New era of Microsoft

Famous Internet entrepreneur on the consequences of Steve Ballmer's departure

Author: Nastya Prazdnichnaya

The departure of Microsoft CEO Steve Ballmer has given rise to a lot of speculation about the future of the almost thirty-year-old corporation. Aaron Levy, founder of cloud storage company Box, which is used by 92% of Fortune 500 corporations, offers advice to Ballmer's future successor.

In technology, events like this only happen once in every generation.

The announcement that Steve Ballmer will leave his post as head of Microsoft marks the end of one of the most powerful and interesting “regimes” in the history of technology. Conventionally, this is like the end of an era led by Bill Gates, then he and Ballmer, and recently - only Ballmer. We consider these periods to be different. While Ballmer may not have had Bill's technological foresight, much of what Microsoft did in the 2000s was a continuation of the strategy that defined the company in the 1990s.

The history of Microsoft under Steve Ballmer can be looked at from two different perspectives. From a public perspective, Microsoft has been slow to respond to the emergence of low-end software makers that have disrupted the market, such as Google Apps and Amazon Web Services; missed the wave of success of mobile devices led by Apple and Google, which significantly weakened Microsoft's monopoly; Moreover, it also experienced a series of failures when launching services like Zune, Windows Vista and others.

The second option is much less popular. Under Ballmer, Microsoft more than tripled its annual profits, from $22 billion when he took over to more than $78 billion by the time he decided to step down.

It was under Ballmer that Microsoft entered the cloud storage space, launched successful online services and platforms Office 365 and Azure, and acquired powerful technologies and companies like Skype and Yammer. Microsoft's search share grew by 30% thanks to receiving the entire volume of search traffic from Yahoo and Facebook. Microsoft was also the only corporate investor in Facebook. Under Ballmer, Microsoft even began dabbling in open source software and other similar platforms.

But, one way or another, in our binary world you are either a winner or a loser - this is how it is necessary for the victory to be more obvious. And even at the height of its recent success, the stock market did not recognize Microsoft as a winner.

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Microsoft must recognize that the world is more diverse and alternative than ever.

And how can this be explained? The answer is that an outdated strategy often refuses to recognize the new realities of a changed market. Today, the Department of Justice is as "concerned" about Redmond's monopoly as the State Department is about Canada. Microsoft no longer has the same level of control over the developer ecosystem, and overall this is not bad, both for the market and, ultimately, for the future of the company itself. Alternative choices stimulate competition, and competition stimulates innovation. Apple, producing better and better devices, forces Google to develop better operating systems, and so on. Microsoft must recognize that the world is more diverse and alternative than ever.

And Microsoft also needs to adapt its strategy in accordance with the new conditions. While the latest reorganization appears to have been aimed at achieving better integration within the company, it is equally important to adapt to what is happening outside the company.

The world of software and technology is no longer a zero-sum game. Bulmer's heir will have to recognize this new reality and accept it. Here are just a few areas where he will need to start:

Applications as a separate product. Microsoft was used to operating in a world where its dominance in operating systems led to exceptional success in a number of key applications. It’s as if all the work on creating the OS was done solely for the purpose of subsequent work on applications, and not vice versa. Competitors were eradicated by Microsoft one by one (see Lotus, Word Perfect, Netscape, Real Networks) on its way to capturing all software budgets. Now things have changed, and the tail is wagging the dog - applications are being used to support Microsoft's efforts on the operating system.

In today's fast-paced world, where the vast majority of Internet-enabled devices are not Windows-based, these services need to be separated from Windows as separate products. Services like Microsoft Office remain unavailable or have limited functionality on Apple and Android devices. With tablet sales set to outpace new personal computer sales over the next few years, it's more important than ever for Microsoft to recognize that its apps must compete on their own.

Openness. One of the main advantages of cloud storage is that individual applications can finally communicate directly with each other. Users no longer need to purchase all services from two or three providers to achieve the required level of integration. APIs and application integrations make it possible to combine and coordinate them for optimal tools: ERP (enterprise resource planning software) on Netsuite or Workday can receive data from the customer success application Zendesk, which in turn communicates with the data feed on Live. This new Cloud Stack platform leads to greater openness between applications, and therefore greater utility for users. But today Microsoft is not visible in this colorful abundance of new applications.

For example, if you wanted to integrate the latest web version of Office into a third-party application (say, Box), it would require almost an Act of Congress, not just an API call. The closed nature of their applications was acceptable in times when there was a need to control the operating system, but not during the current heyday of IT. The new leader in Redmond will have to ensure that products are much more open and interoperable with software from companies once considered adversaries.

Products, products and more products (and developers). Much of Microsoft's product line is still riding on its former glory. Unlike other tech giants that are known for their innovations in recent decades - Android, Chrome, iPad or even more bizarre and futuristic innovations like self-driving cars and Google Glass - the vast majority of Microsoft's successful creations over the past ten years have been replicas of the theme. products released at the height of the PC era, and hardly fits into the “post-computer” era.

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Microsoft needs to be the place where the great apps to come are developed, not by Microsoft itself.

Ultimately, Microsoft needs to become the platform company (again). Google has assumed the role of a benevolent monopolist, providing traffic through Search, standards through Chrome, and distribution through Android. Apple has similarly fostered the emergence of million-dollar startups without encroaching on their territory (Uber, Instagram, Angry Birds, Super Cell, Spotify, and others). Microsoft needs to figure out how to become the place where the great apps to come are developed - and developed by companies other than Microsoft. And this time, Microsoft must overcome its desire to destroy every successful startup that has emerged from its ecosystem.

Vision. The most recent strategy announced publicly was that “Microsoft is a device and services company.” It would sound much the same if Disney described itself as a “movie company and theme park.” The vision of Microsoft as bringing a PC to every desk and home has led to the company it is in today, and it requires a global mission. It is not enough to simply have a strategy that shareholders and analysts understand; It is necessary to have a strategy that will interest consumers.

Microsoft needs to do something unique. Once the world was dominated by Microsoft products, now Microsoft allows others to dominate it.

Of course, it’s easy to say from the outside. Microsoft is one of the 50 largest companies in the world, and pointing to the successes of its competitors, saying “Microsoft should have done this” is much easier than doing the hard work of making the right decisions in the face of rapidly changing circumstances.

Already we can see signs of movement in the right direction: thanks to leaders like Satya Nadella, Key Lu and Tony Bates, Microsoft is becoming a much more open company. At this year's Build developer conference, demos of products using the Mac were presented: just a decade ago, this would have been considered sacrilege, but now it means Microsoft is publicly acknowledging a new reality. Microsoft is also accelerating its pace of innovation by updating its web products and platforms several times a quarter, a big improvement from its traditional product update cycle of every three years.

The technology ecosystem needs companies that will raise the bar higher and higher, both for each other and for consumers. Let's hope that no matter who is chosen as the new navigator of the "oil tanker" in Redmond, that someone can set the right course for Microsoft in this brand new era.

This article is a translation of Aaron Levy's "Microsoft's Next Era" column on TechCrunch .

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