Last but certainly not least, while he deals with these issues and with the myriad others that cross his desk as CEO, Nadella will be expected to be a tech visionary, much more so than Ballmer was, and anticipate hot market opportunities. Among those Microsoft missed under Ballmer's watch, which started in 2000: the rise of smartphones and tablets, Web search and social networking.
Forrester Research analyst David Johnson said Nadella is likely less worried about "what" will get built and more worried about "how" the company decides what those things will be, and how it develops them into market leaders.
"He will need to restart the innovation engine that can put Microsoft back on the leading edge in personal computing," he said. "Ballmer was about execution. Nadella will need to be about innovation and that means turning the company's eyes and ears to the world outside to build things that astonish customers with their excellence and usefulness."
In a letter to Microsoft employees, Nadella acknowledged the importance of vision and innovation, or as he put it: "clarity of purpose and sense of mission that will lead us to imagine the impossible and deliver it."
"While we have seen great success, we are hungry to do more," he wrote. "Our industry does not respect tradition — it only respects innovation. This is a critical time for the 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."
Johnson and other industry analysts are generally positive about Nadella's chances of doing a good job as CEO.
They view Nadella as a strong technologist whose clear understanding of cloud computing has allowed him to lead a successful transition of the company's backend server software and system tools group so that Microsoft can offer enterprises multiple deployment options — on premises, hosted on private clouds or provided via a public cloud.
He is also seen as someone who, after more than 20 years at Microsoft, understands the company's culture and has a deep insider's view of what is working and what needs to change.
"I see a proven leader who knows Microsoft from the inside, which means he's in a good place to know what needs fixing," Johnson via email. "It's clear he knows what innovation looks like and he's proven he can be a tireless student of the market and create successful product strategies in a disruptive market, as he has with Windows Server and Azure."
Microsoft had been looking for a new CEO since Ballmer declared his intention to retire in August. The surprise announcement triggered a series of rumors over who would be picked, including most notably outsiders like Ford CEO Alan Mulally, considered a front-runner for months.
Sign up for CIO Asia eNewsletters.