Microsoft\'s New CEO - Satya Nadella

After months of speculation, investors and pundits were finally happy to learn that Microsoft has chosen its newest CEO, Satya Nadella. There was growing discontent within the company due to a confusion about the sense of direction that it would be taking with its array of products and services. Finally, that speculation has been laid to rest. There is a new boss in town, and his credentials and history suggest that everyone watching and working for Microsoft should be prepared for a shakeup of the decades-old status quo, even if Microsoft employees have a familiar face to rely upon.

Who is Satya Nadella?
At the age of 47, Satya Nadella is the poster boy for the American success story. Immigrating to America from India in his twenties, he obtained degrees and qualifications for software engineering that enabled him to land a job at Sun Microsystems, a bellweather for the type of projects he championed as he transitioned to work at Microsoft and climbed its ranks.

His ascent at Microsoft was swift. During Microsoft’s development of Bing, the only currently relevant competitor to the Google search engine, he served as senior vice president of research and development for the Online Services Division and vice president of the Microsoft Business Division.

He then moved on to the now-critical role of leader of the Server and Tools division. His success in growing this part of the business from $17 billion to $20 billion in revenue in just 2 years was probably a huge factor in the board of directors giving him the nod for the CEO role. Amongst his accomplishments was transitioning the client service and licensing model for his division to a more stable and forward-looking subscription model with technology built on Microsoft’s ever-evolving Azure platform, a move that the rest of the company’s products have slowly been making. It’s arguably because of Nadella that Microsoft maintains such a strong presence in the enterprise IT arena and is still an absolute titan of a company.

So, a capable and experienced engineer now leads Microsoft. What can come of it?

Is he the right guy for the job?
The narrative for the past few years has been that Microsoft is on a wayward path. That it has lost the prominence that it once held and is fading to the background as more exciting companies like Google and Facebook catch new waves of technology. Much blame has been laid at the feet of Steve Ballmer, who, while maintaining and growing Microsoft’s enterprise dominance, has allowed its presence at the forefront of consumers’ minds to languish. Sure, the Xbox experiment has been a great success, but Ballmer is the kind of executive who once proclaimed that the iPhone would never take off. Not much more has to be said in this respect.

Ballmer was loud, aggressive, and absolutely passionate about the company that he helped start and also ran for long time. The problem was how his style filtered down through the product teams and the rest of the company. The Microsoft of recent history can be likened to a set of feudal fiefdoms vying for their king’s attention, all while supposedly trying to work towards a shared objective of growing together as a company. Each division was given impetus to compete against the others, stealing crucial engineers or holding milestones captive until their requests were met. This meant that Microsoft was unusually slow and bureaucratic, and therefore, unable to adapt to several new waves of technology such as mobile and social.

Nadella is not a salesman like Ballmer was. He’s been described as quiet and thoughtful, absorbing as much information as possible before making a decision. While this has alarmed certain investors who wanted a dynamic individual who would really shake things up, there are some positive signs that things should be different under Nadella’s reign.

A recent Slate story sheds light on Nadella’s management approach at Microsoft. The following anecdote from a Microsoft employee sheds much light on the changes that could be coming, company-wide:

Malhotra first met Nadella when he became his boss in the server and tools group. Malhotra was an engineer, and Nadella held an informal meeting to ask lead engineers about their products. That meeting was unusual for Microsoft because it wasn’t extravagant. Meeting a new executive usually involved a lot of pomp and circumstance, Malhotra said, including PowerPoint presentations, demonstrations, and rehearsals for the meeting. Nadella “literally gave you a day’s warning. No theater. That may seem normal to people outside of Microsoft, but I can tell you that at Microsoft, and I was there for 10 years, that never happened before Nadella. Never once,” Malhotra said.

Nadella is quiet but ruthless, having already removed layers of middle management, giving Microsoft’s engineers room to express themselves and work without an aggressive sales culture. In another break from Steve Ballmer’s idealogy, he has described the new Microsoft as having a mobile and cloud first approach, a subtle but important distinction from Ballmer’s mantra of “devices and services.”

What would he do?
Nadella brings focus to an organization which has suffered from a fair amount of feature and product creep over the years. The surefire initiatives that he would implement, given his background as head of Microsoft’s Azure initiative, is to bring the cloud to all of Microsoft’s services and ensure that they integrate well. Still, two important questions remain for the short to medium term of Nadella’s term as CEO. First…

Would he sell off Xbox and Bing?

Two different questions, which many analysts unfortunately don’t understand. The answer for both is no.

Xbox is a rare feather in Microsoft’s cap: a consumer product that has grown to compete neck and neck with the other titan of the games console industry, Sony. It is an important asset that can still be leveraged to bring more Microsoft services to customers who already have a certain level of acceptance towards Microsoft products. To sell this division off would set Microsoft back years in the consumer marketplace. Nadella doesn’t believe that Microsoft can thrive as an enterprise-only company, as he rightly points to the BYOD (bring your own device) culture forcing businesses to adapt to their employees’ use of Android and iOS products. If Microsoft can’t make it so that consumers are happy using their products both at home and at work, then they’ll eventually be crowded out of a workplace that no longer has to contend with just offering and servicing their own products.

Bing is a less obvious, but far more crucial no. Many treat it as a mere search box, a blank field that only services the same needs that the Google search engine so admirably fulfills. It is far more than that. Bing is a window (no pun intended) to the growth potential of big data. It has become an integral part of Microsoft as a whole and, less prominently, the discovery features of products such as Apple’s Siri and iPhone. It has been built on top of the Azure platform, meaning that selling it off would cause a lot of headaches for product teams that have relied on its presence. It’s also a giant data vacuum, collecting information on relationships between people, objects, and events. If Microsoft is to leverage some of the more groundbreaking work done at Microsoft Research and keep up with Google as it makes its investments in tomorrow, Bing has to be there to power these new innovations.

Lastly…

What would he do with Windows Phone?
This is a tricky proposition. While it has grown over the past few years, Windows Phone has been struggling to gain a foothold in huge, developed economies such as the United States and China. One route that Nadella could conceivably take is to drop the proprietary approach and build a Microsoft-branded fork of Android, much as Amazon has done. This would provide Microsoft with the huge developer support already available on Google’s platform. It is a plausible approach, as Nadella has been vehement about the importance of Microsoft’s presence on mobile. The flip side to this argument would be that Microsoft would be putting its fate in the hands of its fiercest competitor. Google, who has already closed off certain aspects of Android as the years have gone by, would be able to dictate Android’s development and somehow cripple Microsoft’s progress if it ever perceives it as a threat.

The other way is to double down on the Windows Phone investment and utilize the new Lumia division to push Microsoft’s vision. This is definitely a far more costly route, as Microsoft would arguably have to sell high quality low-end handsets at a low cost while pushing US carriers to simultaneously launch premium Lumia handsets with unique features to build its mindshare against Samsung and Apple. There are no margins in such a business, so it would have to be a marketshare play that justifies long term investment. It is risky, but that’s the price to pay for falling behind in mobile in the first place.

There are many more aspects to Satya Nadella’s approach as CEO that could be discussed, but they are far too numerous to be adequately covered in a single article. For the first signs of how Nadella is influencing the new Microsoft, pay attention to his keynote and announcements at this April’s BUILD 2014 developer’s conference. There, we’ll expect to see a variety of updates, such as Windows 8.1 Update 1, Windows Phone 8.1, new Windows and Mac versions of Office, and more unified developer tools.

Nadella’s promotion starts an interesting and exciting chapter for Microsoft, further perpetuating the technology sector’s penchant for drama and innovation.

The field has been reset, and the game between tech titans begins once again.

Marcin Skok
Tech Talk
www.marcinism.com