Bill Gates was recently asked “Are you happy with his [Steve Balmer’s] performance?” He answered, “He & I are two of the most self-critical people you can imagine. There are a lot of amazing things that Steve’s leadership got done with the company last year. Windows 8 is key to the future, the surface computer, Bing (people have seen it is a better search product), Xbox. Is it enough? No, he and I are not satisfied that, in terms of breakthrough “things”, we’re doing everything possible... There are a lot of things like cellphones where we didn’t get out in the lead very early… We did not “miss” cellphones, but the way we went about it didn’t allow us to get the leadership; so it’s clearly a mistake.”
From his words, he believes that Microsoft is focusing on the past, and missing out on the future. There are five main Microsoft divisions, and a “re-allocation” division for adjusting the books.
The core business divisions that make money and have great margins are:
- The Business Division (Office, SharePoint, etc.);
- Windows Division (Windows 8 Pro, Window 8 RT, Window Mobile, etc.);
- Server/Tools Division (Windows Server 2012, SQL Server etc.).
All are bound to a "Windows together" strategy. Only the Server products are growing.
The entertainment and devices division has lost very large amounts before getting a reasonable percent of the gaming console market, only to see most of volume gaming market migrating to mobile devices.
Microsoft has invested $20 billion over the last three years in the online search division for revenues of $8 billion in total over the same period and is now slipped to 5th in the world search rankings.
The current strategy is holding the potential of each division back, and investing far too much is lost causes. The result is frustration for enterprise customers and growing irrelevance for consumers. For example:
- CIOs would like the Servers & Tools to embrace the mobile environment and provide great tools to help them manage it – not try to force Windows 8 or Windows Mobile against business demands;
- Windows Business should release Office Suite to run on iOS & Android tablets before other software takes away that marketplace, and make an estimate $2.5 billion each year;
- SQL Server should implement atomic writes on Linux and double the throughput now, before MySQL becomes the de facto database standard for Linux;
- Intel is probably going to maintain market share in the server market but has little chance in the client market. Microsoft needs to make the necessary platform support changes early and ride the consumer cost curves.
These changes will need new leadership. The comments from Bill Gates are not an endorsement for Steve Balmer.
Action Item: CIOs should demand a change of strategy from Microsoft to manage all mobile devices, and allow great Microsoft software to be run on any platform.
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