Symbolic wave of change hits the new Microsoft

Lydia Winters from Mojang talks about the "Minecraft" video game for HoloLens during game publisher Microsoft's Xbox media briefing. (Reuters)

Lydia Winters from Mojang talks about the "Minecraft" video game for HoloLens during game publisher Microsoft's Xbox media briefing. (Reuters)

In 1986 Microsoft was about as cool as a company could get. Its software dominated the market, its IPO had just created thousands of millionaires, and all the smartest geeks in the world wanted to work there. 

Today, Microsoft’s most ambitious new projects sound like pure science fiction. HoloLens is a “augmented reality” headset that projects three dimensional, interactive holograms into the space around you. At a live demonstration in April this year, the company showed people playing with virtual pets and viewing movies on a virtual television screen that followed them wherever they went. 

And this isn’t a proof of concept scheduled for release in a decade. Microsoft has built support for HoloLens right into Windows 10, the newest version of its blockbuster operating system, which is due for release at the end of July.

Whether anyone actually buys a HoloLens headset with their copy of Windows 10 is largely beside the point. The project is symbolic of a change in attitude that has permeated the entire company. It’s a symbol that says “we’re not an irrelevant dinosaur - we can contribute to the future of technology”.

Its easy to overstate the influence any one person can have on a company, particularly one the size of Microsoft, but since Satya Nadella took over as chief executive in February 2014, the company has shifted quite radically. 

And it’s not all sexy research and development projects - Mr Nadella has pushed through bold and uncomfortable changes to the core of Microsoft’s business. Under his leadership the company has begun aggressively marketing the online versions of its Office packages - known as Office 365 - even though it makes less money from these versions than it does via traditional channels.

Microsoft has even begun giving its premium software away for free - something that seemed unthinkable two years ago. Anyone with an iPad or an Android tablet can download and use products like Excel and Word without any charge. 

Granted some of the crunchier features require a subscription to Office 365, but giving away any version of its most profitable products is revolutionary for Microsoft.

These aren’t acts of charity. Mr Nadella has realised something that his lumpen predecessor seemed unable to grasp: that the software business is changing, and doing so rapidly. Businesses are tired of spending large chunks of capital upgrading desktop software every few years, and are increasingly turning to online alternatives.

Google, which is now worth more than Microsoft, is slowly but surely stealing market share across a wide spectrum of products. Its online spreadsheet and document editors are not quite as feature-rich as Microsoft’s products, but they are good enough for most users and they are much cheaper for businesses and free for home users.

But there is an even more uncomfortable change on the horizon - one that Mr Nadella is determined to face head on. After decades of seemingly unstoppable growth the personal computer market is now in steep decline. The worldwide market for desktop and laptop computers shrank by almost 10% in the last year.

The future of computing is clearly in newer technologies like smartphones, tablets and wearable devices. But realising that obvious fact and acting decisively on it are two different things. Mr Nadella’s predecessor, an odious bully named Steve Ballmer, paid lip service to this new reality but never truly accepted it.

As a result Microsoft finds itself a very distant third behind Google and Apple, even after buying Nokia in an attempt to jumpstart its own mobile device offering. Last week Mr Nadella moved to cut the company’s losses in that disastrous deal, announcing that 7 800 staff will be retrenched and writing off $7.6-billion - nearly the entire value of the acquisition.

Whether Microsoft will recover and close the gap with its competitors remains to be seen, but with Mr Nadella at the helm it seems possible. He has managed more important and positive changes in the first 18 months of his tenure than Mr Ballmer achieved in more than a decade.

It’s tempting to paint Mr Nadella as a white knight, swooping in to save a struggling company, but in reality the seeds of the new Microsoft were there all along. All that was required was the right leader with the right focus to unlock all this latent potential. 

As a result the freaks and weirdos are coming out of the woodwork again at Microsoft. These are the people who move an industry forward - the people with ideas that sound absurd until they are reality. After years of suffocating inertia, Microsoft is suddenly a cool place to work again. It’s been worth the wait.

 
Alistair Fairweather

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