Microsoft's New CEO - What's Next for Microsoft?

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STAMFORD, Conn., February 18, 2014

After Microsoft's new CEO, Satya Nadella, settles into his new position, Microsoft's efforts at reinvention will accelerate, creating both opportunities and risks. In today's blog post, Merv Adrian, research vice president at Gartner, lays out some of the first actions Mr. Nadella and Microsoft should focus on, as well as some of the challenges that can be expected.

Mr. Adrian said:

Nadella's "insider" understanding of Microsoft's culture and his effectiveness in cross-team communication and collaboration could help him reshape Microsoft for the digital era — which will be key for the company to attain the visionary technical leadership to which it aspires.

Nadella's main challenge consists of evolving Microsoft's existing businesses (including its enterprise offerings, which represent half of its current revenue) while reinventing Microsoft to make it relevant in mobile and cloud-centric markets.

Unlike his sales-focused predecessor, Steve Ballmer, Nadella has an engineering background; thus, his selection has reinstated the model of a technically minded CEO driving the company's technical vision. But Nadella also must overcome several challenges.

He lacks direct experience in the mobile market. His insider status raises the risk of his being overly respectful of existing businesses, and hanging back from tough decisions that potentially threaten them but are critical to generating innovation. He will also need to shake up what is widely viewed as a culturally dysfunctional management structure.

Nadella must quickly demonstrate that he is not backing a "business as usual" strategy, and that he recognizes that design is front and center in client computing for both consumers and enterprise users and that a mobilized environment has replaced the desktop. The next six months will show how well Nadella and Gates collaborate to determine Microsoft's technical direction.

We expect Microsoft's trajectory will be clear by year-end 2014. Do not expect radical changes in the company's overall "devices and services" strategy; instead watch for organizational shifts, product design changes and updated product road maps to address a mobile- and cloud-dominant world.

Microsoft must:

  • Establish a vision of itself as an innovative, disruptive force in IT. Concentrating on mobile technology and leveraging lessons learned from gaming can help Microsoft appeal to the next generation.
  • Emphasize design to enhance ease of use for consumers, and apply these lessons to its considerable assets in IT infrastructure to change its image of a legacy enterprise vendor competing in a consumerized market.
  • Enable entrepreneurs and developers to develop new business value atop a common Windows client environment with unified, cross-platform services. Microsoft must enable a complete, compelling set of apps that attracts developers and can compete with and within iOS and Android environments.
  • Acknowledge its customers' heterogeneity by supporting Google and Apple client environments, the Linux/Java environment on servers, and cloud-based services in general.
  • Deliver compelling experiences and solutions to both IT and to non-IT buyers.

Additional analysis can be found in the research note "Nadella Must Disrupt Microsoft Models to Establish Market Leadership". The full report can be found on the Gartner website at http://www.gartner.com/doc/2664432.

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