Microsoft's new CEO: The technology isn't his problem

Not just business software, for his sake

Server and Tools made Microsoft $20bn in its last fiscal year - the second largest earner after the business division, which includes Dynamics. Windows was third.

While Nadella featured in The Reg's list of 14 possible candidates for CEO he came with a big caveat: lack of experience running a business the size of Microsoft.

Server and Tools was his first big ship and he ran that for just three years. It was Bob Muglia who did the heavy lifting on Server and Tools - handing Nadella a $15bn business in 2011 when he left following a disagreement with Ballmer over cloud.

If Microsoft wanted a rounded, blue chip CEO like a Mulally, it didn't get one in Nadella. What it does have is a gifted product-unit chief with a strong background in business software.

What this means is that Nadella as CEO is not the end of this story; rather, it's the opening of a new chapter. Microsoft's positioning of itself as either a consumer and enterprise company, or a company that straddles both, has yet to become clear.

The players in this battle go beyond Nadella and are already in place.

Those individuals are new chairman John W Thompson, incoming board member Mason Morfit, executive vice president of operating systems Terry Myerson, former Nokia CEO and incoming head of devices Stephen Elop and Ballmer - who remain on the Microsoft board... not to leave out Bill Gates.

Let's take them individually.

Of all the movers, it is Thompson who has really come out on top and who emerged as the power behind the throne of the CEO at Microsoft.

Hitherto just a board member, it was Thompson who - if we're to believe the reports - persuaded Ballmer that was time to step down last year. Thompson then led the recruitment panel to find a replacement with Gates, and not only helped pick the new CEO but also ousted Gates as chairman and taken his role.

What power can a Microsoft chairman wield if they are motived? Chairman Gates swung the board to behind Ballmer's purchase of loss-making VoIP telco Skype.

Now Gates is gone, and - supposedly - his influence over the board with his baggage and blinkers of a Windows-PC-centric world consigned to the past.

Thompson, as the man who helped pick Nadella, will plays a crucial role as in keeping the board inline and both protecting and mentoring his man.

Ballmer has done the heavy lifting on One Microsoft. He even bought a phone company. And contrary to what you will read, "innovation" won't come from Nadella - that's no longer his job. It should flow through that new structure.

Ballmer's presence is important, too. He, too, will likely be called on to continue mentoring Nadella and ensuring no part of the overall business is neglected. Thompson once headed up antivirus company Symantec and also ran the sales and marketing on software at IBM. Nadella might be a CEO with a technology background, but a CEO needs to be business captain first.

Their role will be doubly important because the battle over "what is" Microsoft is not finished just because there's a new CEO. Joining the board is Mason Morfit from investor ValueAct. Morfit believes Microsoft should break fidelity with Office only on Windows and it should embrace new operating systems and devices. Also, that Microsoft should get out of the consumer market by dumping Xbox.

Ballmer and Thompson believe Microsoft must retain its presence in consumer.

He'll also, it seems, be the voice in Nadella's ear on the consumer stuff.

There are another group of managers. who will be important under Nadella Myerson will be Nadella's go-to man on the innovation mission, given he has control over Windows on clients and mobile phones. It will be Myerson who realises the merger of Windows 8 and Windows Phone not the CEO.

The remaining question will be the relevance or lack thereof of Elop.

Once reported as in the running for Microsoft CEO, Elop will now - as planned - head the devices team running Surface, Windows Phone and Xbox.

These are strategically vital divisions in Microsoft's play for cloud and consumer - too important, I'd say, to be handed to Elop.

Three years after becoming Nokia's CEO, his company announced net sales for the phone business down 29 per cent for the fourth quarter to €2.63bn ($3.6bn) net phone sales for the full year were down 29 per cent, to €10.74bn ($14.71bn).

It's hard to see what Elop can do other than damage Microsoft's hopes in devices. The question is how long he stays and under what circumstances he leaves.

Microsoft has a CEO with a technology background: an "outsider" within Microsoft and an enterprise IT guy who has been running a diversified enterprise and consumer operation.

Ballmer has done the heavy lifting on One Microsoft. He even bought a phone company. And contrary to what you will read, "innovation" won't come from Nadella - that's no longer his job. It should flow through that new structure.

It is Nadella's job to grow the business and expand into devices and cloud to offset Microsoft's reliance on two of the three engines - Office and Windows client

In doing that, he must blast through some gnarly philosophical problems that a person who'd risen up the ranks through the core business would have struggled with.

Those questions include: whether to decouple Office from Windows and allow it on iOS, Android or even Linux. Should other products like SQL Server also be de-coupled from Windows and allowed to run on Linux - driving so many cloud servers?

Does he yield to Morfit and dump Xbox to satisfy the moneymen? And what if he resists them? Will that mean pitchforks and burning torches again? What of Bing?

For all the billions poured in and partnership with Yahoo!, Bing still has less than a fifth of the world's search traffic and it's hardly nibbled Google's market share while the online business is a regular loss maker. How does Bing grow and stop losing money?

if he dumps Xbox or Bing, what will be the cost to current and potential revenue and to Microsoft's prestige?

Mobile is a wicked mistress to tame. Sure, Ballmer handed Nadella a mobile business to put Windows Phones in the market, but things aren't going well.

Nokia just reported slumping quarterly and yearly sales in phones as Elop's big bet on Windows Phone has struggled and Android and Samsung dominate.

Now, just as Microsoft is about to absorb tens of thousands of Nokia staff the market that Microsoft and Nokia should really be devoting their attention too looks like it's shifting again and fragmenting further. First it was smartphones, then tablets, then small-screen tabs, now bog standard phones/tabs you make calls from, called phablets.

Nadella on Tuesday quoted Oscar Wilde to illustrate what he believes is next for Microsoft: "We need to believe in the impossible and remove the improbable."

I prefer to paraphrase the great WWII leader Brit Prime Minister Winston Churchill's words after the second battle of El Alamein that turned back the seemingly unstoppable Axis advance.

Nadella's appointment as CEO is not the end of Microsoft's challenges - it is not even the beginning of the end. But it is possibly end of the beginning now that Ballmer is gone. ®