What about Windows, Mr. Nadella?

Demotion of desktop OS to second half of mission statement leads some to wonder what changes are in store

In his all-hands strategy email of last week, Microsoft CEO Satya Nadella demoted Windows to a handful of terse mentions deep in the 3,100 communique, a clue how he, and thus the company, now see the firm's long-time cornerstone.

"Windows will deliver the most rich and consistent user experience for digital work and life scenarios on screens of all sizes -- from phones, tablets and laptops to TVs and giant 82-in PPI boards," Nadella said in one of the first uses of "Windows" in his massive message.

That sentence appeared well past the half-way mark in the email: 60% of the message preceded it.

Some observers were struck by the contrast between Nadella's placement of Windows and the importance earlier regimes assigned to the client operating system, which in the September 2013 quarter accounted for 25% of the company's total revenue.

In January 2012, at the Consumer Electronics Show, former CEO Steve Ballmer said, "Nothing is more important at Microsoft than Windows," something independent analyst Ben Thompson pointed out on Friday (paid subscription required for Thompson's analysis).

"Demoting Windows all the way to this point in the letter is a dramatic shift, said Thompson (emphasis in original) as he took to task others who claimed that the email was the same old-same old Microsoft. "Nadella not even mentioning the OS for the first 2,000 words sends a very different message [than did Ballmer]."

Ballmer stressed Windows' importance more recently than 2012. Last year, in a press conference during which he outlined his corporate reorganization plans, Ballmer said, "In a sense Windows is the definition of a device called the PC."

Although Windows will not vanish from Microsoft or its balance sheet, Nadella's focus on productivity and his repetitive use of "cloud OS" as the most important platform was clearly a major shift in thinking.

"Our cloud OS represents the largest opportunity given we are working from a position of strength," Nadella said. By "cloud OS," Nadella was referring specifically to the combination of Azure and Windows Server, a notion he had pushed long before he became CEO: In mid-2012, when he was the head of Microsoft's Server and Tools Business division, Nadella touted the cloud OS concept to attendees of the company's TechEd North America conference.

"The combination of Azure and Windows Server makes us the only company with a public, private and hybrid cloud platform that can power modern business," Nadella asserted last week. "Our cloud OS will also run all of Microsoft's digital work and life experiences."

Windows -- the OS on devices -- got shorter shrift.

It will still power millions of devices -- for PCs there is really no alternative beyond Apple's OS X and Linux, which run less than 10% of the world's computers -- but in Nadella's world, the strategy for the Windows client seemed underwhelming.

"We will invest so that Windows is the most secure, manageable and capable OS for the needs of a modern workforce and IT," Nadella wrote, sounding a very status quo note. Only in a line moments later did he spell out his goals for Windows, goals which Microsoft has worked on for decades. "Windows will evolve to include new input/output methods like speech, pen and gesture and ultimately power more personal computing experiences," he said.

More than anything else, Nadella's comments on Windows were a recognition of the operating system's new place in the computing universe. Where once it was the OS by virtue of its dominance on personal computers, the explosion of mobile devices, particularly smartphones, has relegated it to a no-or-little-growth market, far behind Google's Android as the world's most popular operating system.

Nadella said he will provide more details of his plans in the next weeks, notably at the July 22 earnings call with Wall Street, but for now, his ideas about Windows were unclear.

His deemphasizing Windows, however, could herald changes in how Microsoft sees Windows' place, and thus how it releases or even charges for the OS.

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