Nadella Spells Out Microsoft’s Bold Ambitions

Microsoft CEO Satya Nadella on Thursday mapped out his vision for the company’s future, emphasizing cloud and mobile computing, in a letter to all employees. The letter also appeared on the company’s website.

“More recently, we have described ourselves as a ‘devices and services’ company. While the devices and services description was helpful in starting our transformation, we now need to hone in on our unique strategy,” Nadella wrote in his 3,000-plus word letter.

“At our core, Microsoft is the productivity and platform company for the mobile-first and cloud-first world,” he continued. “We will reinvent productivity to empower every person and every organization on the planet to do more and achieve more.”

Nadella’s emphasis on productivity is a play to separate Microsoft from its rivals in the industry, suggested Patrick Moorhead, founder and principal analyst at Moor Insights and Strategy.

“Nadella’s change from a ‘devices and services’ to ‘mobile and cloud productivity and platform company’ is smart. It focuses them on productivity versus entertainment, and it doesn’t limit them to just services,” he told the E-Commerce Times.

“Apple and Google are primarily about consumer products and services but do some commercial products,” Moorhead added. “Microsoft is now a productivity company that will still do some entertainment.”

Hardware Justification

The emphasis on productivity extends the justification for the hardware Microsoft makes, which isn’t for the sake of the hardware itself, but for the sake of extending the platform, Moorhead also noted.

Nadella admitted as much in his letter: “We will build first-party hardware to stimulate more demand for the entire Windows ecosystem.”

Although Nadella outlined far-reaching goals for Microsoft, his emphasis on productivity likely will preclude the company from substantial investment in some areas where its competitors are entrenched.

“I don’t think home automation or pure entertainment will be a focus and will be a limited investment. Sure, they’re keeping Xbox, but that doesn’t mean it will get a lot of funding,” Moorhead said.

“I don’t expect Microsoft to be a leader in home automation or distributed home entertainment,” he continued. “They’re ceding that leadership to Apple and Google.”

Xbox Defense

Some Microsoft watchers long have recommended that the company get rid of its Xbox division because it’s outside the company’s core business. With the new productivity mantra, that move seems to make even more sense.

However, Nadella showed strong support for Microsoft’s gaming console in his letter.

“As a large company, I think it’s critical to define the core, but it’s important to make smart choices on other businesses in which we can have fundamental impact and success,” he wrote. “The single biggest digital life category, measured in both time and money spent, in a mobile-first world is gaming. We are fortunate to have Xbox in our family to go after this opportunity with unique and bold innovation.”

What’s more, the Xbox has contributed technologies that have enhanced Microsoft’s productivity efforts — core graphics and NUI in Windows, speech recognition in Skype, camera technology in Kinect for Windows, and Azure cloud enhancements for GPU simulation, he added.

The Xbox not only fits Microsoft’s mobile ambitions, but also supports its cloud aspirations.

“In three or four years, cloud gaming and streaming is going to really take off,” Jim McGregor, founder and principal analyst with Tirias Research, told the E-Commerce Times. “If Microsoft has the ability to be a major source for providing game solutions in the cloud, that could be a real revenue generator for it.”

Image Problem

Although Microsoft aired some bold ambitions for its future, it still faces an image problem in the near term, observed Laura DiDio, principal analyst with ITIC.

“Microsoft gets about one-third the press it did 15 or 20 years ago, and much of the press they do get isn’t helpful to its image as a top-tier vendor,” she told the E-Commerce Times.

“Nadella needs to get people talking less about when support ends” — a reference to the cyclone of controversy that erupted over ending support for Windows XP — “and more about their new initiatives,” said DiDio.

“They’ve got lots of good things, but you don’t hear a lot about them — not as much as you’d expect,” she added.

“Nadella talks about bold ambition in Microsoft’s core in his letter, but the letter itself isn’t bold,” DiDio noted. “He’s got to be bold and make people take notice.”