The new-look Microsoft: More integration needed if 'devices plus services' is to succeed

The new-look Microsoft: More integration needed if 'devices plus services' is to succeed

Summary: Devices and services are the future for Microsoft. But what will that strategy look like? And how can the company sell more Surface tablets?


Microsoft's CEO Steve Ballmer has said it clearly: Microsoft is a devices and services company now.

It's taken its first steps into a new world with the launch of a subscription version of Office that's tightly integrated with its Microsoft Account, with its Office 365 cloud servers, and with its Azure service platform. That follows on from the launch of its first computers — the Surface family of tablets.

Microsoft needs to concentrate on integrating hardware, software and the cloud.

But there's still a disconnect. Sure, Windows 8 uses Microsoft accounts to share information between your PCs (and therefore with your Surfaces) and while Surface RT's bundled version of Office is designed to use SkyDrive, it's not a full part of the Office 365 ecosystem. Even Surface Pro is a standalone device, with a click-to-run promo version of Office 2013 that can be linked to an existing Office 365 account — but with no direct way of selling the service to a new user.

Surface doesn't seem to have set the world on fire, if the recently leaked numbers are anything to go by. So how can Microsoft take advantage of its ecosystem to boost sales, and to get people excited about its platform and its new strategy?

First, Microsoft needs to get rid of the disconnect and concentrate on integrating hardware, software and the cloud. The company is selling devices and services in separate boxes, rather than a blended devices-and-services model. Although it's easy to mix and match PCs with services, you're billed for everything separately — and you're having to manage integration and deployment yourself.

If you're a small business seeking a turnkey solution, wouldn't you expect Microsoft to provide you a bundled Surface Pro with an Office 365 account and an Intune licence for management? Maybe you'd want something like Software Assurance with access to other pieces of business software as part of the deal? And how about some extra cloud storage, above and beyond the free SkyDrive? And let's not forget the Surface Pro.

Being a software company is one thing, as Microsoft knows. Being a hardware company is another. But being a devices-and-services business is something new in the IT industry.

You could think of this model as the anti-Chrome. Google is saying that for small businesses and individuals what the cloud can do is strip out features to make management almost unnecessary, bundling a basic control panel and devices as a subscription service. Microsoft, meanwhile, takes a different approach in offering services like Intune and Office 365 that give users the features they want, but make it easier and cheaper for IT departments to manage things the way they want. Just adding devices to a subscription would change the price, but not the intent.

Targeting small businesses makes a lot of sense for this model too. Enterprises already have their device fleets, their system management strategies and their custom images, so they don't need a bundled, managed mix of hardware, software and services. But SMEs are a different beast — and there are millions of them all over the world, all wanting to reduce their IT costs and simplify infrastructure, while still needing to operate flexibly.

Being a software company is one thing, as Microsoft knows. Being a hardware company is another. But being a devices-and-services business is something new in the IT industry. The closest model is probably that of a mobile operator, where you purchase a package of hardware and services when you buy a phone. The phone is subsidised, with minimal upfront costs, and you pay for it over time as part of your service subscription.

Bringing that model to PCs is a big shift, and one that's going to take time fine tuning. It's a model that will be extremely price sensitive, and one that's vulnerable to disruption — as the mobile operator price wars in Hong Kong showed, with a race to the bottom that left the market distorted for years. Getting things right will be important, will take time, and will need a lot of commitment from Redmond.

This is all speculation, of course. But still, 'Surface plus Services' has a ring to it.

If Microsoft was actually considering something like this, how would we know? Microsoft's a smart company with an extremely data-driven internal culture, so we'd expect it to start by running anonymous customer surveys, as well as more easily identified surveys to help refine offerings — and of course there will also need to be pilot programmes to test customer appeal, much like the public Office 365 previews.

Topics: Cloud, Microsoft, Software, Microsoft Surface

Simon Bisson

About Simon Bisson

Simon Bisson is a freelance technology journalist. He specialises in architecture and enterprise IT. He ran one of the UK's first national ISPs and moved to writing around the time of the collapse of the first dotcom boom. He still writes code.

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  • Tell That To The Desktop Windows And Office Empires

    Microsoft's mobile efforts are stymied by internal rivalries that will not allow anything that might be a threat to desktop Windows or Office to succeed. That's why the Courier tablet was cancelled, and we got this insipid, watered-down, ineffectual, fragmented hodge-podge of mobile efforts in the form of "Windows Phone 7" versus "Windows Phone 8" versus "Windows RT" versus "Windows 8 for Tablet". If there were some sort of coherent, unified vision behind these, it seems to be deliberately made impossible to find.

    When even beleaguered Blackberry is looking good by comparison, you know Microsoft is in a bad way.
    • Bean counter greed may sink the product

      Yes, when companies get lazy they typically drift towards providing services as an income stream. The bean counting strategists have obviously taken control of policy.

      I would have continued to fork out money for Microsoft products until the end of time if they provided value with each offering. I've never had any problem paying for anything that worked better, easier, smoother, and was more aesthetically pleasing. Up until recently I personally was happy with Microsoft products and lived in the joy that they would always get better. The jury is still out if I will find any interest in their new services oriented world but if it sacrifices quality and aesthetics I may be enticed to move on.
    • Technology not politics

      Those various versions you speak of, WP7, WP8, Windows RT, and Windows 8 were created because of technology reasons, not because of some BS internal politics that you claim.

      Windows Phone 7 was created on the old kernel which was already dated when WP7 was released. The new kernel that WP8, Windows RT, and Windows 8 run on was released just after WP7 was launched. But of course WP7 was built on that because the kernel wasnt ready yet.

      WP8 is WP7 built on the new kernel, plus additional features. Windows RT is Windows 8, but for ARM chips because what runs on x86 doesn't run on ARM. It's pure technology.

      If it was internal politics like you claim, then the mobile team would have never been able to push the UI redesign that is in place on Windows 8.
      • Eh

        It isn't like Linux changes the name for every platform it was built for - You don't see Ubuntu RT for ARM and Ubuntu Sol for UltraSparc, and Ubuntu - I for Intel, Ubuntu -F for freescale ...

        You might be right about having a more unified approach, but the naming is sure confusing the rest of us.
    • Erm. No.

      The Courier was an incubation project - half-way between R&D & actual product development. While it was interesting, it had a number of issues (UI flow, app compat, hardware cost, unfamiliarity, etc.). Had the Courier market testing revealed HUGE adoption promise, Microsoft would likely have pursued it.

      Microsoft is CLEARLY working more effectively towards closer integration than at almost any point in its past. It's not going to be able to make everything work together cleanly (without breaking things that work today) in one step.

      The "Blue" initiative will be a good indicator of Microsoft's goals, ambitions and progress towards smoother integration and interop between its devices, software and services.
  • I don't have much faith in Ballmer

    as a tech guy, but he is very good at maximizing revenue from product. Unfortunately, that product has always been built around Windows and Office on the desktop and in the enterprise. Xbox has had success as a gaming console, but never became the living room media hub it was envisioned to be. MS's tablet and phone offerings are struggling. Google, iTunes, Amazon, Facebook, and Netflix didn't exist, or were minor players when Ballmer took over as CEO.

    Ballmer can call MS a device and services company and I can call a horse a unicorn, that does't make it so. MS has a lot of work to do.
  • Hard Yards

    MSFT has chosen a very hard course: entering the device war with APPL and SAMSUNG, following an expensive suite subscription model after ADOBE and the 30% tax model for apps. of APPL ... and as the network pervades, butting heads with GOOG and AMZN, even IBM for cloud services.

    I cannot see a win on the device front. Operating systems are becoming less critical. I think MSFT's future hangs by Office (hence the cheap price for W8 and the expensive price for Office). Indeed if IBM woke up and developed an equivalent cloud service (say a LIBRE Office enhancement) then it could gain sweet revenge.

    Further by alienating OEM partners with Surface; customers with Windows 8, Office single non -transferable licensing, converting the componentised x86 ecosystem into a locked-down silo ...
    ... long-term prospects don't look good :-)

    A pricing strategy which is MORE EXPENSIVE THAN APPL is ... insane.

    I would have gone for a cooperative model with other big players a la WINTEL.

    I see MSFT a whale adrift on the ocean ... with the sharks circling.
    • Perhaps adrift...

      I think fickle is a better term. I do believe you have a solid point about the device and OS becoming less relevant and I think MS needs to start planning to adapt to the strategy. They are certainly setup for it. Instead they chase down consumers as if they are the most important market possible. I don't think they should just cede the device OS market but I also think it should be less of a driving factor in decisions for the rest of their businesses.

      The success of Windows 8 should have no impact on Office. Office NEEDS to be a subscription service that offers itself on all major platforms. There should be an iPad version, an Android version, it should work in Chrome as an HTML5 offline app so they don't need to sweat ChromeBook. And you should get all that as part of your subscription. That's the reason it makes sense as one. If you can access Office from all your devices they have a winner.

      Their enterprise solutions, especially the ones that are client facing, are getting much better about access from other ecosystems. Exchange and SharePoint 2013 work great in other browsers. They need to license (or perhaps open source, although I'm not holding my breath) RPC over HTTPS that way people can build their own feature rich mail clients for Exchange. Although the web version of 2013 is quite excellent. Azure is a great implementation of cloud computing. HyperV R3 and System Center 2012 are excellent products. As is Server 2012.

      MS needs to focus on the services and infrastructure. Otherwise they could lose Office and Windows. They would survive but much more like IBM. They would play in the cloud and data center and be less visible to the consumer. Not a bad thing. Just not what they want. Although they seem to fickle to setting on a cohesive, company-wide direction. Or perhaps a whale adrift...
      • But...

        What happens when the same morons that turned Windows 8 back into a two color two dimensional decide to do the same to office (Think Office 1.0 interface). They have already done it to their web sites and IE (2D scrollbar).

        HTML5 was supposed to make the internet prettier and Microsoft is going in the opposite direction (unless thier plan is to sell it back to us as something new after we have forgotten the good old days).
        • Simple can be "prettier"

          Overall I like the direction of the Windows UI in Win 8. It's less distracting. Sure, Aero was nice (although many complained about "needless eyecandy") but the bottom line is I don't really care about window dressing. And Win 8 looks good while staying out of the way. I can't tell you that I've noticed a difference, and that's a good thing.

          Also, HTML5 is there to make the web more functional. It has nothing to do with Pretty.
    • I agree that OSes are becoming less important

      certainly few people care now whether they have iOS or Android, because users can get all the same apps. However, Microsoft has to ensure that it is getting them too. And not by pulling a RIM and including an Android interpretation layer - it will need to "carrot and stick" the major players (Instagram, Facebook, Google, etc.) into playing along.

      The only stick of consequence is market share.

      Giving the Surface the ability to do some stuff the others simply cannot - a Kinnect sensor perhaps? Might be the key to it.
      • That is a good idea.

        Too bad it would invalidate the "surface" name though.
  • Options

    I agree, that there should be an option to buy an all-in-one package.

    That said, if I am buying 3 or 4 PCs for the home, I don't want to end up with 3 or 4 Office 365 subscriptions! If I already have a subscription, I don't want another one.

    Likewise, if I've bought a Surface Pro, but wasn't sure if I needed Office 365, why should I be forced to buy it? Why can't I just add it to my account afterwards?

    You are upgrading an existing employee from a laptop to a Surface Pro, if you are already running Office 365, you don't want or need another licence.

    I can see doing it like a mobile operator, if you already have a device, you can buy a SIM-only contract, if you need a new device, you can get it subsidised over 1 or 2 years, with a subscription.
    • Office 365 is already multi user subscription

      Whether you bought customized hardware and software bundles on PC at a time,or for all your employees at once, you could get another person on the same subscription. Business Office licenses are multiple devices per user, for the number of licenses you pay for. All Microsoft has to do is tie together the plans it already has, add support for the full package and put a discount monthly price on it all.
    • discounts rely on bundling

      If you want to pick and mix like that you can already do that. What we're suggesting is a discount and extra services like setup, support and training as part of a bundle - perhaps typical leasing terms like free hardware upgrades after two years - that you build into a custom bundle and pay for monthly or annually. I hear a lot of small businesses saying they want a single solution...
      • I agree

        I was just pointing out, it could not be the only scenario.
    • "if I am buying 3 or 4 PCs for the home, I don't want to end up with 3 or 4

      Office 365/2013 Home Premium covers 5 devices with one subscription, for example- my touch screen tablet, laptop and desktop are all on the single subscription and the included 7 gb SkyDrive storage and automatic syncing means that my files are available on each of those devices. Each can also have an entirely separate user account, if that's needed (and in most households, separate accounts ARE usually needed). Plus, I still have two more installations available on that one subscription, and that subscription is transferrable to other computers if needed; the subscription remains the same. I believe that you're saying you'd prefer a single license over 3 or 4 separate subscriptions, right? That's exactly what's being offered. NO ONE is FORCING you to buy anything new, you just deactivate the license on the laptop and activate it on the new device, Surface or other. It's actually pretty simple and extremely cost effective for users of multiple devices, so I don't really see the issue you're complaining about...
  • "Microsoft is a smart company"

    If they were a smart company, they would be innovative... I.e. they would own the Internet and Mobile computing. They missed big time on the two greatest paradigm shifts in the last 15 years...
    • it is asking a lot for any company to own an entire industry category

      That takes more than smarts - that takes everyone else failing, which is how it got there on desktops. That was never going to happen with mobile.

      Microsoft was one of the tech players that got mobile, and got it early. Windows CE treated mobile like it was a serious platform that deserved real apps, and gave developers a really good development experience for creating them. Microsoft only missed the boat in a couple of small ways:

      - CE's UI was a miniaturized Windows desktop. That was a mistake, as that's a hard motif to use on a small screen.
      - Following from this, they stayed dependent on stylus for input, and missed the touch screen revolution on mobile (though their 2006 Surface experiment, the table version of Surface, showed they did understand touch.)
      - CE apps had to be installed like desktop apps or through deployment technologies. There was no central app store (something even Linux anticipated with Synaptic Package Manager.)

      This is one of the reason so many Android makers have to pay royalties to Microsoft. Microsoft did Windows CE and Windows Mobile for so long that they invented a significant chunk of how modern smart phones work.
  • Great advice, if you want find yourself in court....again!

    If Microsoft did what the author suggests above, they could be sued by the OEM's (e.g., HP, Dell, Lenovo) who have their own competitive software (e.g., Management software) that would be put at a disadvantage by products sold by Microsoft (e.g., Intune). They would also find companies like Google suing because bundling Microsoft Office on a (Pro, not RT...but Pro) device would give Microsoft an unfair advantage over their Office product.

    They may be able to get away with bundling on Windows RT, because it is a "new device" in the market, because it is more of a tablet than a PC. However, to bundle on an actual PC (i.e., Windows Surface Pro), would be inviting the DOJ to take a long/hard look at the company....Again!

    Although I agree that Microsoft should look for ways to combine Devices with Services, with 90+% share in the PC OS market place gives the OEM's and Competitor, alike, grounds for suing.

    Oh, and don't get me start on how the Open Source companies would react....