In his annual letter to shareholders, Microsoft CEO Steve Ballmer spells out the future of Microsoft, as well as the “fundamental shift” taking place in its business.
The letter is an extension of what Ballmer has been hinting at for the last few months: Microsoft is changing and the way it views its business is changing too.
The team at mashable parsed through the shareholders letter and gave a few key takeaways.
Microsoft: A Devices and Services Company
At the start of the letter, Ballmer calls Microsoft a “devices and services” company. Ballmer writes:
This is a significant shift, both in what we do and how we see ourselves. As a devices and services company. It impacts how we run the company, how we develop new experiences, and how we take products to market for both consumers and businesses.
Bill Gates’s original vision for Microsoft was “a personal computer on every desk and in every home running Microsoft software.” With the exception of the Xbox and the Zune, software has remained Microsoft’s priority.
Instead, hardware was left to others. Later this month, that’s going to change. The Microsoft Surface will, for the first time, put Microsoft in direct competition with its various hardware partners.
Ballmer notes that, “there will be times when we build specific devices for specific purposes, as we have chosen to do with Xbox and the recently announced Microsoft Surface.”
While other hardware partners have their own Windows 8 tablets in the works, it’s already evident that Microsoft has ruffled some of its OEMs feathers.
In June, I went as far as to make a prediction that within a year of its release, Surface RT would be the de facto Windows 8 tablet experience. I remain convinced that this is true.
While Ballmer stresses the importance of partners in his letter, he also says that “we will focus relentlessly on delivering delightful, seamless experiences across hardware, software and services.”
The Cloud is Microsoft’s Next Big Business Play
Ballmer name-checks “the Consumerization of IT” in his letter, noting that it’s “one more reason Microsoft is committed to delivering devices and services that people love and businesses need.”
That’s a nice way of saying that web apps, cloud infrastructure and mobile operating systems such as iOS and Android are encroaching on Microsoft’s stronghold in the enterprise.
In the old days, a business would pay for Windows licenses on every machine, maintain an Exchange and SharePoint server and create Windows-only internal applications to get things done day-to-day. Today, businesses are moving to web apps instead of Windows software, cloud-hosted document solutions such as Dropbox and Box.net and increasingly turning to Gmail in lieu of Exchange.
As a result, we’ve seen high penetration of the iPad in the Fortune 500 (not to mention its huge adoption in small business and education) and a much more open philosophy towards using Macs in the workplace.
Ballmer says that “helping businesses move to the cloud is one of [Microsoft’s] largest opportunities.” “All the online services people use today, both from Microsoft and other companies, run on servers in datacenters around the globe.”
In other words, Microsoft is willing to make more concessions about where its deployments and services will run — even if it means deploying services in a datacenter that belongs to a potential competitor.
It’s All About Windows
When discussing Microsoft’s opportunities for the future, Ballmer says that the company will focus on “firmly establishing one platform, Windows, across the PC, tablet, phone, server and cloud to drive a thriving ecosystem of developers, unify the cross-device user experience, and increase agility when bringing new advancements to market.”
This reinforced commitment to Windows is nothing new for Microsoft, but it is interesting that the “one platform” strategy is still where the company leadership is hanging its hat.
Windows has always been a core part of Microsoft’s business, but with Windows 8, the company is really pushing to have unified messaging across all platforms. More than just sharing the same name, the various versions of Windows for different devices will now share a common foundation.
The confusion between Windows 8 RT and regular Windows 8 aside, the fact that even Windows Phone 8 is now running on a subset of Windows 8 on the desktop is a big deal for Microsoft.
It’s a move not dissimilar to what Apple does with OS X and iOS and its an essential part of making it easy for developers to target specific platforms.
Can Microsoft Thrive in This New Era?
Ballmer closes his letter by noting that “it truly is a new era at Microsoft ” and that the company has “an unprecedented amount of opportunity for both this year and the long term.”
Still, given all the changes that are taking place within Microsoft — as well as in the industry as a whole — thriving in this new era isn’t going to be easy.
What remains to be seen is if it can continue to drive revenue and profits from the new aspects of its business the same way it has in the past.
What do you think of this new era for Microsoft? Let us know in the comments.