Dec 092014
 
Satya_Nadella_Microsoft_CEO_Azure_Cloud_onstage_Page

“Productivity is our life blood,” says John Case, Microsoft’s Corporate VP for the company’s Office product line. “It’s part of the company that we say is our mission.”

Case was speaking at a media briefing ahead of Microsoft’s launch of their Australian Cloud Solution Provider program for resellers with the company making the case for integrators and IT support businesses to sell the Microsoft Cloud Services.

For Microsoft this is part of the evolution from the 1990s “PC on every desk” strategy to a mobile and cloud first service.

This shift doesn’t come without pain for Microsoft and it’s resellers, the cloud is a fiendishly competitive space with Amazon regularly dropping prices and Google steadily eating into the productivity suite market.

Making matters worse for Microsoft are that Google are moving into their hosted server space with the announcement that Google’s Cloud Platform now supports Microsoft Server.

Case though is sanguine though about the threats from Google, particularly the increased commissions being paid to resellers which will only put more pressure on Microsoft as resellers consider the options.

Probably the toughest part of the shift for Microsoft are the reduced margins – although for resellers the change is far more wrenching as the profits from cloud services are far lower than installing servers.

For Microsoft the key to success in the cloud depends upon the confidence of customers; security and trust are going to make and break all cloud services, something that Case acknowledges.

Ultimately though Case sees Microsoft’s network of resellers and partners as being the company’s best defense against Google and the shift to the cloud. Whether that network is strong enough to overcome a structural shift in the market place remains to be seen.

Productivity may be the lifeblood of Microsoft’s business but as margins erode, it may be that that market is not longer lucrative enough to sustain a $400 billion dollar business. Microsoft’s fight for survival is on in the cloud.

Nov 112014
 
Microsoft CEO Satya Nadella

The decision of Microsoft to offer its Office tablet apps for free last week has had the desired effect with them rocketing to the top of the charts as people enthusiastically grab them.

Microsoft’s decision pretty well locks its resellers into the loss leading strategy the company flagged last week in China, with the tablet apps available for free its hard for retailers and integrators to be charging for the desktop version.

That loss leader strategy has been further laid out by CEO Satya Nadella at a function in London yesterday where he described their cloud and mobile first strategy, something he also discussed at a briefing to ‘a small gathering of journalists’ last week.

Nadella’s vision isn’t really anything new; it differs from Ballmer’s ‘devices and services’ strategy but the thrust of the business was always going to be on cloud services and the company’s Azure services regardless of any conceits around tablets or professional offerings.

Of the three key areas Nadella identifies — Windows, Office 365, and Azure — two of them are problematic; the Office 365 for reasons already mentioned and the Windows product line.

The ‘Windows everywhere’ strategy, which also happens one of Ballmer’s earlier initiatives, is doomed as the operating system is not suitable for smartphones or lightweight internet of things devices.

Even if Windows was successful on smartphones or could be successfully ported to low powered smart devices, the margins are tiny compared to the traditional desktop market that was so profitable for Microsoft in the past.

All of which brings Microsoft back to Azure; it’s clear the cloud service is the future of the company but the margins are dire except for some relatively niche areas like collaboration software.

Mantras about ‘productivity’ count for nothing as every software and cloud computing company cater for the B2B market is delivering a service that claims to improve customers’ productivity. That Office is declining as a profit centre only makes things harder for the company.

If anything, Nadella’s discussions illustrate the company is still casting around for the next big profit centre. As the Windows and Office franchises decline, time may start to run out for the current management just as it eventually did for Ballmer.

Giving away Office apps may lock some users into the 365 service and could prove moderately profitable, but last week’s moves indicates a much smaller future For Microsoft.

Nov 052014
 
In 2001 Microsoft released Windows XP

Two of the key indicators that your business model, and industry, is being threatened is declining sales and margins.

A good example of this is the story Microsoft are urging their Chinese resellers to use Office 365 as a loss leader to get their foot in the door with customers.

Not so long ago Microsoft Office was a huge cash generator for the business; now it’s a loss leader.

If anything this shows how the margins in the software business are being eroded by cloud computing. Businesses like Microsoft and its resellers that have grown fat on big margins now have to evolve to a very different marketplace.

This means a very different way of doing business, a different way of delivering products and much more streamlined operation that doesn’t need battalions of highly paid salespeople and managers. In fact those managers and salespeople become a very expensive legacy item in a cloud computing world.

Microsoft are by no means the only company to find themselves giving away once profitable products in order to maintain their market position but when that starts happening it’s clear the time has arrived to find a new line of business.

In Microsoft’s case that’s been a pivot to the cloud, however the company will never find things as lucrative as the good old days when software was sold in boxes or licensed out with impossible to read agreements.

Funnily, the same thing is happening in the telcommunications world. It’s an interesting time to be in business.

Oct 292014
 
Microsoft_Office_2010_launch

One of the great market battles of the PC era was the fight between the ‘best of breed’ software designed to do specific jobs well — Lotus 123, WordPerfect, and Harvard Graphics — versus the bundled ‘suites’ led by Microsoft Office.

Bundled suites of programs offered a common platform and cheaper price over buying products individually.

In the case of Microsoft Office, it also helped that the software giant was aggressive in undercutting the market and leveraging the deals it had made with hardware vendors and system integrators.

The winner of that battle was Microsoft as it turned out customers preferred the cheaper price points of the bundled packages and the common software platform made it easier to share data across the applications.

In the cloud computing field that fight is happening again as Zach Nelson, CEO of Netsuite, describes; “I think the next battle is going to be the same battle that happened in the client-server world. Is it the best of breed cloud apps or is it the suite?”

Nelson believes the suite vision will win out, “the suite is going to win again for exactly the same reasons why the suite won in the client-server world — it’s very hard to synchronise data between applications.”

Given Netsuite’s business, as its name suggests, is in providing a suite of software it’s no surprising that Nelson believes their way of doing business will prevail. Those providing ‘best of breed’ stand alone cloud applications naturally disagree.

Chris Ridd, Australian General Manager of accounting service Xero, disagrees with Nelson’s view. “With cloud and open APIs you have the holy grail of interoperability,” Ridd says. “In the 1990s the open systems were too early and didn’t work as well as they do today.”

Ridd also points out that Xero has over 350 add on services, ” I don’t think any suite can deliver that” he says.

History is on Nelson’s side but it may be that in this case history doesn’t repeat as the technology has moved along and now stand alone apps are what the market wants.

Time will tell although its unlikely whichever prevails will have anything like the success and market domination of Microsoft Office during the PC era.

Oct 142014
 
Salesforce-no-software-cloud-services

Last week we looked at the way we organise information is changing in the face of exploding data volumes.

One of the consequences of the data explosion is that structured databases are beginning to struggle as information sources and business needs are becoming more diverse.

Yesterday, cloud Customer Relationship Management company Salesforce announced their Wave analytics product which the company says “with its schema-free architecture, data no longer has to be pre-sorted or organized in some narrowly defined manner before it can be analyzed.”

The end of the database era

Salesforce’s move is interesting for a company whose success has been based upon structured databases to run its CRM and other services.

What the company’s move could be interpreted that the age of the database is over; that organising data is a fool’s errand as it becomes harder to sort and categorise the information pouring into businesses.

This was the theme at the previous week’s Splunk conference in Las Vegas where the company’s CTO, Todd Papaioannou, told Decoding The New Economy how the world is moving away from structured databases.

“We’re going through a sea change in the analytics space,” Papaioannou said. “What characterised the last thirty years was what I call the ‘schema write’ era; big databases that have a schema where you have to load the data into that schema then transform before you can ask questions of it.”

Breaking the structure

The key with programs like Salesforce and other database driven products like SAP and Oracle is that both the data structures — the schema — and the questions are largely pre-configured. With the unstructured model it’s Google-like queries on the stored data that matters.

For companies like Salesforce this means a fundamental change to their underlying product and possibly their business models as well.

It may well be that Salesforce, a company that defined itself by the ‘No Software’ slogan is now being challenged by the No Database era.

Paul travelled to San Francisco and Las Vegas as a guest of Salesforce and Splunk respectively

Oct 012014
 
Windows-10-microsoft-Tech-Preview_Start-menu-500x281

A few days ago I asked if Windows 9 would be Microsoft’s last desktop operating system.

Yesterday the company partially answered the question by announcing the next version will be named Windows 10 which conveniently skips version nine.

Skipping around numbers isn’t unusual for Microsoft, most famously Word skipped from version two to six just to overtake competitor WordPerfect in the late 1990s.

Windows itself has gone 3.0, 3.1, 3.11, 95, 98, ME, XP, Vista, 7 and 8 in the past — that’s without mentioning the Windows NT family — so jumping to Windows 10 doesn’t detract from any logic in the Microsoft’s naming system.

The key point from Microsoft’s announcement is the business focus along with the continuation of Windows 8’s unified experience across PCs, smartphones and games consoles that has proved less than successful.

One area where Microsoft has conceded defeat is in the battle for a Start button with Windows 10, one of the biggest irritants upgrading users found with the new operating system and one of the reasons why many users chose the older Windows 7 software when buying a PC.

How the Start button will work on Windows Phone remains to be seen although Microsoft seem committed to the ‘One Windows’ vision despite its technological and marketplace difficulties.

Another interesting development with the new product is the Windows Insider Program, billed as an ‘open collaborative development effort to change the way Windows is built and delivered’.

Back in the old days this was called a beta program where testers were invited to try out new software to test the product and fine tune user experiences. At least it shows Microsoft are embracing the language, if not the spirit, of the collaborative economy.

Microsoft have released a YouTube video Introducing Windows 10 with Windows Vice President Joe Belfiore outlining the features of the new system.

Whether Windows 10 is enough to shore up the declining fortunes of the company’s Windows division and Joe’s job will be a key question for analysts and industry watchers over the next three years.

Sep 162014
 
mojang-and-the-x-box-one

Yesterday Microsoft confirmed the rumours that it would buy Minecraft developer Mojang for 2.5 billion dollars.

Following the announcement, Mojang founder Markus Persson — aka Notch — wrote a touching blog post on his leaving the company he founded.

The business had become too big and the demands of Minecraft’s legion of fans were taking their toll; it was time for Persson to move on to keep his sanity.

“If I ever accidentally make something that seems to gain traction, I’ll probably abandon it immediately.”

For all the hubris we hear from technology company founders and CEOs, it’s those like Persson who probably will end up making the most difference to the world.