After months of research, analysis and interviews with various candidates, the special committee to find the gem to replace Steve Ballmer to head Microsoft has finally delivered its verdict! Microsoft has appointed Satya Nadella, a manager in charge of the division that sends software and services via the Internet, as the new CEO. The company founder, Bill Gates, leave the presidency of the board to fill new roles as technology consultant.
The manager, who turns 22 on Microsoft, has led some of the most profitable and fastest growing business, such as Office and server and tools division. During the past seven months, Nadella has served as executive vice president who led Microsoft offers the field of so-called digital cloud. This is a new area for Microsoft, which has traditionally focused on the software installed on personal computers instead of one on remote servers connected to the Internet. Nadella’s group has been growing strongly, though it is still a small part of the actual business of Microsoft.
Analysts expect Nadella to maintain the momentum of the company in the growing field of cloud computing and minimize the negative impact of unprofitable Microsoft consumer hardware forays. His main rivals in cloud computing are Google, Amazon, Salesforce and IBM.
Analysts also believe that Nadella figure of value is safe but the fear of many investors is that Microsoft remains quietly on the right lane and continue being overtaken by other high-tech companies in the segments of social networks, services enterprises, mobile computing and tablets, where they are more innovative than Microsoft.
Declining PC sales
Satya Nadella certainly inherited a group in search of a new life, which still has huge resources. The group generated $27 billion profit in its last fiscal year, has $84 billion cash and still run Windows nine out of ten computers in the world, while Office and Exchange remain the pillars for the company.
But, tablets are increasingly taking on the role of a desktop or notebook computer. Due to lack of market share in the tablet market, Microsoft is not benefitting from it. A Windows computer is no longer needed to use at home or Facebook to find out about the timetable. In addition, many tablets are cheaper, easier to use and easier to use. So Microsoft loses the important revenue from the profitable Windows licenses.
In addition to the pressure from the tablet market Microsoft is also struggling with the reputation of their own operating system. Windows 8 is still not that popular yet like its predecessor Windows 7. The market share of Windows 8 is still below 10% worldwide. Microsoft was hoping that Windows 8 would eliminate the gap between tablet and PC, but the distance is still very large. Windows 8 has been criticized for Modern UI interface centered on the device’s touch. Most Windows users use the mouse and keyboard, Nadella has a tough task ahead to convince users to migrate from a tablet device to Windows devices (in particular Surface devices) or come with innovative solutions in next releases of Windows.
The addition of Bill Gates as the technical advisor to Microsoft might boost the confidence of Windows team. Bill Gates is still very popular with Microsoft employees and investors, as his contribution has enabled the company to dramatically increase profits, thanks to Windows licenses. Today, however, the PC market is in crisis, it is necessary to develop a truly revolutionary product for the mobile industry, a goal not achieved so far with neither Windows Phone nor with the Surface. According to marketing experts, Gates is a visionary as it was Steve Jobs, and thus can provide valuable assistance.
Microsoft Missed the Mobile Computing Era
Nadella says it is critical time for the industry and for Microsoft to ensure that Microsoft thrives in a world where mobile and cloud come first. This involves reinventing itself. While its historical market – PC software – is in crisis, Microsoft must respond to the rise of mobile devices such as smartphones and tablet computers, an area where it has been slow to react.
Meanwhile, its rivals Apple and Google took a big lead. For 2013, the Windows Phone operating system from Microsoft for smartphone displays a small 3.6% market share in the world, behind Google’s Android (78.9%) and Apple iOS (15.5%). Windows Phone 8 has increased quite strongly in 2013 via a smartphone like the Nokia Lumia 520 which has brought millions of units to Nokia, but that is still very small as compared to billions of activated Android devices.
Nadella needs to establish Microsoft as a strong number three, taking market share to Android and iOS. The company will have to impose on the mobile, but it is not everything. Microsoft should play on all fronts – smartphones, tablet, connected object. The acquisition of Nokia last year to $7 billion reflects this awareness. With the Finnish giant, Microsoft acquired a portfolio of patents, as well as expertise in hardware, ergonomics, software and applications.
Microsoft was again slow to start adopting cloud computing. But under the leadership of Nadella, Microsoft has quickly established itself as a major player. He developed cloud computing and created “one of the cloud infrastructure the largest in the world. Microsoft now uses cloud computing on wide range of services such as Bing search engine, online games console, Xbox video games, Office 365 and most importantly Windows Azure.
However, the Redmond company is facing tough competition from market leader like Amazon Web Services, Google, Salesforce and others. The challenge in cloud computing is quickly shifting to implementation vs. core technology development. As such, Nadella’s charter is to effectively sharpen to focus more specifically on integration and delivery, as it needs to be moving forward. Microsoft now needs to allow the cloud computing discussion to move to higher business values, rather than get pulled apart on operating systems and hypervisor compatibility.
Despite this changing environment, the capabilities of Microsoft are still very relevant. Nadella confirmed in the immediate strategy designed by his predecessor to refocus the group on equipment and services, as rival Apple, referring to the tablet surface, the Xbox games or Nokia smartphones. This will be made possible by a growing network of connected devices, computing capacity incredible in the cloud, big data analysis and artificial intelligence.