Why Microsoft can't compete in the cloud
In my recent debate with Ed Bott over Microsoft's future, the public bought Ed's arguments that Microsoft will have a bright, shining future with Satya Nadella as CEO. The judge though gave me the win because he agreed 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."
That is indeed the problem. Nadella is the right guy for the job but he doesn't have the time to fix all of Microsoft's problems. At the same time as he's dealing with Ballmer's leftover messes, companies such as Amazon, Apple, and Google have moved forward to grab the leadership roles in cloud and mobile.
Bott said that I think Microsoft can't recover because "my perceptions of Microsoft were formed decades ago, and nothing’s going to dislodge [my] outdated prejudices." He couldn't be more wrong.
True, I have no love for Microsoft's hyper-aggressive business tactics during Gate's reign nor many of its programs, Outlook, Vista, and Windows 8.x. I also think Ballmer was a truly awful CEO who should have been fired years ago. But, I've also long thought that Windows Server, since Server 2003, is an outstanding server operating system, Excel is still the best spreadsheet around, and Azure is a real contender for any serious enterprise cloud deployments.
In short, I see Microsoft's flaws and features with a clear eye. And, when I look at my crystal ball, what I see is a company that needed to transform itself from its PC-centric past to a mobile and cloud-based future three years ago. That didn't happen.
Instead, 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. Worse still, while the overwhelming majority of people still use Windows on the desktop, it's not the new and hated Windows 8.x they're using. It's 2009's Windows 7.
Nadella's avowed goal 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.
It can't. It's too late.
By Strategy Analytics' numbers, Android was on 85 percent of smartphones sold in the last quarter. Windows Phone? It dropped to under 3 percent.
The Nokia purchase seems more and more to have been an utter waste of money. The fact that the recent layoffs hit Microsoft's former Nokia employees — 12,500 out of 18,000 — harder than any others says it all. Microsoft attempts to become a hardware power with its Surface devices has also failed. Surface appears to have lost at least $1.2 billion. And, at the same time, Microsoft's hardware initatives alienated its once faithful hardware partners.
True, Microsoft is finally bringing its applications to other mobile platforms, but the idea that bringing Office to other platforms would let Microsoft "start printing money" appears — according to Jan Dawson, chief analyst at Jackdaw Research — to have gone nowhere.
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, it' s not. Azure will be a player in the enterprise space, but it's not going to be the top dog.
So, here's how I see it coming out. Microsoft will continue to be a giant company, but it will prove unable to dominate the mobile and cloud markets the way it has the desktop market. Without that domination, Microsoft will stagnate and start to fall behind the other technology giants.
If that sounds impossible, then I suggest you're the one living with perceptions of Microsoft that were set in the 90s and 00s. Even the biggest companies can lose their way.
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