Devices, Services and the Modern Microsoft
By on October 15th, 2012

In a letter addressed to Microsoft’s shareholders, customers, partners and employees, CEO Steve Ballmer laid out the direction in which Microsoft was about to embark upon, calling it a fundamental shift for the company. The gist of the change is that instead of being a software company, Microsoft was focused on becoming a devices and services company. This is a big shift in strategy and could very well be the defining moment for Microsoft as well as Ballmer.

Services

A lot of pundits have focused too much on the devices part of the strategy, and that is justified, given that traditionally Microsoft has not built hardware except the Xbox and some keyboards, mice and web cameras. The Surface tablet was introduced as “the first in a series of devices” that Microsoft intends to make. That statement, along with the phrase “devices of various form factors” in the letter would imply that Microsoft may in fact make other devices like phones, or smaller tablets in e-reader form factor.

However, I want to focus on the services part of the strategy. Microsoft is essentially saying that all the software it is making, is now going to be delivered as a service. We already see many of the server products being delivered as a service via Office 365, Azure, etc. This is a tremendous achievement because it is almost completely opposite of how Microsoft used to make money – boxed software or licensed software delivered as a product. Now, they have been able to pitch various types of models for the delivery as a service, like pure service-based delivery as Office 365, pure on-premise delivery as in Exchange Server (or any of the other servers) and the hybrid model where some part of the infrastructure stays on-premise and some gets delivered as a service.

It is not just the “business” side of things that have become the focus of services. On the consumer side Microsoft completely revamped their much-underutilized SkyDrive cloud storage service. Not only did they make it easier to use, but they made native apps available on all mobile platforms. See the devices angle that others have not focused much on? You can enjoy the benefits of their service across Windows, Mac, iOS, Android and Windows Phone. Similarly, they launched a brand new, extremely good-looking mail service Outlook.com, which takes the negativity associated with Hotmail brand away from Microsoft. The web app works nicely on all modern browsers, including mobile browsers on iPad and Android tablets. They also made Outlook.com work with Exchange Active Sync (EAS) so all modern smartphones can connect to it with 2-way push on email, contacts and calendars. Another huge service that is coming soon is the Xbox Music and Xbox Video, combined with their cross-platform app Xbox SmartGlass.

The other services piece for Microsoft is Windows Azure, both as a Platform-as-a-Service (PaaS) and Infrastructure-as-a-Service (IaaS). This area of focus is not brand new, but the pace at which the teams at Microsoft are innovating and competing (on price) shows that they are really serious about these services as well. They are investing a lot of time and money in improving the feature-set and filling the holes that the modern developers (read: not only Windows developers) have reported as crucial for them to adopt Windows as a development platform. Adding support to open source software and frameworks to Azure is a good example of how Microsoft is saying they are a service provider which does not have any favorites when it comes to tools and technologies. The market sure seems to like it because Azure has gained not just a lot of new customers (as Microsoft claims), but they have started reversing the negativity associated with Microsoft when it comes to the open source community.

Massive Change

As you can see, there is a lot of change Microsoft has stepped into, and these things are not going to start showing results immediately. When you are moving an oil tanker like Microsoft, turning it is not quick, nor easy. However, the speed at which Microsoft has pulled off this change, is amazing. They have realized that Windows is not going to have the same clout as it used to have in the 90s. They cannot force themselves onto customers, partners or consumers. Everyone has choices now, and more importantly, as tablet and smartphone sales have proven, people prefer smaller, simpler, mobile devices over larger, more powerful, but more complex devices like laptops. Microsoft knew they had to quickly retool themselves, or face irrelevance.

“PC” Market Or “Computing Devices” Market?

The PC market is now morphing into a more general category of “computing devices” market. Some prefer laptops, some prefer desktops, many prefer tablets, and some are even ok with just their smartphones. In this new world, Windows (which I consider to be 8, RT and Phone combined) would probably end up at no more than 30-40% while iOS and Android take similar shares. With focus on services that work across devices of all form factors, and more importantly, across all OSes, Microsoft is positioned well to take advantage of the new wave of computing.

Devices

Finally, as for the devices part of the strategy, it is important to note that while Microsoft may make their own devices in addition to the Surface tablets, they are definitely not going to become a hardware company. Making hardware at scale is very hard, especially in today’s world of supply chains spanning many companies and geographies, and hardware design needing specialized materials to get the most efficient devices made. I firmly believe Microsoft said devices in the letter to denote the importance of being present on all devices, some of which will showcase their own OS, while some may be running other OSes.

It is a bold strategy. One may argue this is probably the only thing Microsoft could have done to keep their enterprise customers happy while moving forward into the new computing era along with the consumers who have started embracing competing platforms in large numbers. By defining themselves as a company that provides services across all types of devices, Microsoft is ensuring they are built to avoid the irrelevance they would be relegated to if they stayed stuck to the old process of providing incremental updates to all their products.

Looking forward to seeing what happens this holiday season, and more importantly, how Microsoft reinvents itself as it starts providing updates to its entire line of services in the next year.

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Author: Romit Mehta Google Profile for Romit Mehta
Romit writes about mobile news and gadgets, and is currently a Windows Phone owner (Nokia Lumia 920). Find him on twitter @TheRomit. Personal site is http://romitmehta.com.

Romit Mehta has written and can be contacted at romit@techie-buzz.com.
 
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