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2/5/2014
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Satya Nadella: 6 Must-Do's For Microsoft's New CEO

Where to start as Microsoft's new CEO? Let's examine six priorities for Satya Nadella.

New Microsoft CEO Satya Nadella's ascension comes at a unique and peculiar moment for the 38-year-old company.

On the one hand, Microsoft just posted record revenue, a neat trick considering its hard-to-eclipse history and the PC industry's ongoing decline. It also beat Wall Street estimates for the second consecutive quarter. Given that earnings were driven by the enterprise products Nadella oversaw, his promotion to the top job in Redmond is in many ways a just reward for 22 years of outstanding work.

But it's hard to find a company as rich and successful as Microsoft that is so consistently dogged by doomsday prophesies. Commentators blasted outgoing CEO Steve Ballmer's consumer-oriented strategies in the months leading up to his August retirement announcement, citing the company's irrelevance in the mobile market, embarrassing sales of first-generation Surface products, and myriad objections to Windows 8.

[Nadella's priorities should also be your priorities. See Microsoft's Satya Nadella: Marching Orders For Digital Business.]

Nadella inherits all of these concerns, as well as the disarray of an ongoing company-wide reorg that seeks to replace divided teams and internal politics with a collaborative culture and common vision. At the same time, he must also contend with speculation that Microsoft settled on him only after higher-profile candidates, such as Ford CEO Alan Mulally, dropped out.

As if that weren't daunting enough, he'll have to continue the progress he made as the company's enterprise and cloud chief. As Nadella asserted in his first remarks as CEO, the company's future is in the cloud. Microsoft's Windows and device strategies need attention, but not at the expense of Azure and the online services it supports. These face heated competition from Amazon and Google, among others.

Microsoft CEO Satya Nadella
Microsoft CEO Satya Nadella

Is Nadella up to the task? Here are six goals he must prioritize to get started.

1. Remember how you got here. As a 22-year Microsoft veteran, Nadella has a close relationship with both Bill Gates and Ballmer. It is perhaps too close, if you were among the people hoping Microsoft would select an outsider to defenestrate the Surface line and double down on enterprise products.

Indeed, in his first statements, Nadella made clear that he will pursue Ballmer's "One Microsoft" blueprint, device ambitions and all. But he also repeatedly described a business model grounded in a mobile-first, cloud-first stratagem -- and that should come as no surprise. He's been internally advocating the same ideas for years, often to disruptive effect.

In advancing products such as Windows Azure, Bing, and Xbox Live, Nadella "has made significant innovations around agility," Gartner analyst Merv Adrian told InformationWeek in a phone interview. He noted that Nadella championed iterative releases when Microsoft's status quo still revolved around monolithic updates that arrived every few years.

Nadella has also shown a willingness to break from Microsoft's historically proprietary-minded playbook. Under his leadership, the company's cloud products have become increasingly open, supporting not only Microsoft software and services, but also a wide range of other workloads.

"There have been fewer sacred cows when he is in charge," said Forrester analyst James Staten, who said Nadella overcame internal opposition to push products such as SQL Server into the cloud.

As CEO, Nadella must remember the strategies that have worked for him so far. Ballmer drew the broad outlines of "One Microsoft," but Nadella will be responsible for sketching in the finer details. If those details include his past projects' openness, agility, and irreverence for tradition, Microsoft's new CEO will have taken a step in the right direction.

Still, Nadella could face challenges implementing this attitude across the entire company.

"Microsoft has evolved to be less proprietary over the years," said Gartner analyst David Mitchell Smith in an interview. "But that's easier to do on the

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Michael Endler joined InformationWeek as an associate editor in 2012. He previously worked in talent representation in the entertainment industry, as a freelance copywriter and photojournalist, and as a teacher. Michael earned a BA in English from Stanford University in 2005 ... View Full Bio

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rradina
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rradina,
User Rank: Ninja
2/7/2014 | 12:32:36 PM
Re: 500 lb gorilla in the room
Microsoft is already at risk on the client side.  We've been here before.  I lived through the PC revolution and all the naysayers who said "real work" gets done on the mainframe or minicomputer (i.e. green screen).  For those that say "real work" isn't done on the iPad, hogwash.  It's a human interface problem, not the fact that "real work" cannot be done on the iPad.  Someone sells a POS system for the iPad -- no, not just a simple Square payment device, a fully grown POS.  Sure, it sticks an iPad in a frame attached to a cash drawer but that's the "human interface" issue.  The iPad Air is dangerously close enough to having the power to do all that a laptop does.  The only difference is the human interface and that's easily solved.  Many companies now develop "mobile first" and guess what's first ... the iPad.

Regarding the enterprise, most folks could care less what runs HTTP JSON Web Services.  Windows, Linux, Unix, Mainframe CICS, AS400.  The only thing that matters is does it work and what does it cost.

Databases -- SQL Server has legs but in 10 years, will we care what the RDBMS "service" is that we use?

E-mail -- Exchange has legs but in 10 years, do we care whether or not our tablet e-mail/calendar app connects to Google, Yahoo, Lotus Notes, Exchange or Outlook.com?

Microsoft's enterprise data center penetration came from everyone using their client and the subsequent realization that the client did more and was easier to manage if they combined it with other MS products.  By owning the client and the server, MS has been extremely successful.  They may have already lost the client which allows others to dictate policy to server room.  Customers and staff want their stuff to work.  They don't care what it takes to make it work.

If Apple suddenly shifted their iPad Exchange compatibilities, would folks get rid of their iPad, get rid of Exchange or look for an app that made it work?  It's pretty safe to say that they are not going to get rid of the iPad when other LOB apps only work with the iPad.  They'll probably find an app.  However, if that app works better with Google, you see where this goes...  This same logic exists for why Windows has legs.  So many LOB apps require Windows.  Is there a tipping point at which many of those apps are rewritten for the iPad?  Right now iPad uses Citrix to access desktop capabilities but if they can run those capabilities locally, why do they need to license all that Microsoft stuff?

Microsoft will lose their competitive edge if they lose the end-customer to other devices.  They have to win it back or at least level the playing field by retaining a lot of it.  Otherwise they risk becoming similar to IBM.  However, IBM was primarily a hardware company.  Microsoft is primarily a software company.
petey
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petey,
User Rank: Strategist
2/7/2014 | 8:47:38 AM
Re: 500 lb gorilla in the room
With all due respect, won't happen. If open source was going to kill MS it would have already happened. MS biggest concern going forward is growing profitably. They are addressing this by investing in several areas--phones, cloud, tabs with games being xtra. They don't have to dominate any of these areas to be successful. They just need to execute to plan.
rradina
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rradina,
User Rank: Ninja
2/6/2014 | 7:51:23 PM
Re: 500 lb gorilla in the room
Services yes, licensing software, no.  Software is headed for open source.  Open source platforms and middleware are good enough and it's becoming harder to justify big annual license fees.  However, selling services backed by closed source still works since the costs are baked in to the overall cost...as long as you are reasonably competitive with others who sell similar services backed by open source.  Likewise Office 365 is the future too but eventually competitors might be good enough to drive margins down ... to the point where it might not be feasible to cover the closed source costs.  The same could happen to the other services.  That's why they are trying to get into devices.  They are tangible and will never be completely free like where other software might be headed.  If you can differentiate the software and services on your own devices, that might be enough to keep reasonable margins.

Unlike Caterpillar, I don't think MS can just keep improving office or Windows.  At some poinnt there won't be any margin because of the low barrier to entry by competitors who can start with OSS alternatives and build a competitive service with minimal cost.  Because software is virtual, there's no expensive assembly line and manufacturing processes to duplicate.  Billions can use the same source for free.
rradina
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rradina,
User Rank: Ninja
2/6/2014 | 11:12:21 AM
Re: Many good suggestions
I agree.  Any play for BlackBerry should be based on the value potential patents that might be useful to battle rivals vs. its current clientele.
petey
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petey,
User Rank: Strategist
2/5/2014 | 10:26:51 PM
500 lb gorilla in the room
His most important task is to keep the financial engine running smoothly. If this guy was the force behind their cloud effort than he knows exactly how to accomplish this. The future is not the next Facebook. There is no next Microsoft. The future is steadily increasing revenue by executing the plan. Keep doing the things you are doing profitably. Caterpillar does not reinvent earthmoving, they continue to make using their equipment more profitable. Don't do what you don't do and play to your strengths.
Thomas Claburn
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Thomas Claburn,
User Rank: Author
2/5/2014 | 4:51:19 PM
Re: Mcirosoft is a legacy consumer company
>I agree that getting Office for iPad out quickly would be a good move by Nadella -- and an important message to his mobile teams.

Apple is sure to welcome 30% of the Office for iOS revenue stream.
rradina
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rradina,
User Rank: Ninja
2/5/2014 | 3:01:13 PM
Make Sure MS Devices Work With MS Stuff
As a company with a huge footprint in enterprises, I find it baffling that their "devices and strategy" devices are third class citizens to the enterprise.  Try to get a Microsoft device to work with Exchange.  Try the same with a Windows tablet.  Although the iPhone has been capable of this since 2008 (3Gs in 2009 if device-level encryption is required), last fall (2013!) a co-worker tried to get a Windows Phone sync with his corporate Exchange server.  It didn't meet the EAS policies.  Apparently there's some bug that's fixed in a WP8 October 2013 update but his carrier still hasn't made it available (in Feb 2014!).  Similar problems exist for Windows tablets.  They might support all the EAS policies but they aren't listed as an "approved" device.  Yet the iPad works fine.  

Would Larry Ellison ever permit SQL Server to run PeopleSoft better than Oracle's own RDBMS?

If the competition's devices work with your enterprise products better than your devices, that should be job one.
WKash
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WKash,
User Rank: Author
2/5/2014 | 2:10:27 PM
BlackBerry suggestions
Interesting suggestion about Microsoft buying BlackBerry, but while the Defense Department is sticking with BlackBerry's for now, because of its enterprise-level security controls, I wouldn't count on other federal agencies to step in and insist on using BlackBerry's -- especially given how fluid the mobile market has become. Clearly Nardella's charge will be to figure out the best way to deliver Microsoft's many enterprise services over mobile devices.  Bagging BlackBerry seems like a short-term answer to specialized market.

 
Laurianne
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Laurianne,
User Rank: Author
2/5/2014 | 2:00:30 PM
Re: Mcirosoft is a legacy consumer company
I agree that getting Office for iPad out quickly would be a good move by Nadella -- and an important message to his mobile teams.
cbabcock
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cbabcock,
User Rank: Strategist
2/5/2014 | 1:53:54 PM
Mcirosoft is a legacy consumer company
Excellent dfiscussion, Michael. Microsoft has evolved away from being primarily a consumer company and is now more of a systems company--Windows Server/System Center/Azure Cloud. That explains the record revenues, while getting beaten up in the press. Nadella needs to capitalize on being a legacy consumer company and get Office onto the iPad, Withholding it in hopes of selling Microsoft's own tablet is dumb. If you remember, Bill Gates put Excel on the Macintosh before the Windows PC and made a success of both. By withholding, Microsoft is in the position of Word Perfect and Lotus 123 as they withheld Windows versions because they didn't want their customers adopting the new operating system before WordPerfect and Lotus were ready. Microsoft beat them with Word and Excel as they dug in their heels. We know how that turned out.
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