- Microsoft was once known for prioritizing Windows and Office over the rest of the company.
- That changed under Satya Nadella, under has led Microsoft with the philosophy that noi single product is more important than Microsoft’s mission.
- Nadella explained his philosophy during an earnings call this week: “There’s no such thing as a canonical business.”
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Under CEO Steve Ballmer, Microsoft was notorious for prioritizing its Windows and Office businesses over the rest of the company – at one point, it even canceled the Courier, which would have been an early, future-looking competitor to Apple’s iPad, because it may have undermined the Windows business.
CEO Satya Nadella, who took over in 2014 six years ago almost to the day, has a different philosophy. Rather than hold up any single business as the core of the company, Nadella has chosen to prioritize Microsoft as a whole — even if it means taking the focus off certain individual products.
Nadella summed up this philosophy well during the company’s post-earnings conference call with Wall Street analysts and investors this week.
An analyst asked Nadella about the importance to Microsoft of Dynamics, its customer relationship management software that competes most prominently with Salesforce.
Indeed, the question seemed to reflect concerns that were raised when last year Microsoft and Salesforce struck a partnership that some analysts took as a signal that the two would no longer compete quite so fiercly.
Nadella took the opportunity to lay out some of his philosophy: No single product is more important than Microsoft’s mission, he said.
“There’s no such thing as a canonical business and no such thing as a canonical business over time, right?,” Nadella said. “The business processes change. The question is how rapidly can people and domain experts keep up with the change.”
‘Microsoft loves Linux’ – but still plays hardball
One of the best examples of the change at Microsoft is the company’s decision to support Linux. Microsoft once shunned Linux, free open-source operating system once considered the biggest threat to Windows. But early on in Nadella’s time as CEO, Microsoft changed tack and proclaimed “Microsoft loves Linux.”
Microsoft at the time said it realized its customers used both Windows and Linux, and saw providing support to both as a business opportunity on-premise and in the cloud. That would have been unthinkable in the Ballmer years, but it’s proven to be a savvy business move: Microsoft recently hinted that Linux is more popular on its Azure cloud platform than Windows itself.
That’s not to say Microsoft has always played nice under these new rules.
Microsoft last summer changed licensing agreements to raise prices — often significantly — when customers choose to run certain Microsoft software on rival clouds including Amazon Web Services or Google Cloud.
And when Microsoft in November introduced Azure Arc to make it easier for its customers to use rival cloud computing platforms, analysts said it’s because the company had no other choice.
To go back to Nadella’s comments, they came in defense of Microsoft’s business application strategy, amid broader skepticism of the Salesforce deal.
Microsoft in November put aside its longtime rivalry with Salesforce to strike the partnership, as part of a plan to grow its cloud business – but some feared that this plan came at the expense of its rival Dynamics product.
Microsoft’s Azure will now be the public cloud underpinning Marketing Cloud, Salesforce’s cloud software for marketing professionals, and the companies are working on a way to allow Salesforce customers to share information within the Microsoft Teams chat app.
The deal is intended to help get Azure in front of more customers. The partnership, however, risks Microsoft’s own Dynamics, Seth Lippincott, the director of research at Nucleus Research, said at the time.
“The Salesforce partnership is almost undermining Dynamics in order to promote Azure as the cloud of choice,” he said. “This is an additional sign of where we think Microsoft is going — and it’s pretty clear business applications is not where they want to be for the long haul.”
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The old Microsoft might not have taken the Salesforce deal – generally accepted to be a good move for the cloud business, and therefore the company overall – because it might have risks for one individual business. Nadella, however, says that it’s all about what customers need.
“When I look at what the world needs, it needs a business application suite that is more comprehensive, that can turn what is the real currency of this next era – which is data – into predictions, insights and automation without boundaries,” Nadella said.