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Microsoft's emergency stop kickstarts Dynamics speculation

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16th Jul 2013
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Every so often, Microsoft does an emergency stop and spins itself into a different direction. 
It happened when Bill Gates who had dissed the internet suddenly realised he was on a hiding to nothing and issued his Pearl Harbour Day memo to all Microsoft staffers putting them on internet war footing as of that day. 
It's happened (less colourfully) with the Cloud in recent years as Microsoft and its partners faced up to the slow decline of Windows. 
Last week it was another 'stop the clock' moment as CEO Steve Ballmer instigated a radical corporate restructuring which many observers see as the last roll of the dice for him - and possibly for Microsoft's long term future. 
"We are rallying behind a single strategy as one company - not a collection of divisional strategies," Ballmer said in a memo entitled "One Microsoft" which was emailed to all staff on Thursday.
"Although we will deliver multiple devices and services to execute and monetize the strategy, the single core strategy will drive us to set shared goals for everything we do. We will see our product line holistically, not as a set of islands."
The most obvious manifestation of the new world order will be the replacement of unit presidents by executive vice president titles who will  - apparently - collaborate across four newly-formed groups - OS, devices, Cloud and apps.
"Collaborative doesn't just mean 'easy to get along with,' collaboration means the ability to coordinate effectively, within and among teams, to get results, build better products faster, and drive customer and shareholder value," Ballmer said in the memo. 
Heading up the Cloud division will be Satya Nadella who will lead development of back-end technologies like datacentre, database and specific technologies for enterprise IT scenarios and development tools.
"Our strategy as far as the Cloud goes all stems from this one strategy and mission that the company has," he said. "If you look at our Cloud footprint, in fact, it starts with all of the first-party applications from Xbox Live to Bing to Office 365. 
"So we build the Cloud infrastructure and our datacentre footprint in support of our first-party applications. That not only battle tests our infrastructure, which then we provide to our third parties, both as a public Cloud service in Windows Azure, as well as our server products, and our server products are increasingly getting better because of that reinforcing cycle we have with our first party."
The analyst take
Analysts watched the comings and goings with interest - and some confusion over what will happen to certain parts of the Microsoft portfolio. 
Forrester's David Johnson picked out Nadella for some praise who had "done a great job of driving Agile development and continuous delivery into every team and that is resulting in faster moving and more compelling products and services."
He added:  "One of Microsoft's greatest strengths is that they give smart people development tools that are extremely easy to use and deceptively powerful. So much so that generations of developers will commit themselves and careers to mastery of Visual Studio, for example. Microsoft democratizes software development by lowering the barriers to entry like no other company. 
"The shift to Cloud gives them the chance to do it again, and the improvements in Visual Studio 2013 shown at BUILD in San Francisco are superb and stretch smoothly from the datacentre to the Cloud ."
Johnson can understand the need for a re-organisation in the first place. 
"Microsoft is facing disruption in their traditional businesses (the Windows desktop, datacenter virtualisation), and they face strong competition in newer markets like Cloud Infrastructure as a Service (IaaS) and business tablets to name just two," he notes. 
"But they have enormous capabilities and resources as a company, that if coordinated in the right ways, would allow them to do things that no other company could do. Also, perhaps the greatest potential advantage of a large company is the ability to coordinate resources and talents across a large number of things, to get a few very important things done. 
"Forrester believes this new organisational structure will foster this coordination, but we may not see the real results until 3-5 years out. Why? Because truly disruptive ideas and strategies that these new organisations incubate today, will take more than a few months to germinate and grow. That's a long time in a constantly shifting technology landscape."
But for now, he concludes: "Microsoft is a worthy contender for your private, hybrid and public Cloud needs and this will only increase. They are leading well across server, tools and Cloud , as they follow in the tablet and smartphone markets. They will eventually regain ground here as the AppContainer in Windows 8.x matures and new apps are built for it." 
But Ovum's Jeremy Cox was left wondering where Microsoft Dynamics fits in to 'One Microsoft'.  
"All Ballmer said after announcing the four engineering divisions, OS, Apps, Cloud , and Devices, was: 'We will keep Dynamics separate as it continues to need special focus and represents significant opportunity'," he observed. "With no further clarification forthcoming, Ballmer has opened the door for unhelpful speculation that is certain to concern enterprise clients that have heavy investments in the Dynamics platform."
He added that Ovum continues to regard Dynamics as "a safe bet, but that Microsoft needs to make its intentions much clearer and explain how the Dynamics portfolio fits within the new paradigm."
Cox believes the new structure will provide Microsoft with the  potential to innovate at greater speed.  "The realignment around four business units all aiming in the same direction should reduce drag and aid faster, more continuous, innovation," he predicted. "Once the transformation is complete this should greatly enhance speed, ensure a balance of supply with demand, and reduce overall costs."
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