Nadella leaves no doubt about who is in charge in first six months as CEO

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Embracing a cross-platform approach

Nadella has been credited with leaving no doubt that under his command, the “Windows first” philosophy of protecting the OS franchise at all costs to other products is no longer in place.

Nadella’s first major launch as CEO was the native Office apps for Apple’s iPad, a move that Ballmer seemed, for a long time, reluctant to make, possibly out of fear it would hurt Windows and to a lesser extent the fledgling Surface tablets.

Coming less than two months after Nadella’s appointment, it’s obvious the project had been in progress under Ballmer, but many observers assumed that the new CEO made the endeavor a top priority, and they also praised him for whole-heartedly endorsing a cross-platform approach for Microsoft desktop, server and cloud software.

“What motivates us is to make sure that we build the great experiences that span the digital life and digital work of our customers, both individually and as organizations. And that’s what you can count on us doing, both with Windows as well as other platforms,” Nadella said at an event in San Francisco in late March.

Flying high with cloud products, but open to co-opetition deals

Microsoft tied the Office apps for iPad to a subscription for Office 365, which is one of the products Nadella is most excited about. In his view it exemplifies the future of the company, along with Azure, Microsoft’s set of cloud computing offerings.

office 365

Microsoft has made Office 365 one of its fundamental platforms.

He’s also gung-ho about Dynamics CRM Online, the cloud version of the company’s CRM software, but that didn’t stop him from brokering an eyebrow-raising partnership with CRM rival Salesforce.com in May.

The deal, which calls for Salesforce.com’s CRM software to be integrated with Microsoft’s Windows OS, Azure cloud computing platform and Office suite, was needed to respond to the demands of the companies’ mutual customers, Nadella said. He added that Microsoft will pursue similar “co-opetition” partnerships intended to make life easier for Microsoft customers.

Under Nadella, Microsoft has also been right smack in the middle of the consumer and enterprise cloud storage arms race, aggressively pushing its OneDrive and OneDrive for Business services against those from Google, Box, Dropbox and other rivals.

Most recently, Nadella made an appearance at the company’s big partner event, the Worldwide Partner Conference, held in July. There, he and other top executives urged partners of all stripes to embrace cloud computing, saying Microsoft doesn’t have enough partners selling these cloud products.

While that message was all well and good, En Pointe Technologies’ Hogan said that Microsoft still needs to further tweak and refine the incentives it gives to resellers of its cloud products, like Office 365 and the Azure services.

Gartner’s Adrian said Nadella should do more hand-holding of enterprise customers when it comes to steering them through the transition from on-premises deployments and deals to cloud, subscription-based purchases.

“So far he’s been fairly quiet about the shift in how enterprise customers will pay; subscription-based pricing is new and disruptive to Microsoft’s relationship with its customers, and licensing shifts will be a challenge for the year ahead as well,” he said.

Nadella needs to help enterprise customers navigate these changes patiently, and resist the temptation to rush them based on sales metrics, Adrian added. “That may slow transitions, but retain goodwill and ensure more complete migrations instead of moves to alternatives.”

Mixed reviews on the layoffs, Nokia deal and hardware strategy

Forrester’s Johnson gives Nadella low marks for the way he articulated the need for the layoffs in the memo he sent to employees. “It was full of management-speak instead of empathy and humanity. He missed a key opportunity to connect and build trust and support with employees,” he said.

The IFRC’s Happ is also unimpressed with the process of downsizing and flattening the organization, which he said is understandable but which he found was executed rather arbitrarily. “Some very good people were let go, and with them an exit of important knowledge. It takes longer to be surgical, but ultimately better for the patient,” Happ said.

However, Gartner’s Adrian says the restructuring isn’t just about shrinking the staff. “There has already been significant investment in new positions and people to fill them,” Adrian said, adding that the company also appears to be trying to streamline and emphasize a flatter management structure.

lumia 635 Microsoft

Will Microsoft's Nokia acqusition prove to be a boat anchor, or a strategic asset?

Certainly one of the biggest challenges Nadella is dealing with is the integration of the Nokia devices and services business, for which Microsoft paid more than $7 billion last year.

Most of the layoffs announced in July will come from the Nokia staff that came over with the acquisition, which closed in late April, leading some observers to question whether Nadella is significantly less than enthused about the deal than Ballmer, who brokered it.

In late July, during the fourth-quarter earnings report conference call, Nadella gave further indications that he’s not as gung-ho about Microsoft-made hardware devices as his predecessor.

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