Microsoft goes internal for its next CEO with Satya Nadella

Microsoft goes internal for its next CEO with Satya Nadella

Summary: Microsoft has finally chosen its third CEO: Company veteran Satya Nadella. What does this mean for the future of the devices and services company?

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Five months after the announcement that Microsoft CEO Steve Ballmer would be stepping down, Microsoft has appointed a new CEO: Satya Nadella.

2-4-2014 9-01-11 AM

Nadella's first day as CEO is today, February 4. Current CEO Steve Ballmer is out, effective immediately.

The choice of Nadella  is somewhat surprising, and in other ways, not.

Nadella -- believed to have been, all along, one of a small handful of alleged internal candidates for the Microsoft CEO job -- has been at the company for 22 years. As of 2011, he ran Microsoft's lucrative server and tools businesses. His official title, as of the July 2013 "One Microsoft" reorg, became Executive Vice President of Cloud and Enterprise.

Given Microsoft is remaking itself as a devices and services company, it's not too crazy that Microsoft's selection committee would choose a "cloud guy" to be the next CEO. The fact that the majority of Microsoft's revenues and profits come from enterprise software also make Nadella -- who also heads up the company's enterprise software businesses -- a seeming shoo-in.

Read: Microsoft CEO Candidate Nadella: Here's What Ballmer Taught Me

But... and there's always a but, right? Microsoft execs have said in the past that Microsoft's brass isn't content for Microsoft to become "just" another IBM. Microsoft also wants to be known as a devices and a consumer-savvy company. And on that front, Nadella has far less of a track record.

Nadella -- who has degrees in electrical engineering, computer science, along with an MBA -- also formerly led engineering for Microsoft's Online Services Division and its Business Solutions group (ERP and CRM). While Bing, one of the products Nadella has managed in the past, is a Web search engine, it's also a development platform and the back-end for Microsoft's big-data and machine-learning services and products.

Many on Wall Street have been in favor of Microsoft going outside in selecting its third CEO. But those of us who've followed the company for years know that outsiders don't have a very good survival record at Microsoft. Most of those tapped from non-Microsoft posts to take on high-level management jobs at the company in the past couple decades ended up leaving frustrated because they were unable to infiltrate the political (and sometimes, technical) hierarchy.

Many company observers believe Microsoft needs a fresh pair of eyes in order to get out of habitual development and marketing patterns, despite the fact that those patterns have allowed Microsoft to continue to turn in more than a few record earnings quarters. As Ballmer told me last year, Microsoft's brass believes that trends like bring your own device and consumerization of IT mean that no software/device/services company can ignore the consumer part of the market.

Nadella: Enterprise shepherd or disruptor?

Now that Ballmer will no longer be CEO, will that "we're not just an enterprise vendor" attitude remain?

A number of Wall Street investors have been advocating for Microsoft to sell off Bing and/or the Xbox unit and tighten its focus on more business-centric products and services.

When I spoke with Nadella in December 2013, he professed to be onboard with the One Microsoft reorg Ballmer had put in place. He seemed to be a firm believer in the need to keep Microsoft intact, maintaining both consumer- and enterprise-centric businesses as part of a mutually reinforcing whole.

Not everyone shares that view. Most notably, ValueAct's Mason Morfit -- who is expected to take a seat on Microsoft's board around March of 2014 -- is said to favor a strategy via which Microsoft's enterprise products and cloud services take center stage. Bloomberg has reported that ValueAct is believed to want Microsoft to jettison or scale back its efforts in consumer hardware like Surface, Windows Phone and Xbox.

Microsoft board member -- and new board chairman  -- John W. Thompson has gone on record stating he believes Microsoft needs to be a player in both consumer and enterprise

Microsoft also announced that on February 4 that Gates, previously Chairman of the Board of Directors, will assume a new role on the Board as Founder and Technology Advisor, and "will devote more time to the company, supporting Nadella in shaping technology and product direction." 

Ballmer will remain on the Microsoft board, a company spokesperson confirmed.

 

Topics: Steve Ballmer: The Exit Interview, CXO, Cloud, Enterprise Software, IT Priorities, Microsoft

About

Mary Jo has covered the tech industry for 30 years for a variety of publications and Web sites, and is a frequent guest on radio, TV and podcasts, speaking about all things Microsoft-related. She is the author of Microsoft 2.0: How Microsoft plans to stay relevant in the post-Gates era (John Wiley & Sons, 2008).

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114 comments
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  • Solves a lot of Microsoft's problems, actually

    Puts a guy with proven vision, proven execution abilities, and proven technical skills into the drivers seat. Azure was a major coup, and Satya (and ScottGu under him) made it possible.

    This is an excellent choice.
    Mac_PC_FenceSitter
    • Agreed

      Tech guy leading a tech company. Win-Win. Satya just needs to surround himself with other good leaders in non-technical areas, like Marketing.
      Sean Foley
    • Agreed

      Entirely!!
      Koymik
    • Well, actually...

      It solves who will have the title of CEO - nothing else, despite all the wishful thinking in the world.

      Let's watch, wait, and then eventually see what Mr. Nadella manages to "solve."
      moyashi@...
  • Hopefully...

    as a 'server and Enterprise' orientated guy he will have more understanding that the hopelessly flawed concept of Win8 phone style touch interface on all platforms does not work, and see it for exactly what it is - hopelessly flawed!
    The Central Scrutinizer
    • Partially agree

      No, the interface shouldn't be forced on users. On the other hand, NO, apps I buy from the windows store should not be proprietary to one platform of windows. I should be able to use those apps on ALL my windows devices. In truth the interface works perfectly well in a point and click environment, but I will allow that it radically changed how we think about windows organizing things in a computing environment and confused some people.

      That said, if you take 15 minutes you can figure it out.
      d20dad
      • Not CEO material

        Especially for a Compnay of this size, however I think Microsoft will be shrinking in size significantly in the coming years anyway so perhaps this is the right move? Glad to see them promote from within though. Too many comapnies these days are always looking for the "name" as if that will solve all their problems. I think they need to break the Company in two and eventually appoint someone who really has a handle on the consumer market. Nadella is fine for the business side, although he will be over his head here as well.
        BruinB88
        • Significally shrinking

          Haven't we heared this when Microsoft was concerned for at least ten to fifteen years ?

          Yet they are still growing, especially in Enterprise, a market that doesn't replace personal computers with tablets and smartphones any time soon.

          I don't see a reason why the consumer side of things should be separted, it doesn't make any business sense. As if the two are mutually exclusive, and don't offer economy of scale currently.
          sjaak327
    • Wow...just wow....

      Really? You're going to be THAT guy? All because of the start screen as opposed to the start menu? Guess what? Every OS is migrating to that.

      OS X does it with their Launchpad
      Every Linux OS that uses Gnome 3 does it with Activities
      Every Linux user that installs Unity does it
      Windows does it with Start Screen
      Heck, even ChromeOS has their own like it, albeit not full screened like the others.

      Simple fact of the matter is, it's modern, its user friendly, and it's everywhere. Every single non-techy user I've ever seen on Windows 8 or 8.1 prefer it to Windows XP, Vista, or 7's Start Menu.

      I get it though. You hate change. You feel that the tablet feel shouldn't be forced on you. Yes, Microsoft should have offered a retro Start Menu so that people wouldn't be forced in it like they did with Vista/7. But then nobody would have used it. And other than the start menu, almost nothing is changed in useability.

      So quit your ***ching and accept change.
      jparnell8839
      • and guess what?

        when I walk around my building none of 70 or so mac users are ever using Launchpad, and the 30 or so Linux users don't use Activities.

        It may be modern, but it's not user friendly and it far from everywhere!

        And I don't hate change at all - as long as it is for the better! Then I will gladly accept it.
        The Central Scrutinizer
  • A great choice

    Microsoft is well under way in remaking itself (again) and Satya has the vision and skills to complete the journey.

    And can anyone explain why people listen to ValueAct's Mason Morfit? Nothing coming form him or his group is in Microsoft's best interest. Rather the 'sell stuff' meme is a short term (and short sighted) way for ValueAct to make money. He shouldn't even be on the board.
    Skippy99
    • If you own enough shares, you get to say...

      "Put me on your board". I'm not quite there yet.
      Flydog57
  • wait and see

    Too many times "experts" or "analysts" define people by a person's last job he/she held. BTW they don't have much of a track record. They forget that each person is an individual and not a robot. It will be interesting to see where Nadella takes MS. 2 to 3 years from now we'll have a good ideal if Nadella was a good choice.
    bubbagti
  • they need to abaondon consumer

    The focus clearly is going for maximum $$$, period. I know companies are in business to make money, but a line has to be drawn to provide the best products that the customers expect, as its prime objective.

    Just look what has happened so far with the attempt to unify a consumer oriented touch interface across phones to business machines and even servers and it has clearly backfired, totally as predicted. We can expect more of the same going forward.
    drwong
    • This from the person who admitted he never used WP8 or iOS

      How can you speak with such conviction when you have admitted you never even tried the devices and interfaces you cry about?
      Emacho
    • Wrong

      Know why sales of Windows 8 PC's are crappier than Windows 7 PC's? Because sales of PC's period is down. Tablets and smartphones are taking over.

      Let's run a little scenario here:

      Microsoft abandons consumer platforms like Xbox, Windows client OS's that are available to consumers, and Office to focus on Server, Clients for businesses, and Services (Azure, SkyDrive, etc). Why do you think businesses invest so much in Windows servers and Windows clients? Because that's what consumers are used to. If everybody started using Linux at home and liked it and figured out its quirks, guess what? Business would migrate to linux servers and clients. This is all besides the whole BYOD movement that IS gaining popularity. Not to mention that their Xbox is a phenomenal success and abandoning that platform would only lose the company money.

      The only place MS is failing is the phone market, and that's because they waited way too long to throw their hat into the ring. By the time they entered, everybody was divided between iOS fanbois, Android powerusers, and the occassional die-hard blackberry clinger. And lets face it, blackberry IS going dead, and most people leaving blackberry is going to Windows phones.

      How's that sound?
      jparnell8839
      • RE:

        You have it so wrong on so many levels, that's not even worth my time writing where you are wrong. I'll let someone else take that pleasure.
        Lapithes
    • Has it backfired on consumers?

      I was talking to a Mac owner (iPhone, iPad, MacBook), he used to work for Apple (Genius), and even he commented on the idea of unifying things across platforms.

      He said he actually like the idea, and thought the WP8 interface to be nice.
      William.Farrel
      • I'm not sure it does much good...

        ...to win over a few Mac users at the expense of alienating many more Windows users. There is something to be said for appropriately managing expectations.
        John L. Ries
        • I'm not saying at the cost of Windows users

          I'm saying if someone accustomed to something else sits up and takes notice, will others who are accustomed to Windows follow in time?
          William.Farrel