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Meet the New Microsoft, Not the Same as the Old Microsoft

Bill Gates, you knew about. The press has written stories, sonatas and sagas (well, stories, anyway, and lots of them) about the departure of Microsoft's legendary leader. Redmond has worked to ensure his line of succession, with Steve Ballmer continuing as CEO mostly for the business side of things and Ray Ozzie taking over the technology reins.

But there's a lot more to Microsoft's transition than just Gates' departure. Bruce Jaffe, architect of some of Microsoft's biggest acquisitions -- including the massive aQuantive buyout -- will be gone by the end of February. And, perhaps more critically, Jeff Raikes, president of the Microsoft Business Division, the group responsible for a little product called Office, will be gone -- "retired" -- by the end of the summer of 2008.

Raikes' replacement, Stephen Elop, formerly of Juniper Networks and Adobe, is already in Redmond preparing to take over one of the company's biggest roles. But Elop isn't the only new arrival in Microsoft's executive cabinet. In fact, there's been so much executive shuffling in the Pacific Northwest lately that even those who are trying to keep score are having trouble just keeping up.

The question, of course, is what all of this means for Microsoft, its partners and its customers. What's happening looks to RCPU (and to others, surely) like the exodus of old-school Microsoft and the birth of a new generation in Redmond -- one that could steer the company toward Web-based applications and Software-as-a-Service, and (gently) away from the old Windows-Office juggernaut.

We're not suggesting that anybody's being put out to pasture here. We are noting, though, that the new generation coming in looks very Web-focused and that a lot of the new-ish arrivals are outsiders, not Microsoft veterans moving into new roles. Ozzie, Elop and COO Kevin Turner have all joined from other companies within the last few years, and former aQuantive CEO Brian McAndrews has taken control of a big chunk (understandably) of Microsoft's high-priority advertising business.

We're also not suggesting that Microsoft is going to stop selling Windows, Office, Windows Server, Exchange or any of its other moneymakers any time soon. Microsoft's new executive hires, however, do seem to reveal a corporate commitment to become more "Web 2.0" and less desktop and fat client. Raikes is hardly a luddite -- after all, he did add SharePoint capabilities to Office and is still a driver of Microsoft's unified communications initiative -- but his years of experience in Redmond and desktop-heavy résumé do look a little old-school in comparison to Elop's Adobe pedigree.

Observers these days, sometimes in this newsletter, love to say that Microsoft is going to have to scramble to keep up with more Web-savvy competition from companies like Google (and Adobe, for that matter). After further review -- yes, we've been watching football again -- RCPU is not so sure about that. Microsoft is still the giant of the software industry in terms of market share and influence on users and the channel. Our take isn't that Microsoft, with its fresh faces and new categories of technology, is scrambling to keep up with competitors, but rather that it has decided to move corporate IT investment in a new direction -- one that will have progressively less to do with Windows and Office -- at its own speed. Call it a soft landing for the desktop-heavy Microsoft economy, engineered and controlled by Redmond.

Oh, sure, Microsoft is way behind in some key areas -- consumer search, for instance -- and unlikely to make up the gap, but there's really no other company in the industry outside of maybe Cisco that wields the power over corporate money that Microsoft does. Microsoft sees the demand for SaaS, for virtualization, for managed services, and it's reacting to it without killing its own current cash cows of Windows and Office. It might not be the leader in those new categories -- in terms of either market share or innovation -- but it's there, and our guess is that Microsoft will be powerful enough to move its customers to Web-based business models at its pace rather than have to chase after a customer base fleeing to other vendors.

And the competition? Oh, it'll be there -- it is there, and it's strong -- but it won't be able to just run away with an installed base that includes pretty much every company in the world and has such a massive financial commitment to Microsoft already in place. Some companies -- think IBM -- fail to see technological and generational shifts coming and miss them altogether. Microsoft is taking steps now not to make that mistake -- and to take control of its own destiny as businesses gradually shift away from the desktop.

Usually, markets move companies, but sometimes companies move markets. Microsoft wants to be in the latter category, not the former.

What's your take on Microsoft's new blood and on the departure of bigwigs like Jeff Raikes? Send it to [email protected].

Posted by Lee Pender on January 15, 2008


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