Despite the persistent perception that the company is unable to keep up with the Apples and Googles of the world, it is difficult to describe Microsoft’s recent financial performance as disappointing. Thanks to frequently better-than-expected earnings results, a newly resurgent Office productivity suite and a breath of fresh air in the form of a new chief executive officer, Microsoft has been the subject of several analyst upgrades, including two price target hikes this week alone.
Even though the company’s Windows mobile platform is a very distant third behind Google’s Android and Apple’s iOS operating systems in the world of smartphones, Microsoft’s share of the market is slowly growing, recently overtaking BlackBerry, according to International Data Corp. Indeed, IDC predicts Windows will be the fastest-growing mobile platform in the world over the next four years.
Most importantly, Microsoft is also seriously competing for dominance of the enterprise and consumer cloud computing market. The cloud, where Microsoft is locked in a fierce battle with Google and Amazon, is pivotally important because it allows Microsoft to offer its services across a range of devices – for example, a user can open a cloud-based copy of Microsoft Word on their tablet, smartphone or desktop, and sync the data across all those devices seamlessly.
But to achieve this, Microsoft risks stretching itself thin competing against behemoths on either end of the cloud computing spectrum – Amazon, which has created a massive enterprise cloud that powers many of the Web’s biggest services, and Google, which offers myriad cloud services such as Gmail to consumers for free.
Because cloud-based services require all of the company’s disparate divisions to work closely together, Microsoft has recently been forced to undertake a complete overhaul of its corporate culture.
Last summer, in an attempt to make the company more united and agile, then-CEO Steve Ballmer introduced an initiative called One Microsoft. Under the program, the company would no longer work in silos dedicated to certain products, but under more broad divisions, such as engineering and research. Within the engineering division, the company shifted to focus on its new top priorities: operating systems, apps, cloud services and hardware.
In February, Satya Nadella replaced Mr. Ballmer as Microsoft’s newest CEO. “We need a CEO who will be here longer term for this new direction,” Mr Ballmer said in a memo to Microsoft employees. “Microsoft has all its best days ahead. We cannot and will not miss a beat in these transitions.”
Mr. Ballmer’s chosen successor, Mr. Nadella, previously headed up Microsoft’s cloud services division, illustrating just how vital the technology is to Microsoft’s future plans.
“As we look forward, we must zero in on what Microsoft can uniquely contribute to the world,” Mr. Nadella said in his first note to employees. “The opportunity ahead will require us to re-imagine a lot of what we have done in the past for a mobile and cloud-first world, and do new things.”
It’s still early days, but some of those new things – particularly, the One Microsoft streamlining initiative – seem to be showing some signs of success.
“With One Microsoft, it brought the leadership closer together,” says Karsten Aagaard, who helps run Microsoft’s hardware prototype modelling shop. “Before, we would work with individual teams. Now it’s better, there’s more partnership.”
But as Microsoft works to streamline its decision-making processes and become more innovative, nothing in the One Microsoft manifesto addresses how to convince customers to come along for the ride.
The same tug of war between Microsoft and its Windows users can be seen with other products. Last summer, in the lead-up to the release of the newest gaming console in the highly successful Xbox family, Microsoft attempted to radically change the way the system worked – for example, requiring users to always be connected to the Internet in order to play games, and putting severe restriction on used games.
Even as a minority of observers commended the company for making a big bet on the concept of always-connected gaming, a massive number of users were outraged by the changes.