Microsoft Needs an Enterprise Reboot Now

I don’t usually like to admit I was wrong, but my love affair with Microsoft’s Windows 8 strategy is over. While I still think the basic strategy is a sound one for the enterprise – a single code base for building touch-enabled apps that can live on phones, tablets, laptops, desktops, and anything else Windows 8 will run on – I’m a little tired of the lack of execution on key parts of the strategy.

As Windows 8 is a proxy for Microsoft as a whole, my shift on the operating system side is really about the company as whole. Here we are in mid-2013 and it’s clear: Microsoft either reboots its enterprise strategy and refocuses on breaking down the software barriers that have impeded Windows 8 (and frankly, pretty much the rest of the Microsoft software stack) from reaching its full potential, or the company will have effectively scroogled itself.

My understanding is that this imperative isn’t lost on Microsoft, and some sort of major organizational reboot is already underway. And like his peers, I’m guessing is that Steve Ballmer will follow the path that every software exec of his relative generation seems to be taking in the twilight years of their careers: hardware.

Freudian, Viagra-fueled analyses aside, it’s a phenomenon worth thinking about. The latest convert (following Larry Ellison’s disastrous Sun foray and Hasso Plattner’s promising HANA adventure) is SAS Institute, whose CEO, James Goodnight, has taken to pulling an Intel Sandy Bridge processor from his pocket (easy does it, Sigmund) during his keynotes to extol the virtues of modern hardware to his customers.

However smirky the thought, this isn’t as crazy, stupid, or metaphorically overdrawn as it may seem. Microsoft is already a hardware company, and it really just needs to do a better job making that component of its business an equal partner to the software and services side. And considering what Microsoft is trying to do with hardware, there’s a lot more to their potential than what Oracle has been trying to do, and a way better fit than what SAS is trying to do by pushing hardware to rooms full of BI/analytics customers.

Most importantly, it’s what hardware, as a general term, can do in combination with the software and services that Microsoft already sells or is planning to sell that makes this a potentially compelling direction for Microsoft to take. One of the best and most promising examples of this is Xbox Kinect – the potential that comes from adding voice, video, motion, and infrared to the available user interface technologies in the enterprise is one hell of an amazing idea. In case you didn’t see it, Microsoft just released an upgraded Xbox that includes a more industrial-strength Kinect system (though one that isn’t, yet, truly ruggedized for industrial use, but that’s coming too, so I understand). It’s also got Skype, a Windows 8 UX, a so-far-obscure connection to Azure, and a few other bells and whistles that make it so much more than just a gaming platform.

Even better, Kinect isn’t just a piece of hardware and a bunch of games trying to morph into an enterprise-ready user experience. Xbox is a portal into one of the worlds’ biggest online communities, 46 million strong and with a growth rate of 18 percent over last year. That’s a solid base for understanding the interplay between great hardware, services, and software and driving a new combo strategy into the enterprise.

Windows 8 is also part of Microsoft’s hardware promise, though it’s pretty obvious that Surface 1.0 was a bit of a flop. Floppy hardware notwithstanding, as I have written before, my experience using a Windows 8, touch-enabled laptop has convinced me that the touch/desktop hybrid is the future of enterprise productivity. Surface 1.0 was a mistake partly because the price point looks ridiculous when compared to some of the Windows 8 laptops now available, and more because the Windows 8 team confused itself and the market by pushing a worthy new OS into becoming a bi-polar standard-bearer for Microsoft’s own internal confusion: Windows 8 is way cool and full of potential on a touch-enabled machine, but using it on a non-touch enabled PC is like watching a Blue Ray movie on an old black and white TV.

What Kinect and Windows 8 touch have in common is the true foundation of the new Microsoft that I think Ballmer has to run with. With these two innovations Microsoft has invented new forms of interaction that define a unique interplay between hardware, software, and services that, at least today, can only be delivered by Microsoft. If the company could leverage that uniqueness into a touchstone (pun intended) for its increasingly impressive software and services play, I think the enterprise – as well as consumer – markets would pay attention.

So maybe hardware is the wrong word, maybe it’s user experiences. Certainly the way Windows 8 operates on phones and touch-enabled laptops is more about the UX than the hardware, and Kinect, if you haven’t tried it, is a pretty amazingly immersive experience for a pretty inexpensive piece of hardware. What is clear from my Win 8 experience is that the more I use the services that Microsoft is providing or supporting on my Windows 8 machines, the more that integration of hardware, software and services becomes greater than the sum of the parts. (Which is pretty much what the new Xbox announcement was really about too.)

Silos of Doom
This pan-Microsoft functionality goes to its ultimate denouement when you look at what Microsoft Dynamics is doing with the full stack of systems software, SaaS services, social, mobile, and, one day soon, Kinect as well. It’s an impressive model of a thoroughly modern hardware/software/services company, bar none.

But that’s the potential. The reality is that structural problems inside Microsoft still make summing the parts somewhere between hard and impossible. And this isn’t a onetime problem that can be solved by some sloganeering – it’s cultural, and these cultural deficiencies need to be torn up by the roots and thrown in the compost bin.

Microsoft’s infamous silos are the biggest candidate for a little mulching: My favorite example is the fact that once upon a time Windows phone users were told to use Google to synch their desktop Outlook contents to their phone, to the general ridicule and shock of Windows phone and Outlook customers. This bone-headed idea graced the official support pages of Outlook and Windows phone despite the fact that the then nascent Office 365 offered an Exchange Server that did a better job synching Windows phones than Google. Of course, that would have required the two groups to talk to each other and work towards a common, cross-silo solution.

This isn’t just a problem from the past. Today, official cross-platform strategies notwithstanding, Windows Phone, Windows Desktop, and Windows Embedded are run by three different groups that also, as far as I can tell, talk to neither each other nor their counterparts in other divisions at Microsoft. Similarly, even after the Window 8 phone launch the Dynamics team had to beg the phone guys for a some Win 8 phones to start working with, and one exec who was finally given one was only able to do so by leaving his first-born son as a hostage (okay, that part’s an exaggeration, but only a little one.)

The resulting lack of synergy and leverage are really damaging the Windows 8 brand, and doing a number on the whole of Microsoft: not a single major enterprise software company I’ve asked recently is planning on a major Window Phone push , customers and partners are giving up on moving embedded Window CE systems to Windows 8 and are moving instead to Android, and for four weeks in a row no big box retailer in the San Francisco Bay Area where I live has advertised a Windows 8 phone. Meanwhile the confusion about Windows 8 touch versus non-touch has smeared the brand pretty much across the board.

Then there’s Lync, which doesn’t. Skype, which does but could do much much more. Microsoft’s BI group, which is centered around SQL Server (a very 20th century notion of the relationship between data and analytics) and frankly doesn’t seem to understand that its greatest role is to be of service to the part of the enterprise where Dynamics lives (as an analyst who covers Dynamics pretty closely, I can count on Django Reinhardt’s left hand how many times the BI team has briefed the Dynamics analysts.) Office, which somehow muscled its way into owning Yammer (huh???), as if social was about creating Powerpoints and spreadsheets instead of driving collaboration into much higher value business processes.

Interestingly, Microsoft has already begun to fix its sales and services businesses to be more pan-Microsoft, and I think the Dynamics group – which, as the smallest piece of the pie, has the most to gain – is clearly and unequivocally pan-Microsoft. But the rest of the company is wallowing in fiefdoms and old tired visions of a past made from monopolizing the PC operating system that don’t, as they say, hunt no more.

So, combing software, services , and user experiences is the way to go. Hardware is part of that, so if Ballmer wants to pull an Xbox, or Win 8 phone, or Surface out of his pocket during his keynotes, more power to him. However the new Microsoft is configured, the fighting against itself has to stop. Microsoft has a great potential destiny to fulfill. But it has get out of its own way first.