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Will Nadella shake up Microsoft more than expected?

Thor Olavsrud | Feb. 6, 2014
The reception has been lukewarm to Microsoft's decision to name 22-year Microsoft veteran Satya Nadella as CEO. Critics wonder if Nadella can make the changes the company needs. But he has a history of change from within.

Wildstrom suggests that rather than a weak move that will keep current Microsoft strategy in place, the decision to go with Nadella is about reinforcing strength. After all, Microsoft earned an operating profit of $14.3 billion on revenues of $29.7 billion in the six months that ended on Dec. 31. Microsoft's commercial operations, of which Nadella's Cloud and Enterprise group comprises the lion's share, accounted for 55 percent of those sales and 66 percent of those profits.

Some industry watchers have expressed doubts that Microsoft can maintain its commercial business in the post-PC era, but Nadella says he's heard such talk before—10 years ago when Microsoft first made a play for the enterprise market.

"As of late, there has been a lot of interest in what I call the commercial business, which spans nearly every area of enterprise IT and represents about 58 percent of Microsoft's total revenue," Nadella wrote in a blog post in October as he outlined his cloud roadmap. "It's a critical business for us, with great momentum and one to which we are incredibly committed."

"But as people look to our commercial business in this age of cloud computing, big data and the consumerization of IT, people are asking questions about our future strength in the enterprise," he added. "Will Microsoft continue to be at the core of business computing in, say, 10 years? I'll be honest that there's a little déjà vu in that question; 10 years ago many people doubted our ability to be an enterprise company and today we surely are."

"Nadella has done a remarkable job getting Microsoft to move fast on the cloud and begin staking out a strong position against difficult competitors, such as Amazon."

Nadella outlined a compelling vision for Microsoft's future in the cloud, arguing that it is uniquely positioned to excel in the cloud based on a combination of top-notch, first-party SaaS applications (like Office 365, Dynamics CRM and Xbox Live), a public cloud at global scale that supports a broad range of third parties with fully supported platform and infrastructure services, and the ability to seamlessly support hybrid cloud deployments infrastructure tools like Windows Server 2012 R2 and System Center 2012 R2.

Microsoft Now Exists in Mobile and Cloud-First World
Given that vision, it's no mistake that Nadella's first statement to Microsoft employees as CEO was to tell them the company cannot rest on its laurels while reinforcing that they now live in a mobile-first and cloud-first world.

"While we have seen great success, we are hungry to do more," Nadella wrote in an email Tuesday.

"Our industry does not respect tradition—it only respects innovation. This is a critical time for the technology industry and for Microsoft. Make no mistake, we are headed for greater places—as technology evolves and we evolve with and ahead of it. Our job is to ensure that Microsoft thrives in a mobile and cloud-first world," Nadella wrote.

 

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