NEWS ANALYSIS: Satya Nadella has the cloud-computing expertise and the enterprise roots that Microsoft needs to get back on track in its core markets.
Microsoft needs to win the enterprise cloud wars and Satya Nadella is a good choice for a general. Since its founding, Microsoft has been a company that often missed the big technology shifts (graphical user interfaces, office suites, the Internet), recognized its miss and made up for its gaps in the late innings with winning products.
Now that the company has recognized its stellar financial results masked big gaps in its mobile and cloud products and installed a new boss to get things done, the enterprise chunk of Microsoft’s business has a chance to regain its former verve.
From the start of Amazon Web Services in 2006 through 2013, the other big tech company in Seattle headed by Jeff Bezos essentially had free reign to build an infrastructure as a service business that was innovative, priced by usage and regularly enhanced by lots of new capabilities, essentially capturing the buzz and dollars that once flowed to Microsoft.
Microsoft, IBM and Google all recognized the error of their ways in 2013 and either bought or built their way into a competitive cloud infrastructure business for 2014. Microsoft’s Azure is particularly well suited to those traditional enterprise customers anxious to build hybrid data centers linking their past infrastructures to the cloud future.
What Microsoft needed was a leader to clearly state that Microsoft recognized its past dispersed efforts and needed to put the big bet on the future of cloud driven, software as a service, pay-as-you-go technology.
Nadella's appointment to replace Steve Ballmer accomplished two necessary goals for Microsoft. The company really did need to pick an internal candidate who understands the Byzantine politics of the Redmond, Wash. empire. Bringing in a new player from the outside would promise a fresh infusion of ideas, but turning ideas into actions is what Microsoft needs now.
Furthermore, Nadella is a techie able to see the current trends, convince Bill Gates of the necessity of acting on those trends and develop a strategy that can encompass the enterprise, consumer, mobile and gaming mini-empires at Microsoft.
This is not to say the task will be easy. Microsoft, like IBM and Hewlett-Packard, grew in an era of licensed software, upgrade-based revenues and proprietary customer lock-ins. Those days are ending as CIOs and customers embrace or at least want to know a lot more about open projects including open compute, OpenStack and applications built on meshes of service-delivered applications, pools of data residing both inside and outside a company’s confines and users expecting all applications to have a mobile first orientation.
This open model is all about subscription-based revenues and building your next revenue cycle on vast circles of cooperation versus building proprietary barricades.
Nadella’s selection should give some comfort to those enterprise customers wondering if Microsoft had abandoned its original supporters as the company wandered into online advertising, trying to take on Google with its Bing initiative, video games and, lately, a confusing hardware and Windows mashup. While the Windows 8 and 8.1 versions appear headed for the same derision as Windows Vista, Microsoft Azure and Office 365 have been well thought out and well executed.
Nadella will be the third CEO to lead Microsoft since its founders started building up the company on its personal computer roots in April 1975. Microsoft’s other founder, Paul Allen, recently reached Super Bowl success with the Seattle Seahawks after a 17 year quest.
Now, Allen’s other co-founding partner Bill Gates has a new quarterback at Microsoft with the skills required to bring the company into the next computing era, but I don’t think he has 17 years to make sure his team wins the enterprise super bowl.
Eric Lundquist is a technology analyst at Ziff Brothers Investments, a private investment firm. Lundquist, who was editor-in-chief at eWEEK (previously PC WEEK) from 1996-2008 authored this article for eWEEK to share his thoughts on technology, products and services. No investment advice is offered in this article. All duties are disclaimed. Lundquist works separately for a private investment firm which may at any time invest in companies whose products are discussed in this article and no disclosure of securities transactions will be made.