Steve Ballmer’s Classy Exit

Next Story

SalesPredict Raises $1M In Seed Funding Through A Marriage Of Analytics And Sales

Today, Microsoft CEO Steve Ballmer met his critics head-on by announcing that he will relinquish his title within the next 12 months. Microsoft’s stock ticked higher on the announcement, adding about $18 billion to the company’s market capitalization.

The market responded to the impending leadership change not with exultation, but with grim relief.

Microsoft is a company struggling to be reborn, but its new trajectory is something Ballmer steered. Were mistakes made under his tenure? Certainly. But that doesn’t mean Ballmer isn’t leaving on a high note. In fact, his exit is classy: He stuck around longer than few others would have, and the concluding years of his tenure as CEO have been his best.

You can view Microsoft from a pre-Windows 8 and post-Windows 8 perspective. And by pre-Windows 8 I mean before the company embarked on its new creation. That was before Apple released the iPad, as you certainly recall. Since then, Microsoft has enacted a number of changes that bear remembering. From the re-org to a new business model to cloud-based businesses and back to app stores, it has been a big few years for the company, and Ballmer stayed until a new path was forged.

Let’s take a look at the Microsoft Ballmer is leaving behind.

Re-Org And A New Way To Sell Software

Microsoft recently made two massive internal changes to its management and goals: A complete internal reorganization to better align its efforts and a business model switch away from selling software to instead vending both services and devices.

In practice this means that Microsoft broke its famously bickering business units into new groups in hopes of better synergy. Hardware was aligned, and the like. And some rose during the changes, such as Terry Myerson who is now the head of the Operating Systems Engineering group, and some fell, such as my personal favorite Tami Reller, who slipped from co-running the Windows group to head of marketing for the company.

However, the change dovetailed nicely into the company’s new business model: No more software in a box. Instead, have a service on a subscription payment and a device. The new Microsoft is potentially more nimble, precisely as the company moves to a faster software cycle (think Windows 8.1 in a single year). You can’t have one without the other, as the old fabric of Microsoft would have rent under the stress.

Bringing this back to Ballmer, the man stuck it out until all this was set and underway. He could have shrugged it off and shipped out, but instead he ensured that the company he was leaving was as prepped for the future as possible.

We don’t know yet if the reorg will succeed, or if the device side of Microsoft’s new business model will find market acceptance. However, we can say that the old Microsoft was becoming quickly obsolete. Big bets and big changes were needed.

I can’t predict the future, but the Microsoft of five years ago would have been fucked by it.

New Products Driving Revenue Growth

In the past few years, Microsoft has minted several new billion-dollar businesses, products that generate 10-figure revenue each year. Azure, Office 365 and Lync are driving Microsoft’s top line forward even as Windows slips with the contraction of the PC market.

These efforts are, respectively, out of character, gutsy and proof that some old formulas can still work. Azure, born from a slit in Bing’s stomach, is Microsoft’s cloud computing service that plays nicely with open source and any competitor. Office 365 is a reformation of the Office product, an essential profit cannon for the company; it is a realization that an old model is failing, even as it prints cash. And Lync is old-school Microsoft, selling a service to enterprise customers in the way that it always has: Through its massive partner network.

But Lync is also baked into Office 365 SKUs, making it a SaaS product like the rest. Forget per-seat one-time fees. The future is recurring revenue and Microsoft knows it. The company is busting a hump to reform its products to fit that new norm. Done? Not even 10 percent. But some of the products that will solve the Windows revenue slump are now mature enough to walk alone.

Platforms, Baby

Microsoft, until quite recently, was the platform. Then Apple came along and blew that up, followed by Google’s Android, which further exploded Microsoft’s hegemony as the platform company de rigueur.

Well, those days are over, and it can be argued that Android is now a larger platform than Windows. But rather than retreat from Windows, Microsoft’s response to this, under the gaze of Ballmer, has been to greatly expand the damn thing — from your desktop to every screen you can imagine. Phones? Yep. TVs? Yep. Tablets? Yep. Trick bit on that last one, as Microsoft’s core Windows experience is built for tablets, unlike Apple’s OS X.

The kicker here is that Microsoft is bringing a shared operating experience to every possible slice of pixel. And it is uniting it with a shared code base that will allow developers in the future to build once and run everywhere. You want a bold gambit? That’s one.

Microsoft is not there yet. But as we have seen before, Ballmer stuck at Microsoft until the vision was firmly under way. Windows Phone 8, Windows 8, and the Xbox One are the bones of this transformation, and all were released under Ballmer’s time in the driver’s seat. (This assumes Ballmer doesn’t race out the door before the Xbox One goes on sale. I don’t think that will happen).

A short coda on Windows Phone and Surface. Talk about the peanut gallery. Ballmer has been hit, dinged and shellacked for both products. Windows Phone 7 Series — as it was once called — was a joke, people said, that would never work. The market would only bear two platforms, so the thinking went, and Android and iOS were the best. So forget it, Microsoft.

Billions of dollars and years later, Ballmer has carved out a growing seat at the mobile table. Few thought this was possible. Ballmer spent and pushed.

The same will come true, eventually and in one form or another, with the Surface product. Microsoft views the project as core to its future as a device company. Therefore it is playing a five- or 10-year game, and not one in which short-term revenue is god. The company is richer than Croesus, and generating staggering profits each quarter. Not Apple money, mind you, but big sums all the same, and so it can afford the journey.

If Ballmer had exited, say, during the Windows 7 period, I think that his time at Microsoft would have deserved a different badge. However, missteps included, the recent few years have been a fundamental shift for Microsoft, leading it to functional preparation for the future, which is to his credit. If the company had failed, we would have blamed the leader. So as the company finds new success, we should laud the boss. Let’s be consistent, at least.

Presuming that Ballmer’s successor is competent, he or she will be inheriting a firm in transition, but one with a future that is quite interesting. And it hasn’t been too long that we’ve been able to say that about Microsoft.

So, all right Ballmer, you never would have dinner with me, but points for the classy exit.

Top Image Credit: D.Begley