You know that if you type "google" into Google, you'll break the internet?
Turns out that if you type "microsoft" into Google, everything's fine. But I did see this:
We've been aware of Microsoft's desire to reposition as a "devices and services" business for some time. But seeing it there in black and white on the screen made me think about it for the first time -- what does it actually mean?
"Devices and services" seems an obvious mantra, yet the market leaders don't follow it. Apple makes great devices, and one good service (iTunes). Google doesn't make devices, but does make good services. Microsoft is saying they want to be the one that does both?
"Microsoft" is a particularly obvious name for a company that sells software for microcomputers, that being the plan for the past 38 years.
Over those 38 years Microsoft has done a lot to shape the devices that we use, but up until very recent history it's never gone out there and created PCs directly.
It has always worked with OEM partners to evolve the PC and non-PC devices that we are used to using. And really, "OEM partner" is a misnomer. OEMs are customers of Microsoft -- not partners. They buy Windows licenses and put them on PCs.
We know that Microsoft is producing their own PCs under the Surface brand. These look and behave like iPads and Android tablets in important ways, so let's call them tablets. We also know that they are buying Nokia's smartphone business.
Those two strategies make up the device hardware side of the business. But it's pretty small, both in terms of what they used to have in the PC space and what their competitors have in the post-PC space.
The last reported quarter of PC sales gives a figure of 81 million unit sales. Virtually all of those would have come with Windows OEM licenses, which is great news for Microsoft, except if it's a "devices and services" business, does it remain great news? Because now it's framed as a "devices" business, selling a software component to OEMs isn't a core activity within that strategy. Windows is neither a "device" nor a "service." I guess the argument runs that by installing a Windows component on a device it becomes a "Windows device", although it's not a "Microsoft device," because Microsoft didn't make it.
The Nokia acquisition at least means it has the smartphone side of the device market looking sensible. However on the tablet side — they're still relying on OEMs and probably always will. They have no tablet hardware manufacturer to buy and make their own at this point. The only people who are good at making tablets are Apple, Samsung, and Asus — and none of which seem like obvious acquisition targets.
This means that on the tablet side of things, Microsoft will likely remain a component provider to the OEMs. In this side of the "devices and services" mantra, the "devices" part seems extremely lopsided. All they have is the Lumia that is a true fit within the mantra.
The alternative is that what will then be the Nokia business unit starts making amazingly good Windows tablets that sell in huge numbers. Although in this context, "huge" has to be assessed within the 80-million-units-per-quarter range that the PC currently hits.
In all this though, devices aren't important at all. For the most part, making hardware is a fool's game. The value in the whole post-PC proposition (and the old school PC proposition for that matter) comes down to what you can do with it, i.e. the services that you access.
Microsoft should be good at building services. To all intents and purposes, building "software" and building "services" is the same activity, all that changes is some of the detail of the execution.
On the enterprise side, this makes a ton of sense. If we imagine a future world where on-premises systems are flat-out unusual, having all of Microsoft's products running in the cloud somewhere and sucking the Redmondian goodness into your private-cloud-based enterprise systems seems like a natural and logical progression. Plus, there is no product that Microsoft cannot send into the cloud.
On the consumer side, once you've got a consumer that has a device running Windows, which Microsoft services do they connect to? Bing (a service that connects you to other services), Office 365, and Skype).
Services that users choose to dial into when they use their devices are things like Facebook, Twitter, YouTube, and so on. Go and look at a list of the top 20 web sites and there are no services there that could have originated within a large, generalist computer company.
OK, so several of those services are now owned by large, generalist computer companies (YouTube, Flickr, Tumblr, etc) but they didn't start that way. They were all created within the crucible of the tech startup culture. Can you really imagine Microsoft creating Facebook? Look at Google+ to see what happens when engineers try and develop a social network from scratch.
Yet if Microsoft wants to be a "services" company that's what it has to aim for. In 2023, when that Top 20 list is radically different, how many of those services should be Microsoft owned? How many would have been created by a Skunkworks startup within Microsoft itself?
My concern that's been ongoing for the past eighteen months is that Microsoft can't shift its mindset from the one where the only thing that matters is selling Windows and Office.
The decline of the PC prompts diversification from that position, and ostensibly "devices and services" seems to be about that diversification.
But when you parse that strategy and look at what they're doing, is there any real change?
I can't see one. It still seems to be about selling devices that can run Office. Perhaps it's mellowing slightly in that it's about selling devices that can run Office, run Skype, and access Bing, but the future of the post-PC era isn't in this area.
The future of the post-PC era is about making devices better and cheaper, together with creating new types of services that deliver life-affecting value.
Change is still needed at Microsoft. "Devices and services" is better than "software for microcomputers", but it's not quite there.
What do you think? Post a comment, or talk to me on Twitter: @mbrit.