Microsoft's man in Nokia: he's all business
Ballmer's remit expands
Analysis Nokia's decision to poach a Microsoft president as chief executive is as surprising for Nokia watchers as it is challenging for the company he leaves behind.
The embattled cell-phone maker's new CEO is Microsoft president Stephen Elop, an execution man with a track record of safely running well-performing businesses.
On Friday, Elop promised to take Nokia through a period of change and disruption, vowing to respond to disruptive forces in the cell-phone market.
Elop was named CEO on the day mega-analyst Gartner forecast that Android will become the world's second largest smart-phone operating system this year. It's poised to usurp Nokia's Symbian and take over the number one spot after 2014.
But if Nokia was looking for a consumer whiz or a business visionary to lead the company's long-awaited fight back against the iPhone and Android Blitzkrieg, it failed.
Elop is "all business." For the last two years, he focused on business applications at Microsoft, and before that, he handled network infrastructure as chief operating officer at Juniper Networks.
For two years, Elop has pretty much stewarded the already humming Office, SharePoint, CRM, and unified communications businesses at Microsoft.
Office grew by 15 per cent in the last quarter. As for product push, he oversaw the release of one version of Office and SharePoint - versions 2010 - and updates to Dynamics CRM.
Office and Dynamics did move to the browser, but that was thanks to work begun before his time and inspired by Microsoft's white-haired chief software architect Ray Ozzie.
The really hard work on building Office was done by his predecessor Jeff Raikes, a Microsoftie for 26 years who quit to help Bill Gates save humanity.
Microsoft chief executive Steve Ballmer summed up the loss of Elop Friday in a short, two-paragraph email in which he called Elop a "good steward of the brand and business during his time." Raikes got a far more effusive good-bye from Ballmer.
Microsoft's software steward is walking into a briar patch of connected challenges that must be detangled and dethorned if Nokia is to hold off Android in the next few years.
He must reverse eroding market share and shake up a company that's been slow to respond to the iPhone or Android and still believes its current efforts are a success.
Nokia's management genuinely believes that Ovi is a success despite evidence of unhappy developers making less money than they'd expected due to hacked apps, low customer numbers, and a cheapness on behalf of those who do show up - expecting cheap or free software.
The company's hardware-engineering-centric culture must change too.
The success of the iPhone and Android is more down to the apps and online services integrated with the operating system and device, making them easy, cool and fun to use.
Developers, developers, developers
Driving the phones have been developers, who've been building apps consumers want. Developers have been genuinely excited by the iPhone for being "cool" - despite being closed - and Android for having open code and being available on multiple devices. Symbian lacks any excitement despite making more sense in terms of serving a larger addressable market.
Hard decisions will need to be taken as a result of the industry shift to software and services around phones.
The toughest decision will be what to do with Symbian. Under outgoing Nokia CEO Olli-Pekka Kallasvuo, Nokia placed all its bets on Symbian by buying out other consortium partners and open sourcing the Symbian code in the belief if you release it they will come.
But Symbian has done nothing but lose market share, and as it sinks, it takes Nokia's handsets with it.
Symbian is an underfunded adjunct to the main Nokia mothership. The company's low-balled efforts to woo developers, in the mistaken belief coders will simply love the code for being open source.
It's time to either pour money into Symbian's industry and developer outreach or cut Nokia's losses and jump on a platform with growth - or at least the potential for growth.
A more insidious problem has been Nokia's tribal corporate culture. This must be overcome if Nokia is to branch out beyond building handsets.
An example of the tribalism burst out in 2009, when the disgruntled Maemo group tried to sabotage the chosen child Symbian by telling the press that Nokia was dropping Symbian for Maemo.
On a more day-to-day basis, there are structural problems. Handset and Ovi staff are both remunerated by the apps people run on their Nokia handsets – apps like Facebook.
Problem is, Ovi wants Facebook downloaded to phones from the store, while the handset people want Facebook pre-installed. Ovi won, despite a lack of traffic to its store.
Maybe in hiring a former Microsoft executive, Nokia's board hopes to solve some of these issues – at least the software and services questions.
Microsoft and Nokia have had a spasmodic relationship over the years: agreeing to put Microsoft's Flash challenger Silverlight on certain devices, for example, but not others.
It's possible Nokia's hire hints at where it really wants to go: into a closer partnership with Microsoft. Elop's team has been working with the faltering cell-phone giant to put Microsoft software like Office Mobile and Communicator on its Symbian smart phones.
Our man in Nokia
In a Machiavellian world, Elop could be Microsoft's man inside telecoms. Finally, an army of devices for Windows Phone 7, with phones hooked into its Windows Phone marketplace. Despite slipping, Nokia remains the world's largest supplier of cell phones.
While that theory has potential, new leaders of companies are rarely stooges for their past bosses. Paul Mauritz, for example, has turned into a tough adversary for Microsoft at VMware despite helping build Office and SQL Server and different versions of Windows over the years.
Past is prologue, according to vice president Joe Biden during the 2008 US presidential election. If so, then Nokia future success against the iPhone and Android is far from clear based on its new CEO's experience.
At Microsoft, Elop's exit leaves Steve Ballmer with an even bigger succession crisis than before. Two of Microsoft's five product groups are now being run directly by Ballmer. The president of entertainment and devices Robbie Bach announced this summer he's leaving Microsoft. Entertainment and devices is home to Windows Phone 7.
Ballmer is now running both groups, presumably until he finds full-time replacements. Where those replacements come from, though, is unclear.
Like Nokia, Microsoft could use a little consumer mojo on phones, as Gartner also predicted Friday Windows Phone will continue to lose market share.
By 2014, Gartner expects open-source platforms will account for more than 60 per cent of the market for all smart phones. Microsoft will be relegated from fifth to sixth place behind Linux newcomer MeeGo from Nokia and Intel, making this October's highly anticipated Windows Phone 7 launch a sideshow to the march of history.
On business applications Microsoft could use somebody with a real foot in the clouds, to convince people it's serious about online services and not simply happy relying on the existing Office and SharePoint franchises as money makers. ®