and cloud efforts?

    How important is the success of Azure and cloud efforts to the Nadella strategy?

    Posted by Larry Dignan

    It’s crucial, obviously

    Microsoft has spent tens of billions of dollars building a cloud infrastructure that only Amazon and Google can compete with. And it’s making a legitimate case to convert existing customers of physical, on-premises servers to the same product, running in the cloud.

    I have yet to hear from anyone who uses Azure that doesn’t love it. And it’s evolving enormously fast, surprising critics who claim Microsoft is old and slow.

    Ed Bott

    I am for Yes

    It's essential.

    I have real doubts about Microsoft's ability to make mobile work, but Azure is good. I think with the proper backing, support, and DevOps tools, Azure can be a contender in private, hybrid, and public clouds.

    Microsoft really doesn't have much time to get Azure into companies though. The cloud isn't hype anymore. It's the real thing and lots of real companies, such as Amazon, Red Hat, and VMware are already there and making enterprise sales.

    If Microsoft ends up a distant third in the business cloud, the way it has in mobile, Microsoft's future isn't going to look very good at all.

     

    Steven J. Vaughan-Nichols

    I am for No

  • Great Debate Moderator

    OK, time for one more question:

    Do you think Nadella has the backing and chops to make tough decisions like a spin-off of Xbox or divesting businesses that don't quite fit with the platform and productivity mantra?

    Posted by Larry Dignan

    We’ll see...

    Does he have the chops? Yes.

    Does he have the backing of his board and outside investors? I think so. The biggest wild card is the influence of Gates and Ballmer, who could try to veto any big change. I think Gates has really become a senior advisor and is far more interested in changing the world with his foundation. And Ballmer is unlikely to have the desire to weigh back in; he knows it’s not his company anymore.

    The rest of Microsoft’s board is solid and they still have confidence in Nadella.

    Ed Bott

    I am for Yes

    The right CEO for Microsoft

    Well, Nadella already has thrown half of Nokia out so he's shown he can make killer decisions. Nomura Research wanted Microsoft to dump Xbox and Bing last year . I don't see a whole lot of point in keeping them, but Nadella wants to keep them for now.

    I'd like to think that he has the nerve to spin Xbox off, just dump Bing, or throw Windows RT out with the trash. If he doesn't have that kind of nerve, he's not the CEO Microsoft needed.

    Whether Thompson or Gates will let him is another question. Hopefully for Microsoft, it won't come to that.

    I do think Nadella's the right CEO for Microsoft. My real question is whether he's gotten the job with enough support and time to transform Microsoft. I fear he has neither.

     

    Steven J. Vaughan-Nichols

    I am for No

  • Great Debate Moderator

    Debaters, thanks for a Great Debate

    And readers, thanks for following along. Please circle back tomorrow to review our debaters' closing arguments. On Thursday, I will issue my final verdict.

    Posted by Larry Dignan

Closing Statements

Bet against Microsoft at your own peril

Ed Bott

If you feel like you stepped into a time machine during this debate, it’s not your imagination.

My opponent’s perceptions of Microsoft were formed decades ago, and nothing’s going to dislodge his outdated prejudices.

So please allow me to focus the argument back on the central question of this debate: Can Microsoft execute on Satya Nadella’s strategy?

Yes, they can. This is a company that has done remarkable things with Azure and Office 365, which are only two of the 16 billion-dollar businesses  at Microsoft. My opponent’s loathing of Windows 8 is so profound that he forgets that Windows is no longer the primary profit engine at Microsoft. Windows 8 is a fraction of just one of those billion-dollar businesses.

For the past five years, Microsoft has been building an enviable cloud-based portfolio under the leadership of the man who is now CEO. Bet against him at your own peril.

Right guys can finish last

Steven J. Vaughan-Nichols

Nadella is the right CEO for Microsoft. He has a vision and the engineering and leadership chops to make it happen.

What I don't think he has is time.

Under Ballmer, Microsoft's squandered its strategic advantages. Today, people still think of Microsoft as the Windows PC company. That was fine in the 00s, but we're in the 10s now. Today, Microsoft is the Windows 8.x's company. Yuck!

Microsoft's in-house mobile efforts have come to nothing. Bringing Office to other platforms, far from enabling Microsoft to "start printing money," appears -- according to Jan Dawson, chief analyst at Jackdaw Research  -- to have gone nowhereMicrosoft is only one of many cloud players. Azure is good, but better than OpenStack, AWS? No.

Ed worries that Microsoft can't connect with consumers or new business leadership, and about Google's competition. He's right to worry. All three factors will add up to Microsoft becoming a dull legacy company.

The challenges are formidable.

Larry Dignan

The question that anchored this debate was almost impossible to answer without a crystal ball. In theory, Microsoft can execute and everyone seems to be rooting for CEO Satya Nadella. What's unclear is whether Microsoft will be able to execute. The challenges are formidable.

Overall, Steven Vaughan-Nichols won the argument by a slim margin over Ed Bott. Both had solid arguments and the two debaters actually agreed (for once) that Azure was strong. The argument that Nadella's challenges outweigh his support and time window won out. After all, there are a lot of fix-it jobs to do after Steve Ballmer.

Vaughan-Nichols gets the win. 

Topics: Great Debate

About

Larry Dignan is Editor in Chief of ZDNet and SmartPlanet as well as Editorial Director of ZDNet's sister site TechRepublic. He was most recently Executive Editor of News and Blogs at ZDNet. Prior to that he was executive news editor at eWeek and news editor at Baseline. He also served as the East Coast news editor and finance editor at CN... Full Bio

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