Microsoft’s Next Generation

There’s been a lot of buzz around Steve Ballmer’s announcement that he’s leaving Microsoft, and some interesting speculation about who his replacement might be. Anil Dash in particular made some outside-the-box suggestions on Facebook:  Reed Hastings, Jack Ma, Michael Bloomberg. Hastings runs Netflix, Ma runs some of China’s biggest web sites, and Bloomberg is Bloomberg. I take these names as examples of the kind of stature the next CEO at Microsoft will have, not necessarily as actual candidates. Jack Ma is particularly interesting because his taking the helm would be like the ascension of Howard Stringer at Sony, a signal that the company has grown from its domestic roots to become an international powerhouse.

It’s easy to sneer at Microsoft – as many do – for missing out on the smartphone, mobile networking, and video streaming, but it has a more substantial presence in these areas than many realize. Microsoft built the infrastructure for AT&T’s U-verse IPTV service, and the latest iteration of Windows Phone is making inroads in the corporate world, especially in hardware sold by Nokia, the firm that actually pioneered the smartphone before Apple entered the fray. As a New York Times article points out, Microsoft is 38 years old and has already out-lived many of its former rivals and out-performed others:

Among Mr. Ballmer’s generation of tech executives, his post-2000 stock performance is hardly the worst. Shares of Cisco Systems, the biggest maker of computer networking equipment, have dropped 54 percent. Shares of Oracle, one of the biggest business software companies in the world, have fallen 30 percent.

Dell, which is now trying to go private as part of a turnaround, is off about 70 percent. Sun Microsystems, once one of the most influential tech companies, was purchased by Oracle in 2010 for $5.6 billion, 88 percent below its value in 2000.

Not many people remember Digital Research, the company that owned the market for microcomputer operating systems before they stumbled and ceded the IBM PC OS deal to Microsoft. So Microsoft continued to grow and prosper under Ballmer’s leadership, roughly quadrupling revenues at a time when  personal computer sales are actually declining. My personal experience with Microsoft goes back to the 1978 pre-IBM PC days when my employer licensed BASIC from what was then a 12 person company (counting the receptionist and the part-timers) in Seattle that was into programming languages and consulting. Bill Gates didn’t like the way Texas Instruments pushed him around, but the tables turned when TI and its spin-off Compaq got into the PC business.

I have no idea who the next CEO will be and find it more interesting to speculate about the future of the PC, the smartphone, cloud computing, and video entertainment as these are the major challenges and opportunities that Microsoft and its current rivals face.

It seems to me that the PC is far from dead, the smartphone is far from finished, and the future of the tablet is uncertain. One interesting development in PCs is a new kind of “all-in-one” device that combines a laptop, a desktop, and a tablet into a single device like the Lenovo Helix  or the Asus Transformer. The idea is that you have a single device that can function as a high-powered desktop when attached to a docking station (with a big screen or three, disk farm, keyboard and mouse) and a light, portable laptop when it’s unplugged. The topper is that it also becomes a tablet simply by removing the display from the laptop base. The magic is that all the data stored in any of the three configurations has to be accessible in every mode without any error-prone syncing, and the user interface has to be seamless with or without the keyboard and mouse you have in desktop mode but not in tablet mode.  There will also need to be some smartphone integration, and some folks even want to dock the smartphone in the device somehow.

These devices need the latest “Haswell” chips from Intel to get to the right balance of speed and power efficiency, so we won’t see really good examples until November.  The much-maligned Windows 8 is an attempt to make the user interface changes that these new machines will need. It doesn’t make sense to many people at this point because it’s ahead of the curve, but when the chips are ready the platform will be ready as well, more or less, so there’s a method in the madness.

The all-in-one story is about the seamless integration of diverse devices, and a similar story is taking place in the mobile space. Google Glass, and its forerunners like Laster Smart Spectacles, are wearable devices that extend and enhance the smartphone experience. It’s unclear whether consumers are ready for Glass, especially in the privacy-sensitive era that follows the Snowden revelations, but it’s reasonably clear that they will embrace smart watches that link to smartphones and and provide a similar hands-free experience. We’ve seen several generations of smart watches for fitness enthusiasts, such as the Garmin Forerunner and its ilk, but they’re not smart phone integrated even though they have accelerometers, GPS receivers, heart rate sensors, and barometric pressure sensors. More attractive, less clunky alternatives for general use with smartphones are emerging from small companies such as Pebble are starting to appear, but the game-changer will be the smart watches from Samsung and Apple. Samsung is first out of the gate, with a device that adopts Apple’s walled garden approach in that it only works with Samsung phones and tablets.

Now it’s not too hard to see that two little islands of integration are less exciting than one big continent that stretches all the way from the watch and the phone to the tablet, laptop, and desktop. The integration story in this space is ripe for Microsoft’s picking as they still control the desktop and laptop operating system, despite Apple’s inroads. If you want to combine devices from different hardware manufacturers, it’s going to be very helpful to have a somewhat unified software platform, and only Microsoft can do that. We can extend this story across the entertainment space as well, which makes it even more compelling. And who makes the Windows Media Center and IPTV infrastructure? You guessed it, Microsoft does.

Now a lot of Microsoft’s current products are pretty uninspiring; Media Center is a bit clunky, and while I use it to watch cable TV, I don’t have a lot of company. It needs a specialized tuner like the Silicon Dust HD Home Run Prime to decode encrypted cable shows. So part of the next CEO’s job is to light a fire under the product teams to make them think differently about user interfaces and seamless integration. Microsoft is a big company that builds products with a lot of cross-dependencies and it’s hard to make too many changes too fast. Perhaps the way to approach it is to start with the UI vision and go from there.

Now who can do that? I have no clue, but I’d like to see it happen.