The Nokia Acquisition

“Two Turkeys do not make an Eagle” – Vic Gudotra, Google Exec

The words of Vic Gudotra, a former Microsoft exec, now Google exec, upon hearing Nokia had selected the Microsoft Windows Phone OS over Google’s Android platform.  It makes for a nice quote and though it may seem a bit harsh given both companies performance of late in the mobile marketplace, for the interim it is pretty accurate.  With that being said this was something that had been rumoured for a long time,  It is interesting timing, given Ballmer’s retirement announcement and the massive re-org that Microsoft is going through. Ina Fried wrote a pretty interesting article on how the acquisition came to be (you can read here).   Nokia was Microsoft’s signature customer for the WIndows Phone OS, but it was never a guaranteed success.  During the entire time of this current agreement, Nokia was bleeding cash with every earnings report.  Market share was improving but it seemed very hard to sustain any momentum, when you have competitors like Google, Apple and Samsung not just increasing market share but owning the media every time they even whisper. No matter how quiet. Looking at what this relationship is and could be, is fodder for a lot of conversations and observations, moving forward this will be fun to watch.

One thing I have hated, let me please put in bold, hated is Microsoft saying there needs to be a third eco system. When Ballmer spoke about this a few years ago I was in shock, what happened to my Microsoft?  I never remembered this kind of talk when we were promoting Windows.  But as in all things in life, things change.  Even former Netscape founder Marc Andreesen says a third eco-system for mobility is necessary for the industry.  He is cheering for Microsoft.  Competition creates strange bedfellows.    Because of missteps and it reliance on its legacy, Microsoft more or less backed itself into this corner.  This ecosystem is first and foremost the developer, what Microsoft would call its birth right.  That is no longer the case as that has been eroding for years as technology advances and new and viable platforms come to market.  I have spent 20 years talking to, working with and selling to developers.  All the talk about better productivity etc… is nice but at the end of the day developers go where the money takes them.  This is an area that both Microsoft and Nokia have struggled, by coming together this could help simplify the message and opportunity for developers.

As Microsoft transforms itself into a device manufacturer the acquisition of a device manufacturer was going to be necessary.  It is one thing to say, “we are going to make devices”, it is another thing to figure out how to construct a supply chain to do it.  To hire the talent to design cool devices.  To make a device.  All skills that Microsoft was just learning.  This was an acquisition driven by necessity, by two companies struggling to compete in a space that was running away from them.  In reading Ina Fried’s article the point is made executives at both companies were becoming increasingly nervous about the fact that the Nokia Windows Phone was not creating buzz and grabbing significant market share.  This on top of the fact that unlike Microsoft earning’s Nokia was bleeding cash, Nokia does not have a Windows and Office business to hold it up.  The bigger concern was how long could hold out before it could no longer remain a viable entity.  It has not been brought up in articles I have read but the knowledge of the device supply chain is very valuable to Microsoft and unlike Nokia for the foreseeable future Microsoft has the cash to keep it afloat.

Long term it will be interesting to see how Microsoft’s relationships with its OEM’s plays out.  The OEM model that Microsoft built out under Joachim Kempin is legendary and has made billions for Microsoft and its OEM partners (Compaq, Gateway, Dell, Sony, HP, Acer, IBM, HTC, Samsung, LG and many more).  The big question is how far will Microsoft have to go.   As of today Microsoft is in  the business of creating new tablets and smartphones  Will they have to make PC’s?  Not in the foreseeable future, but those partners are being challenged as well as the PC market shrinks, what are they to do?   They will have to look at tablets, but he OS of choice by no means will be a guaranteed Windows device, especially as Android devices have an increasingly large share of the market.  The OEM’s I am sure are a bit put out as they look to new markets Tablets were going to play a big part,but  now I would say that they would be wise to hedge their bets by investing in alternate platforms like Android and Chrome. (many are already doing this).

This is the big gamble by Microsoft, it is done dipping its toes in the water with hardware project sand by acquiring a big piece of Nokia, is plunging into the icy depths in search of a bigger and brighter future.  The long run this looks like a great acquisition, but the bigger challenge will be managing the short run, the next 1-2 years.  The market will continue to move forward rapidly and is not waiting for Microsoft and Nokia to get their act together.  Approval of the deal will not be final until Q1 of 2014.  Then there is the  challenge of integrating 32,000 new employees into Microsoft.  This again will take some time.  The worry is if it takes 2-3 years to get this up and running how far will the market have moved ahead?

Will these turkey’s fly?  Will they become a great eagle?  Why are we being so harsh on the turkey?  It is very early, but one thing is clear is that if Microsoft is to become a device and services company it needed to make this acquisition.  Rather than working as separate companies, as partners, but with similar but different agendas this brings them together to work as one and set a mutual agenda.  It will also bring their different skill sets together and hopefully allow them to benefit through greater economies of scale and basic sharing of IP and best practices..  It is difficult to make these type of deals not because you want to but because you have to.  Ina’s article was very interesting in the fact that despite the situation there was a lot of executive posturing, but in the end  it had to happen otherwise it would be colossal failure by both parties. Can two turkey’s make an eagle?  We are about to find out.

Good Night and Good Luck

Hans Henrik Hoffmann September 10. 2013

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End of an Era as Ballmer steps down

I guess there was no way I could not comment on the latest announcement. It was a big one that surprised and gratified a great many people. Wall Street certainly liked it and to be frank, I think a great many Microsoft employees welcomed it.  On August 22nd Microsoft CEO Steve Ballmer announced he would be retiring within 12 months or once a successor had been chosen.  It is a big day at Microsoft after many years of floundering, the guy who has been at the top since 2000 is stepping aside.  I have waited a week or so to get my thoughts around this change, as well as read as many articles as I can on what the post Ballmer Microsoft might look like. But as we look back and look forward it may be a case of be careful what you ask for as whoever takes the reigns will have a daunting task before them.

I was once told back in the day that Microsoft had a problem called “a cult of personality” .  The cult being Ballmer and Gates.  Not long after Bill announced that he was stepping down as CEO.  Bill envisioned the future and the role Microsoft would play and seemed to succeed at everything until he stepped down..  The company led by Steve would go through its first big transformation.  Moving from the mindset of a small entrepreneurial company to the mindset of a big American corporation.  It was new territory, a small tech company just 5 years before, now a Fortune 500 company.  Ballmer chose to follow then american business idol, Jack Welch to build the corporate Microsoft.   But everyone had faith in Steve, so it was not questioned. Throughout this process, even though Bill had removed himself from day-to-day operations, the company was still being led by those two friends from Harvard.   If you think about up until the day Ballmer departs the doors of Microsoft, the company has known no other leaders than Gates and Ballmer.  It has been and still is ingrained into the DNA of the culture of Microsoft.  Until the past five or six years it was not questioned.  Every shift, every great memo, every huge press release contained either Steve or Bill or both.

If you look at the numbers, it would be hard to call Ballmer’s reign anything but a success.  The company now generates over $70 billion in revenues.  It has nearly 100,000 employees and 66,000 contractors.  It has succeeded in the enterprise with the Windows Server line(Active Directory technology), SQL Server, Sharepoint Server, etc…  Windows and Office continue to reign supreme over the desktop world. Xbox has risen to be one  of the leading game consoles. The one big exception in the numbers would be the flat performance of Microsoft stock.  Where he gets criticized is the big misses, missing the mobile phone market and blundering on the tablet, which has led to the ultimate crime losing the developer.  As much as they embraced the internet, even when I was there, I don’t think that Microsoft under Ballmer, fully understood the internet, thus their tardiness in moving to the cloud.  Rather than move forward they looked backward and tried to protect their existing market share.

Since announcing his resignation Ballmer has been very critical of himself over the launch of Windows Vista.  Calling the release his biggest mistake.  I guess in saying that it validates one of my biggest disagreements with  Steve.  Was Vista a bad release of Windows? Yes.  Was it one of the most anticipated and delayed products ever? Yes.  Did we have to go through multiple execs to ship it?  Yes.  But I guess in calling out a product as his greatest failing, that to me, is the issue.  It is a mindset of the legacy of Microsoft.  Shipping product.  In my opinion the biggest mistake was not seeing the shift to a mobile world and realizing both the products and experiences that would be needed for Microsoft to fully participate in “the mobile future”.    With the announcement of the acquisition of Nokia’s Devices and Services division it shows Microsoft dramatically trying to transform itself to meet the challenges of this new age.  That will be the subject of another post.

There are certainly questions with the timing of the departure.  Microsoft has just announced the largest re-org in its history  A change that whatever the outcome will redefine the company, for better or for worse.  Followed by Steve’s announcement and then the acquisition of Nokia.  But if you start to think about it, all these changes coming at once does not happen randomly.  Microsoft is on the process of making big bets.  Companies in tech can rise very quickly, but what is less documented but equally true is they can fall.  For every Google there is a Yahoo, for a Facebook a MySpace, for a Microsoft a WordPerfect, Lotus 123, Novell etc..But it is curious that Ballmer would announce the largest re-org in history and  then step down so suddenly. Whomever succeeds him will need to be bought in on the re-org, but then it seems all these recent big announcements are connected.

When he steps down who will lead?  Given the acquisition of Nokia and the return of Stephen Elop, the early odds makers have Elop being the next CEO of Microsoft.  On the surface it makes sense.  If as I stated above, we believe all these events are connected, than Elop would likely have discussed these changes well in advance of the re-org announcement and the purchase of Nokia, plus he is ex-Microsoft.  At a time where the company craves a dynamic leader, if Elop is chosen it would be like Pope Benedict XVI succeeding Pope John Paul II.  A conservative, but safe choice.  Microsoft employees will await there Pope Francis.  I hope Elop does not do another “burning platform” memo, that would be a bad sign for the company.  The good news is Stephen is a confident and eloquest speaker, He led the Microsft Office division, which is no small task and wil give him some credibility to start. That should get him through the first six months should he assume the role, but after that hunting season will be open.

Some of the other bets and names that have been thrown about seem a bit far-fetched.  One was Kevin Turner, current COO. I dismiss this one simply because this would need Bill Gates blessing.  I cannot imagine a scenario where Bill Gates says, “Let the Wal-Mart guy have a shot”. J Allard, though a popular guy never ran an org close to the size of Microsoft, he was not even the number one guy in XBox.  Steve Sinofsky is interesting, but he was a somewhat polarizing figure while at MS so I don’t see those one happening.  A lot of names come from the outside but usually with Microsoft ties: Kevin Johnson, Bob Muglia, Vic Gudotra and Paul Maritz.  Of the four Paul Maritz is the most visionary and has a track record of success at VMware.  I think Bill likes him as well but he would need convincing to take on such a daunting task.  His downside would be he is not a consumer guy as he has always focused on big enterprise challenge.  Vic, now at Google and doing very well, would have the same challenge as J Allard.  Kevin and Bob I just don’t see, though I respected them both when they were at Microsoft, it would seem late in their careers to take over this role.  I am a bit surprised tha no one was groomed for this role, it seems a rather sudden departure.

Of all the aforementioned candidates in my mind the only one worth considering, would be Paul Maritz.   Maybe more importantly Is the fact that there is no leader I have heard of that inspires in me a dramatic shift at Microsoft.  There in lies the challenge; Whoever takes over will not have the knowledge of how Microsoft works even remotely close to Steve and Bill.  When the change happens it will be seismic as in Microsoft’s entire history has always been about the “Cult” of Bill and Steve, and legacies have a way of enduring beyond their expiration date.  For someone new to come in and say “I lead this company” will not be an easy things. This is however both the exciting and frightening thing about change, you do not know what to expect.  For many at Microsoft it will prove both challenging and frustrating.

Steve, loved the company, as he said many times.  His legacy will be felt for many years to come..  During his tenure there were certainly times where he achieved great highs and seemed to walk on water.  Those were long ago.  More recently he was criticized for lack of vision and relying on Microsoft’s legacy and not its future.  Only time will determine what his legacy will be and how history will judge him.  The future for Microsoft is now uncertain.  For many who wanted to see this happen, the question will remain, “now what?”.    If you polled a hundred people about what Microsoft should now do, I feel confident you would get a hundred different answers.  You got your wish, now be careful of what you wished for.  Uncertainty is a future without confidence.

Good Night and Good Luck

Hans Henrik Hoffmann September 6, 2013

Microsoft’s ultimate threat – Google

When I first joined Microsoft in 1991 we were a company rapidly ascending to the top of the mountain.  We were a company trying to fulfill our destiny, “A PC on every desktop and in every home”.  To climb that mountain required laser focus.  To have people day in and day out committed to accomplishing that goal.  To do this required Microsoft to build a  great set of products.  It also required focus on what was happening  in the industry.  We needed to know at all times what our competition was doing and how it was impacting the market. The potential threat to the Microsoft bottom line.  This was driven into every employee  from the top, from the top man, the founder and chairman, Bill Gates.  Time and time again he would hammer home his fear that a company that was younger and hungrier would come along and clean Microsoft’s clock.  That Microsoft would fall behind in the game.  Every employee understood that and worked hard to prevent it.  But time and growth can be cruel lessons of missed opportunities and so what Bill feared has happened.  It did not happen overnight, but slowly and surely it happened.  A silicon valley sweet heart, named Google came along and slowly they have increasingly encroached on everything Microsoft thought was their birthright.

When Novell CEO Eric Schmidt announced he was leaving his post in Provo, UT.  It was in many ways welcomed.  Eric was well known from his days at Sun Microsystems.  Eric was highly regarded, it was actually more  surprising he took the helm at Novell to begin with as they were rapidly sinking at the time he took over. During a meeting with Bill Gates, while he was commenting on Novell, he felt they were in very capable hands with Eric at the helm.  Google was known, but nowhere near where it has ended up.    In tech circles it was viewed as a interesting and exciting move.  Schmidt was a talented guy who was leaving a dying company to go somewhere where their was a future.  It was good to see him land somewhere worthy of his talents.  He would also serve as a capable mentor to Google founders, Larry Page and Sergey Brin. There were a lot of search engine players in those days (Yahoo, Alta Vista, Lycos etc..).

Google would rise as they changed the computing paradigm with the web search engine.  It was this new business revenue model Ray Ozzie would reference in his landmark memo while he was at Microsoft.  Google was using their incredible ad revenues from search to fuel software development in other areas, among them Google Docs.  This should have served as a great warning to Microsoft executives, but instead they seemed to just read the search revenue piece and seemed to miss what else was going on and focused on the obvious.  They focused on search, not heeding Ray’s words about the funding “other stuff”.  Those being Google Maps, Android, Google Docs, Google Cloud, Robotics, Google Glass  etc..In the end what we  got was Bing.  Google has used search to be a disruptive technology company, one that changes the playing field and in doing so change the balance of power. To simply follow their lead is to risk certain death.

Microsoft has released with some success their cloud based version of Microsoft Office with Office 365 .  In the meantime Google Docs has slowly plodded along improving its feature sets and capturing the low hanging fruit. start ups who do not want to pay a few for Microsoft Office.  They are also starting to make headway into larger enterprise accounts.  With a simple flat fee structure of $50 per desktop, enterprises are talking notice and either considering Google Docs or going to Google Docs.  Companies like Office Depot, Roche and Dillards have already signed on.  Keep in mind if Google takes 10% market share that is over $1 billion to Microsoft bottom line that they lose.  It is no wonder Kevin Turner issued a ultimatum of no losing to Google Docs.  It will be interesting to see how that goes.  Corporate CIO’s would be foolish not to consider Google Docs.  It is the first true contender to Microsoft with a sales force and money to back product development.  Worst case for a CIO is they knock the price of MS Office down.  I cannot think of an instance these days where a CIO is not being asked to do more with less.

The Chrome book has been an interesting development.  It really takes us back to the early days of the internet and what Netscape founder Marc Andreessen said about Windows, “Netscape will soon reduce Windows to a poorly debugged set of device drivers”.  The problem was at the time was not the vision necessarily, but launching an attack against a competitor who had billions when Netscape only had millions.  A second point was ubiquitous bandwidth was not available yet.  Most people at the time did not have DSL services let alone wi-fi in their house.    It was still  28.8kb modem.  Fast forward to today and a couple of developments have changed that has created a new landscape.  The first is we are always connected.  It does not matter if we are in our favorite cafe, at home, at work or at the beach.  We can access the web, we can call our friends, text them, post what we are doing to Facebook, tell people what we are thinking via Twitter.  What device do we use?  Laptop? Tablet? Smartphone? Chromebook?  It is about price and convenience.  The second is Microsoft has decided to compete against its traditional OEM partners with the  launch of SurfaceRT and SurfacePro lines of hardware.  One thing Netscape struggled with in their day was access to Microsoft’s OEM channel.  Give these recent strategic decisions by Microsoft, Google will not find it as hard to gain access to this channel.  They will arrive in a much stronger negotiating position.

Android which is a huge success poses two problems: 1) The mobile OS 2) The developer.  On the first front projections are that in 2013 800 million devices will ship with Android.  How many will ship with Windows 8?  Microsoft will not catch this juggernaut anytime soon.  The mistakes made by Microsoft are many in mobility.  They got hit by Apple’s iPhone, were slow to react, watched as Google ran past them, and fundamentally did not understand what was happening in the market place.  Google in the meantime has been laser focused on building a Android ecosystem that rivals that of Apple.  They have more importantly focused on consumers mobile lifestyles,  To the point, as far as competition goes in the mobility space consumers and industry analysts do not think about Microsoft.  I sometimes wonder if my old friends in Redmond realize what an insult that last statement was.  There was a time everybody thought of Microsoft when competing in a market.  Now Microsoft is just trying to get noticed.  The biggest announcement over the past couple of years has been their exclusive partnership with Nokia, another fading star.  As Google Exec, Vic Gudotra said when this partnership was announced, “Two turkeys does not make an eagle”.  It kind of sums up Microsoft mobility.

On the developer front, Google is a huge hit with the dev community.  Google’s premier dev conference, Google I/O sold out in under an hour this year.  Last year it was twenty minutes.  As I wrote in last July’s blog post “Google I/O and the giveaways“, Google knows how to treat developers.  Like royalty.  They have the advantage of being an internet company who knows that the internet is the development platform.  That sounds obvious but it seems some are slow to learn. Microsoft is still intent on promoting and protecting its “Windows Paradise”.  That was the refrain used back in the day when Microsoft was competing against Netscape, but tat world no longer exists.  The numbers I have heard around applications written for Windows 8 for that launch are horrifying – less than 5000.  The events Microsoft holds for developer are designed to reduce costs and treat developers more like welfare recipients.  As noted Google treats developers with all the care and feeding they could possibly want and it is noticed in the community.

Then there is the area of taking risks.  Despite the billions of dollars spent by Microsoft on Research and Development, there seems little to show for it.  In a group that is funded to take risks it seems little are being taken.  Google seems to be doing nutty kinds of thing all over the place.  At South by Southwest they showed a prototype of the digital shoe.  Their Google Glass, though expensive seems to be getting lots of press.  In the bay area you can see Google’s experiments with robotic vehicles.  Google has ventured into the world of wi-fi attempting to connect cities via wi-fi service, in such cities as Kansas City.  Will any of these tie into Google’s revenue model?  As long as each has internet access you can bet that Google will figure out how to monetize.  A lot of Microsoft’s struggles in this area is cultural as it looks to protect today’s revenues while forfeiting the futures.  Steve Ballmer’s love of the Jack Welch GE model, though a legendary business lesson, does not play so well in the world of innovation.  It has become a quagmire, sort of Steve’s personally built Vietnam. Google at the same time despite their growing size, seem to have remained nimble and agile in how they go about their business.

Finally there is User Interface Design.  Yes the ever present UI – how we interact with the world of technology.  Google’s search engine has been applauded for the simplicity and elegance of its search interface.  For a long time it seemed Microsoft owned the ideas of interaction with the device.  But Microsoft became complacent and did not seem to update or change basic user functions.  With the launch of Windows 8 Microsoft finally killed the Windows 95 interface.  In the meantime we saw not only Google, but Apple and Facebook present us with much more elegant and friendly user interfaces.  Once you lose the advantage it has hard to catch up and in this case the defeat is generational.

Technology is in the end about survival.  To foresee the future and not just react to it, but shape and create the future.  The ability to stay relevant.  To push the boundaries of what is possible.  The easiest way to lose focus on what made you relevant.  Microsoft seemingly has tried to be everything to everyone over the past 15 years.  In the meantime those small start-ups who are young and crave success day in and day out have emerged.  Google seems to have the vision for what the future will be and their role that they will play in it.  Microsoft unfortunately treats Google as one of many competitors.  Google meantime has kept their eye on the prize…Microsoft billions in unchallenged revenue..Windows and Office.  Microsoft now finds itself in the precarious position of having to defend those empires.  More importantly since Ballmer has taken over the reigns from Bill Gates the desire to innovate has been lost and replaced with a culture of old school corporate politics. More concerned with maintaining existing empires rather than creating new ones.

Microsoft needs to refocus, starting by turning its sights to its most immediate threat: Google.  It needs Google more than it realizes.  It needs them to help focus the company.  To energize the companies employees, to rally them from product development to sales behind a common cause.  That was the way it was in the early days.  In those days the companies who lacked resolve faded quickly as Microsoft always looked 3-5 years out.  Companies like Lotus 123, WordPerfect, Borland, Novell etc..Microsoft was thinking ahead of the game visa vi the competition. But maybe I am asking too much of today’s Microsoft.  Maybe I am harping back to a day and a time that will never return again. Just maybe Microsoft is about to become another celebrated company that is more a part of history, rather than making history.

Good Night and Good Luck

Hans Henrik Hoffmann March 25, 2013

Microsoft – Threats and Opportunities

It is an industry legend and the company, along with Apple that started the PC revolution.  It brought technology to our desks and to our homes. It created a lot of young millionaires.  It was a shining star in the technology industry.  That was now what seems a long time ago. The Microsoft of today is one  that is a lot different from the one I joined in 1991 as a young, wide-eyed, fresh out of college customer service representative.  Then everything was new as PC’s were just starting to take off.  We were wiping out the typewriter.  In those days we were still talking about our different lines of business at Microsoft in terms of making our first billion.  Today Microsoft has annual revenues in excess of 70 billion.  Despite this growth, at times Microsoft can appear like an old and tired company.  One longing for a past glory, a glory that likely will never come again.  When you look to the horizon there are storm clouds gathering that could lead to catastrophe, but at the same time there are opportunities that could lead to greater horizons. Let’s have a look at what those different threats and opportunities are.

Google:  No company has the potential to hurt Microsoft more than Google.  They are threat numero Uno.  Ray Ozzie addressed  this in one of his first memo’s at Microsoft.  Google was using its ad revenues derived from search to fund software development projects, like business productivity applications.  Google  was changing the playing field and redefining the competitive landscape.  Google’s bet is pretty simple.  We live in a connected world, a world that is getting evermore connected with each passing minute.  If we assume we will have ubiquitous connectivity 24/7, whenever and wherever we want we need a simple device that can connect us, ala a Chrome Book (kills Windows).  Then you just need some cloud based applications for business productivity like Google Docs (kills Office).  Then you have just shaved off $25 billion in Microsoft’s earnings.  Not to mention ISV’s would flock to Google and the city of Redmond would file for bankruptcy similar to Detroit.  I assume someone in Redmond has figured this out, but these days when Microsoft is competing on so many fronts it seems hard for Redmond to prioritize.

Three Screen:  One of those great ideas that at a high level made and still makes sense.  Who can provide an experience for the PC – Phone – Television and it is all integrated?  Microsoft has the teams and technology to do it.  When this was first discussed it was around 2007.  The problem?  The TV platform was still nascent and Windows Phone 6.0 was a piece of junk.   Microsoft has since then released a new user experience in Windows 8, added a compelling tablet, and now have a competitive smart phone.  What is missing is TV, the holy grail of user experiences.  The three big companies – Microsoft, Google and Apple are all trying to create an experience that changes the consumer paradigm.  This is a big bet by all involved but the rewards could be immense.  If one figures out the TV experience and then can seamlessly integrate with other devices, well then the world will be their oyster.

Apple:  The obvious villain.  Microsoft versus Apple.  Gates versus Jobs.  Despite all its recent success I think Microsoft’s failing here happened because of one single reason:  Microsoft was not focused on the consumer.  They became like the Republican party and did not understand basic demographics.  While Microsoft was focused on the enterprise a new generation of consumers was being born and raised, with technology present from the first day they opened their eyes.  In the old days the belief was you were a software company or a hardware company.  Apple changed that school of thought and created a new market, an experience company.  Though I maintain Google is the biggest competitive threat, I think what Apple did really hurt Microsoft as a company. Not just financially but psychologically   It seemed every time Microsoft tried to say anything negative about Apple they looked foolish.  The “I’m a Mac, I’m a PC” ad campaign was so dead on and the response from Microsoft was so minimal.  Apple humbled Microsoft and remains a significant threat to their future.

Enterprise Customers: If you can think of one major impact Steve Ballmer had on Microsoft it was the transformation of the company from a consumer company to an enterprise company.  It made sense from a Steve standpoint.  Enterprises sign large deals to long-term commitments and provide a stable cash flow.  They are predictable.  Consumers are fickle and change directions quickly, loyalty is earned, but never guaranteed.  So the enterprise business has grown to tens of billions o f dollars.  That being said there still is room to grow in the enterprise.  Sharepoint became a billion dollar business and Lync looks like a sure bet to join that crowd as well. The Microsoft Azure Cloud offering could turn the corner and potentially be the largest new business.  An interesting area is consulting services.  Efforts have been made in the past to make this more of an IBM global services model.  This would go against Microsoft’s partner driven model, but these days that seems under threat anyway.  If they did do this I have no doubt this could be a multi-billion dollar business.  If Microsoft decided to focus on the enterprise excessively that would be a successful venture.  The risk of course if Microsoft ignored consumers they would be at risk, since so much of enterprise IT is being driven by consumers.

Xbox:  Whenever the subject of Microsoft futures comes up people inevitably say the Xbox is the future direction Microsoft.  Probably because it is the one group that has a cool factor associated with it unlike the other door knobs, called Product Groups at Microsoft.  With that being said if Microsoft wants to revitalize and market its three screen vision Xbox has inadvertently taken the lead as the platform to bring all three screens together.  Xbox rose at Microsoft because it operated outside the corporate structure.  They were not part of Windows or Office’s legacy.  They were new, fresh and exciting.  In my view they should own all things consumer.  However the rumblings I hear over in Redmond is they are being brought more into the legacy corporate fold.  If I knew what the grand vision.of doing this was I may support it, but since I don’t all I can say is “leave well enough alone”. I would have expanded their playground rather than constrict it.  I would brand as much stuff “x” as I could; Xphobe, XMusic, Xwhatever..would have used the logo, but that is an opportunity I think Microsoft will bypass.

Focus or lack there of:  One thing that I think kills Microsoft and maybe the biggest threat is just what seems to be a lack of focus and cohesive message from the company.  I remember in one week they had a big Windows Phone launch followed by the Xbox Kinect.  The Windows Phone got absolutely no momentum out of the launch.  If a kid hears you launch a cool new phone followed by a big announcement around Windows Server what are they supposed to think?  The marketing folk at Microsoft view this as two different audiences so they don’t intersect, but in the end they do.  IBM does not have this problem because everything they do is targeted towards the enterprise.  Could they split the company into a consumer entity and a enterprise entity and create a wholly owned subsidiary…called Xbox?  Retain ownership while spurring creativity? Increasing overall revenues with a new focused approach? Just a thought.

There you have it, in many ways it’s the “is the glass half full or half empty” argument  In many ways a threat is an opportunity it is just a question of how you attack it.  Could Microsoft do to its competitors what they are doing to it?  Sun Tzu, the Chinese author if the “The Art of War”., written around the 500BC period., wrote “when confronted by superior forces one must change the battlefield”.  This is what Ray Ozzie wrote about when talking about Google using ad driven revenues to fund software development.  Microsoft needs to do two things: Seize the opportunities and take the leadership position and embrace the threats to provide for a brighter future.  Another option would be for Microsoft to read about history because they are history.  Your call Microsoft.

Good Night and Good Luck

Hans Henrik Hoffmann January 30th 2013

Technology History Mistakes and Opportunities

In 20 years in the technology sector I have seen a lot of both good and bad strategic decisions. At Microsoft I was with a company that was on the good side and then was on the bad side. I saw many competitors make what were poor strategic decisions. Decisions that in the end would either sink them or put them in a place of constant struggle for success or viability.  I thought it would be good to look back on some of my favorite “stupid” decisions made by companies in the industry.

Lets head to Utah for bad decision number one: WordPerfect.  This was a company that when the personal computer first came onto the scene quickly became the number one player in Word Processing.  Competing against other notable companies like Wordstar, Wang, and Microsoft Word.  If one thing killed them off quickly it can be summed up in the acronym GUI (Graphical User Interface).  When Apple launched the Mac, Microsoft used it as an opportunity to learn about creating software for the GUI.  WordPerfect on the other hand dipped their toes in the water and when they did not see the sales they wanted on the Mac, killed it.  As Microsoft became more enamored with something called Windows, WordPerfect dug their heels in and supported DOS, where they were a leader.  The problem being Microsoft owned both DOS and Windows and had more or less stated Windows was the future.  Towards the end the only thing WordPerfect had going for it was free technical support.  Sounds nice from a  customer perspective, but if you looked at the costs, not sustainable.  WordPerfect over time just seemed to disappear.

Apple actually makes the list.  During the period where there was no Steve Jobs.  Early learning here is Steve Jobs killed  himself off when he hired Pepsi executive, John Sculley.  Steve’s pitch to John was, “Do you want to change the world or sell sugared water”.  As Steve learned people who sell sugared water don’t change the world.  However they are master politicians which led to Steve’s ouster.  Apple would go through several CEO’s  before Steve returned.  Some like, Micheal Spindler would start to pursue a OEM model where they license the software, like Microsoft.  A nice form of flattery, but not in the Apple DNA.  Steve would come back, kill this plan, and we know the rest.

Next up we return to Utah and Novell Netware.  When the computer network first became popular, Novell was the dominant player for our file and print services.  However one stupid decision killed the company.  Why just a file and print server and not a app server to?  I remember I was in a meeting with Bill Gates and he went off about why Novell did not do this.  He was stunned that they did not have the foresight to see what was coming in the industry. In his view had they just added application services, Windows Server would never have garnered the market share it did.  A second more technical item was Novell had a proprietary protocol called IPX/SPX.  They did not support the dominant internet standard called TCP/IP. Eric Schmidt, when he was at Novell worked on fixing this, but then this startup called Google came knocking and he left for greener pastures (much greener as it turned out). As I am sure you all know this internet thing became rather large and Novell played themselves out of the market.  Oops.

As we entered a new millennium things would change.  My old company, Microsoft, which seemed to do no wrong would make plenty of mistakes in the new century’s beginning.  They might say search was a big mistake, but as I have said they never would have figured it out.  Google developed a new software business model.  They did a classic Sun Tzu, when faced with greater numbers change the playing field.  Probably the first blunder was the mobile phone space.  Though they might say they were successful prior to the iPhone I never saw it that way.  THe Microsoft strategy was a smartphone was a business phone and they went head on after RIM.  I never saw it that way.  I saw smartphone’s just a natural evolution of mobile phones and as more intelligence was put in the phone, the smartphone would be a consumer phone.  Then the iPhone launched and that was the end of the Microsoft mobile story.  I know they have this Nokia thing going on, but as good as the phone is, everything I am reading is it is too late.

Going back to search the big loser was Yahoo.  Jerry Yang had a dotcom success story, but was really just pushed aside by a competitor with a better search engine and a better business model.  Google ate everybody up in this space.  They proved the age-old business adage, revenue is king.  It was not long before Yahoo was on the defensive in everything they did.  Google was the tech darling and Yahoo had fallen into the worst place in the industry:  Yesterdays News.  Even when they got a get out of jail free card in the form of a massive Microsoft takeover offer they blew it.  Jerry Yang managed to convince everyone they had a future.  With the recent news of a massive layoff and reorganization, all is but lost. Jerry Yang will be a case study in graduate school, and it will not be flattering.  It will be along the lines on increasing shareholder value.  But then Mr. Yang is an engineer not a finance guy.

Amazon was not a likely candidate to be the early leader in cloud computing.  Next thing you know everyone was left standing with their pants of the ground.  Some rode the wave very well, companies like VMWare.  But across the lake the from Amazon’s Seattle headquarters a  Redmond based power was scrambling.  Google was also behind in this space.  When I look at Cloud based posting these days I see many references for people with experience in Amazon Web Services.  I am not sure I have seen one for Azure (Microsoft’s cloud service). VMWare is always in the conversation with its virtualization software, it is always a good place to be, “in the conversation”.  Most companies building out cloud services usually have either Amazon or VMWare, if not both, as part of their cloud offering

Finally there was the tablet phenom.  When Apple founder Steve Jobs announced Apples plans to make and sell the iPad, Microsoft CEO Steve Ballmer was quoted as saying, “They will never sell those things”.  As it turns out they can sell those tablets.  In the last quarter they sold over 15 million of these items Steve said they could not sell.  In the meantime a slew of Android based tablets have hit the market and as for Microsoft, we wait for Windows 8.  Why do I feel like this will be the Windows Phone all over again?  When the new tablets hit the market will it be revolutionary or just another Tablet?  The market is already 3 years down the road and the company that changed people’s lives sitting on the couch and watching TV was Apple.  That is what technology has always been about, changing people’s lives.

In all the examples I have given one thing is clear.  To create these industry and societal changes it takes a leader who see’s beyond today and looks to tomorrow.  When we look at what I provided in each case we have visionaries that we all know Gates, Jobs, Bezos, Maritz, to name but a few.  In the also ran category you see companies always flat-footed and never embracing the future, but reacting to a race that has already began.  If you are racing Usain Bolt and you are slow off the starting blocks do you think you will win?  Even if you were that fast and physically fit you cannot make up a half a second in a sprint.  That is how today’s tech sector works.  Even if you were to catch up the industry has moved on to a new race.  To win you need to jump the gun otherwise you will be but a  distant reflection in the rear view mirror.

Good Night and Good Luck

Hans Henrik Hoffmann April 9, 2012

CES 2012

Well this has been the week of the big Consumer Electronics Show (CES) in the glamorous city of Las Vegas.  It is a show, sad to say, I have never been to but would love to go someday.  Still with today’s interactive technologies it is pretty easy to follow from far away.  The great thing about CES is that it gives consumers a window n how they might spend their money in the upcoming year.  Or not.  Last year was a big year for 3-D TV’s, but I don’t think consumers were ready to give up their new LCD or Plasma screens just yet to experience 3-D at home.  This year promises a whole host of new gadgets and who knows what will be the biggest.  But it is always fun to hear what the big industry players are planning.  Even more exciting can be the young start-ups.

This year, as always, CES started with the keynote from Steve Ballmer, the loud and proud CEO of Microsoft.  Of course the big news had already broke, this would be Microsoft’s last CES.  This was the last chance to see Steve.  It was a draw and then Steve went on to present, uh, well, nothing really at all.  Most of which he talked about had already been announced in previous talks about Windows 8 and Windows Phone.  The biggest announcement was really that Nokia was coming back to America with the Lumia 900.  It is sad to see Microsoft leave the event.  I am not thrilled that they have chosen to do big releases via internal style events and over the web.  My preference is in person events but I may be a bit old school in that thinking.  The problem I have with over the web is it usually means at a desk at work where there are many distractions.  Such as Bob’s vacation or Steve i snot happy at work or..well you get the picture. You may see higher numbers but how many people are really engaged in what they are hearing and seeing?  In any case we bid Microsoft a fond farewell.

Google Executive Chairman Eric Schmidt participated in a “pseudo” panel.  Not sure what kind of panel this was intended to be as it sounded like a group of Google partners just nodding their heads to everything Eric said.  But there were some valid discussion points, mainly the idea of ubiquity between connected devices.  Just think of it this way..walk around your home and see how many devices, appliances etc have digital displays.  You would find dishwashers, washer and dryer, clocks, stereo’s, etc..They should all be talking to one another and to the cloud.  And according to Eric they should be built on a foundations of, drum roll please…Android.  To be clear this idea is nothing new.  Microsoft had this idea of Microsoft @Home over ten years ago.  Novell had its embedded systems technology(NEST).  But like so many things in technology it is not predicting the future, it is timing the future.  As Eric points out with mobility and wireless pretty much everywhere making this “connected” home is much closer to reality.  Google is taking the lead.  Lets see how soon others begin to follow.

The term Gorilla Glass was new to me but it made a splash as Sony showed a Viao made out of Gorilla Glass v2.  First question o I want a laptop made of glass?  It will be a little bit heavier, but the environmentalist in me asks the second question: Is it recyclable?  IN any case they did show hat this glass could withstand 120 pounds of pressure making it fairly durable.  Given how often I drop things this is a good thing.  From a pure aesthetics standpoint it would seem you would be able to do some pretty fancy stuff with color.  I think more than anything this highlights advances being made in the materials that make up our technology toys.  A good thing and though not “sexy” now it will be in the future.

When we look at the best in show winners there, as usual is some interesting stuff.  Kudos to Nokia for coming through with the best smartphone of the show the Nokia Lumia 900.  The Asus Memo 370T Tablet running Android and priced for $250.  It has 16bg storage, oh how far we have come.   The features are nice and with those low price points it makes total sense.  I found the best software app, Bluestack interesting.  It brings all 400,000 Android apps to Windows 8.  It used to be the other way around, with competing platforms looking to run Windows Apps.  Remember Apple had dual OS capabilities.  If you want to be a real old-timer who remembers IBM OS/2 v2.0 with the Windows Subsystem?  To be fair these type of subsystems traditionally ran slow and were painful.  I would hope that Bluestack brings something new to the table and is…fast.  Which it should be ok at since Android Apps for phones and Tablets are not like running Microsoft Office.  Size matters.  One thing to note Bluestack is not yet in beta.  Murmur.

My summary of what I have read and followed about CES is there was a lot of focus on Tablets.  A lot of new and upcoming releases tied to Windows 8 and Android.  The one thing I am interested to see when Windows 8 Tablets roll out is cost.  It seems like Apple has staked out the high ground and Android the low ground, and both have lots of applications.  Is the middle ground a viable place to be? On the TV front I think we are waiting for the next big revolution.  Google did some talk about interactive television, however we are not there yet.  Apple has been strangely silent of lat  in this topic.   But I expect them to bet big on Television.  I do expect in the next 2-3 years for this to be a huge focus of CES.  The interesting question and one of great anticipation is who will lead.  Overall though this was not a great year at CES as there was no break through announcements.  No technology that came out and said this is what will be big in 2012, right or wrong (think 3-D TV).  Looking at the products it was more claims of, “This will be a big improvement on what currently exists”.  Take your pick, Tablets, Smartphones, mobile gaming etc…Next year will be bigger with Windows 8, though I don’t hear of anything ground breaking coming from Redmond…yet.  But what we want from CES is not an upgrade but something that changes how we experience life.

Good Night and Good Luck

Hans Henrik Hoffmann January 13, 2012

Windows 8

Why do I feel like I have been here before?  Probably because I was when Microsoft launched Windows 95 16 years ago.  It was the biggest release of an operating system ever.  It was really the first technology release with a massive amount of hype prior to its release to the public.  It ushered in the famous “Start” button, that is still with us today.  Has it been there that long?  Hard to believe how time flies.  Now 16 years later Microsoft is ushering in a new era of Windows with the developer release of Windows 8 at the Microsoft Build Conference in Anaheim this past week.  So far the reviews have been very positive, yes some concerns, but overall it sounds like Microsoft is getting the picture.  Windows 8 uses the Metro interface, found today on the Windows Phone.  But more importantly it’s about touch and enabling a better user experience across multiple device from factors.  Lets take a look at the good and the bad.

What I found interesting and exciting was what they were able to do with new hardware designs that include the ARM chip and stateless hard drives.  It was noticeable with faster boot times, which for Windows in particular has been a holy grail.  And though Steve Ballmer claimed Windows 7 did this, Windows 7 did not deliver.  It’s a simple request (though not trivial to build) that had to be done.  It’s amazing what the push of a button can do to your market share.  The other area is power consumption, who is not tired of a 2-3 hour battery life?  Though battery technology has not yet solved this problem, changes in the hardware that make up your PC have improved that allow us to reducing the amount of moving parts hidden in your PC thus reducing the heat omitted from your PC or Tablet.  We have not reached paradise for battery life and power consumption but we are getting closer.

Back to my opening comment the user interface has been completely revamped adopting the Metro interface, from Windows Phone 7.  My one dig at MS is having basically the same UI for over 15 years is rather unacceptable.  We have had the same Start button all these years.  But this is a more than welcome change.  The Metro interface provides the “touch” experience with its sexy panels.  It is very important with the rise of the tablet.  The explosion of new and exciting designs in hardware coupled with the need to have a great touch experience will make Windows 8 competitive in the space currently being owned by the iPad and Android.  It will be new for developers, in particular those targeting ARM, as it’s required.

Another positive is it may make Google and Apple pause and look at what Microsoft is doing.  I know that may sound odd, but right now in the area of mobility Microsoft is non – existent.  With Windows 8 it gives Microsoft a chance to be relevant and feared once again.  To date Apple and Google have not really paid much attention to Microsoft as Microsoft has been viewed as yesterday’s news and a company that lacks imagination.  The reinvention of Windows and the fact that it is able to go across device form factors will be a huge plus for Microsoft and help it gain traction in the tablet space.  Tablets will not be as easy to gain market share as Netbooks, beyond technology it will take a strong marketing campaign to reach the appeal level that Apple and to a lesser extent that Android has.

There will be challenges.  One I thought of right off the bat as I read Jay Greene’s live blog was that the Build  event lasted over 2 hrs was there is so much new stuff in Windows 8.  This goes to a Microsoft issue, which they cannot not adhere to the old grade school acronym KISS (Keep it simple stupid).  They put so much stuff in the product that they overwhelm developers and consumers as they simply cannot consume all that is being given to them.  We buy technology products that makes us happy and improve our lives, we do not want them to confuse and frustrate us.  But over the years Microsoft has developed a habit of trying to show cool features, no matter how geeky they may be.

Another challenge is legacy.  Microsoft and the Windows empire has been a partner driven model  throughout its entire existence.  The partner model has created over thousands of peripheral devices from printers to scanners to mice.  You have tp go back a certain amount of years to make sure all those investments by consumers and businesses are protected.  This is no small task.  There is also the question of the user interface, which they did show at the conference, but you just can’t tell everyone that Metro is the new UI.  So you build in a mode that allows you to switch to the old interface (this was showed at Build).  This to me, takes away some of the sexiness that Metro provides.  Rather than saying we are new.  You end up saying we are old and new.  A subtle but big difference

Then another negative was Steve Ballmer.  On day two of the conference he made a surprise guest appearance.  Unfortunately he for got what decade it was.  He went on and on about how many desktops were deployed and going to be deployed with Windows 8 and that developers should all write applications for Windows 8.  It would have sounded great in 1995.  The problem is it made it sound like he is not following what’s going on in the world.  That developer are not writing desktop based applications, pretty much everything is being written to the internet and it needs to support Internet Explorer, Safari, Firefox and Chrome.  This is not new news.  I was having drinks with the Microsoft C++ Program Manger a few years ago in San Jose and he brought up a statistic that stated 75% of all app development today is done on the web.  Maybe Steve should talk to him.  I heard from several people his keynote was a negative on the week.  He even went so far as to ask developers to “stay with us”.  Apparently there is  concern they may be going somewhere else.

Steve did talk about re imaging Microsoft,  I find this both a negative and a plus.  It’s a negative because you have to do it.  It’s a positive because you are doing it.  To change the image of a company is not easy.  Especially one that has had the impact on society both economically and culturally like Microsoft.  But there is no question it needs to be done and the changes and progress that have been made with Windows 8 offer up a great time to do that.  It is all about execution now and delivering Windows 8 before the holidays in 2012.  In addition the right “buzz” is going to need to be generated, coming off of Build a good start was made.

Over the next 12 months it should be a very exciting and stressful time in Redmond.  The pending launch and release of Windows 8 can be and will be one of those defining moments in technology.  Not just for Microsoft but the industry.  We have grown up in a Windows world where over 90% of all PC’s, Laptops, and Netbooks were Windows-based.  However withe rapid evolution of new form factors like the tablet this world is increasingly under a dark cloud as the storm is upon us.  With the possibilities in emerging markets, it does not seem clear that they will follow or want to follow the same path of North America or Europe.  Nor will they have to as it’s apparent they will have alternate choices.  With the increased competition in the global market for technology a resurgent Microsoft can only benefit the competitive landscape, but we will have to wait until Windows 8.

Good Night and Good Luck

Hans Henrik Hoffmann Sept 20, 2011