Microsoft at 40 - mid-life crisis or start of something new?

Profile picture for user slauchlan By Stuart Lauchlan December 14, 2014
Microsoft's about to hit the big 4-0. But will it be a decade of new opportunities or a mid-life crisis waiting to happen? COO Kevin Turner reckons the former.

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Kevin Turner

Forty is a difficult age for us all. We’re past that first flush of youth, expected to display a certain level of maturity and we start to become aware of the intimations of our own mortality. Welcome to your mid-life crisis!

So let’s bear all that in mind in 2015 when Microsoft hits the big 4-0! Yup, Microsoft at 40 - doesn’t time fly when you’re dominating an industry! Of course in recent years Microsoft’s own mid-life crisis has been triggered early by the rise of rivals such as Google and the whole entire cloud industry.

But according to COO Kevin Turner at the recent Credit Suisse Technology Conference, the firm is conscious of the milestone and has been dealing with its approach for some time:

The first 39 years of our company we had one of the greatest business models of all time built around certainly the Windows Client operating system and the PC operating system and catching that wave of innovation certainly was very good to the company.

The beautiful thing about the old world business model was that, hey, as a customer bought our software, we got paid 100% of it upfront and we got paid regardless whether they used it or not.

That was then, this is now, he added:

The ability to transition from that business model candidly is where we are today. So just to ground everybody, this was our past.

If you look at our future, it’s really about becoming a cloud OS, a devices operating system having first-party hardware to light up those experiences and really being the company that can uniquely provide for dual users this idea of digital work and digital life experiences.

Doing all of that really helps transform our company from a PC OS and Office productivity suite and Windows Server company to really being a productivity and platform company as the world has evolved into mobile-first and cloud-first.

From a commercial cloud perspective, the transformation is paying off, he insisted:

Revenue grew triple digits, 128% driven by Office 365, Azure and CRM Online for the fifth consecutive quarter. We’re seeing strong momentum around those products and solutions. Eighty percent of the Fortune 500 has embraced the Microsoft cloud and again that number continues to accelerate and go up.

One major Azure service or feature is released every three days, so we’re moving from a three-year product cycle to a three-day product cycle, which is extremely invigorating for both our customer base and our employee base and engineering base to be able to embrace these new user scenarios and opportunities for our customers.

Turner makes the bold claim that Microsoft has a position in the industry that few others can boast:

You really have about 2.5 companies in all of technology from a multi-national standpoint that have hyper scale cloud. Google certainly has a hyper scale cloud and I count Amazon as a half. And the reason I count them as a half is they’re not completely global at this point and they don’t have the functionality and redundancy.

When you think about those two competitors, we have 19 regional data centers across the world. That is six times more than one of them and two times more than the other.

The ability for us to bring market-leading cloud technologies to our customers exists because we have hyper scale cloud.

The road ahead

In some respects, it’s all about the direction of travel, he argued:

The beautiful thing about that is we didn’t come at it from an enterprise perspective down into this particular space. We came at it from our giant consumer services that we have with 400 million people using which became with 300 million people using Skype.

If you look at our services in the cloud, it’s allowed us to participate in this commodity price storage and compute environment and upgrade those customers to our value-added services. In fact, 60% of the customers we’ve got on Azure use our value-added services and that number only continues to grow as we add more and more value-added services.

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The other different direction of travel comes around infrastructure and platform as a service, said Turner:

One of the big declarations that [CEO] Satya [Nadella] made was [that] everything that we have internally is going to run on Azure. The ability to make that migration and move has allowed us to truly get a cloud, both Infrastructure as a Service and Platform as a Service, that will scale.

We, as a company, started out with a platform as a service and grew into infrastructure as a service. Most competitors are starting out as Infrastructure as a Service trying to become a Platform as a Service. So we actually have a unique value proposition there to be able to on-ramp and bring people to the future.

The future is really about being able to take advantage of an elastic cloud. You can’t take advantage of an elastic cloud until you get the Platform as a Service. So it’s been very strategic for us and how we both go to market and moving existing infrastructure and how we actually are able to help people rewrite applications to take advantage of the cloud.

It’s also about openness of the platform and about a new willingness to partner with the so-called ‘co-opetition’:

When you talk about a customer who runs SAP on BB2 or SAP on Oracle databases, it’s a simple transition for us to be able to say, let us host those for you in Azure and let us lead the way and be able to take that. That’s been fascinating candidly on being able to get a customer take an interest around that, because they’re very excited about that opportunity and that helps us bridge, in my view it opens up new share of wallet opportunities that we’ve never had before.

When you think about the likes of Salesforce and IBM and Dropbox, Oracle, CISCO and on and on and on, our company today has completely changed how we see the importance of third-party partnerships.

IBM as an example, we will compete with them on Notes for sure, but we have embraced DB2 and WebSphere and we run those seamlessly on to the Azure platform. That’s an important step for us. We’re doing a lot with IBM now as it relates to our Dynamics platform and portfolio. With Salesforce, [we are] again extending the Office platform, getting into great partnerships with them to be able to light up CRM in a unique way, and yet I will complete with them on CRM directly.

The list goes on, but you get the sense and the flavor of the fact that the tone at the top for Microsoft is we will embrace and extend the platform in these very strategic areas and we’re really putting again the agreements along with the words.

It’s wonderful to see us extending the platform with what would generally be very competitive environments and being able to find the right balance between cooperation and competition. It allows customers to really vote by what they buy and to have that freedom of choice and innovation wins in that space.

And what about poor old Windows? Has it been forgotten in this brave new world? Not at all, insisted Turner, it’s alive and well:

Windows 10 will be the best enterprise release we’ve ever done. All of the things that companies love about Windows 7 will be included. In addition to that, it will have some incredible features and functionalities around security, privacy, data protection. It will be thinner, lighter. If you want your UI to look like a desktop and look like Windows 7, you can do that elegantly and seamlessly. If you have a touch device, we can light up the touch experience for you or not, and on and on and on.

The thing about Windows 10 is that it’s very unique from any operating system we’ve ever built and any operating system that exists today. We have actually taken four OSs across our embedded operating system, which is basically for our Internet of Things and all embedded devices, our mobile operating system for our phones and phablets and tablets, as well as our laptop and desktop operating system and our X-Box operating system and built a single kernel across all of those entities. The beautiful thing about that is it allows you to have one platform for drivers and apps.

What does that mean to an enterprise customer? It really means that you’re able to build an application now and have it run across that entire spectrum of devices tailored for the individual device with minimal touch and changes. So now you can write that application, have it actually run across the Internet of Things, have it run across your mobile devices, have it run across your laptop and your desktops and your TV with Xbox, and you have a common kernel within that.

My take

I didn’t mind being 40. It’s only bad if you think of it in terms of being the end of something rather than the start of something else.

With the recent arrival of Nadella, Microsoft’s forties could be an invigorating renewal. Roll on 2015!