Two Visions of the Future for Microsoft’s New CEO

Decoding the tech world.
Feb. 6 2014 9:03 AM

Microsoft’s Next Decade: Sliding Doors Edition

One new CEO. Two visions of the future.

140205_BIT_SatyaNadella
What if one split second sent the Microsoft CEO's life in two completely different directions?

Photo illustration by Lisa Larson-Walker. Photos by Dan Taylor/Heisenberg Media/Flickr

The Amazon Post, March 13, 2023
NADELLA TO STEP DOWN AS MICROSOFT CEO

David Auerbach David Auerbach

David Auerbach is a writer and software engineer based in New York. His website is http://davidauerba.ch.

Satya Nadella announced his intention to step down from his position as Microsoft CEO today, ending a nine-year period that saw a remarkable renaissance for the aging tech giant. It was not known at this time who would replace him.

Nadella, who was appointed CEO of Microsoft on Feb. 4, 2014, was only the third chief executive in the company’s 50-year history, following the tenures of founder Bill Gates (1975-2000) and Steve Ballmer (2000-2014). After Ballmer’s hasty, forced retirement in 2014, following the technological and financial disappointment of Windows 8, Nadella—who had been with Microsoft since 1992—was initially seen as the safe, underwhelming choice, a company insider who lacked Gates’ outsize personality and vision. His quiet, nonconfrontational style certainly contrasted with that of the aggressive, blustering Ballmer.

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With Gates staying on in an advisory capacity, Nadella quickly put together a crew of experienced technical experts, hired, many at great cost, from such competitors as Google, Yahoo, and Facebook. They then created a secret—and successful—“roadmap” to revitalize the company and rein in its inefficiencies.

In his first interview after being announced as CEO, Nadella declared he would “ruthlessly remove” any obstacles to innovation at Microsoft. He was determined to put a stop to the design-by-committee process that led to such expensive boondoggles as the Kin phone and the Surface tablet, and so he drastically flattened the company’s organizational structure. Approximately 25 percent of managerial positions were eliminated in this “pancaking”; a number of executives and managers were subject to buyouts or otherwise encouraged to leave. In all, the company shed approximately 15 percent of its R&D workforce in the first three years of Nadella’s tenure.

Recognizing the decline of the PC and its drag on Microsoft’s fortunes, Nadella sequestered the Windows and Office behemoths from the rest of the company, signaling that the two legendary pieces of software would no longer be sites of innovation but instead would serve to provide an annuity for new areas of business. While maintaining tablet support, Nadella shocked many by rebranding Windows 9 as simply “Windows” and announcing that it would be the last major release of the software. The product, internally branded “Windows F” (for “final”), would be supported on PCs and tablets indefinitely, with incremental compatibility and feature updates released quarterly, but no more functionality or interface overhauls.

In a direct rebuke to the Gates and Ballmer years, where the Windows platform was seen as Microsoft’s central product, Nadella’s move ended attempts to extend the Windows brand to new platforms.. It marked Windows as an albatross, a legacy platform that was no longer a growing business. Nonetheless, businesses continued to use Windows well into the following decade and continued to provide the majority of Microsoft’s revenues well past 2020.

Nadella ramped down or terminated many of Microsoft’s noncore businesses. The mostly unprofitable Xbox video game console was spun off into its own company, where continuing financial troubles led to its purchase in 2017 by Sega. Web search Bing was put into maintenance mode, having failed to make inroads against Google.

Rumors in 2016 of a new, embedded device operating system termed “Mindows” seemed an unlikely direction, but the eventual release of Microsoft OmniOS in 2018 heralded a new age for the company. Bypassing the tablet craze, OmniOS was intended as a “hive” OS that operated over local mesh networks in small or disposable devices. Nadella’s famous 2018 “Mom demo” instantly restored Microsoft’s reputation for innovation: Nadella handwrote a note to his mother on disposable smart paper, OmniOS recognized the text and the recipient, and sent the message through the cloud to his mother’s house in Hyderabad, India, where it was read out to her in Nadella’s voice through her OmniOS glasses.

In partnership with local governments and local companies, Microsoft installed cloud uploaders nationwide that any OmniOS device could communicate with. In anticipation of the smart devices to come, Microsoft pioneered the small-scale local mesh networks that proceeded to automate everyday tasks formerly requiring human guidance, from household chores to child care to transportation.

It was a remarkable rebirth for a company once pegged as a dinosaur, whose stock had sat mostly flat for the first decade of the century. Over the years, the greatest criticism of Nadella was that he did not possess genius himself but merely knew who to listen to. It was a criticism most of his CEO peers would envy. Even Ballmer, who at times seemed resentful of his successor, admitted in 2023, “I never could have done what Satya did.”

The Amazon Post, March 13, 2023
NADELLA OUT AS MICROSOFT CEO

After a frequently embattled nine years, Microsoft CEO Satya Nadella announced today that he would step down. No succession plans have been made, and it is widely believed that a combination of longstanding investor pressure and dissatisfaction within Microsoft’s own board of directors hastened his exit. The announcement caps a difficult reign for Nadella, who was once seen as the company’s potential savior but grew to be known as its “gravedigger,” a nickname that surfaced in an internal email leaked by a frustrated executive.

After the wildly successful CEO tenure of founder Bill Gates (1975-2000) and the more modest but steady leadership of Steve Ballmer (2000-2014), Nadella was pitched as the soft-spoken leader who would bring greater innovation and cloud savvy to the company. Ballmer had frequently been criticized for remaining too attached to the Windows franchise and indulging in feature-rich but unwieldy releases such as Windows Vista and Windows 8. But in retrospect, the criticism of Ballmer now appears overly harsh. His missteps did little to harm the overall profits of Windows and Office, while the Xbox video game console—mostly developed during the Ballmer years—achieved significant profits in the late 2010s and eventually matched revenue of the Office suite.

In his first interview after getting the CEO job, Nadella made a famous verbal slip: that he intended to “ruthlessly remove any obstacles that allow us to innovate.” But a few years into the job, observers began to wonder if it had actually been a slip at all. Nadella failed to hold Ballmer’s steady trajectory; in spite of the declining PC market, Nadella invested heavily in an overhaul of aging operating system Windows, called Windows F (for “future”). Windows F offered a unified cloud storage system to businesses and consumers, one that Microsoft offered free in an attempt to encourage adoption. Following from the model of Amazon, which offered free Wi-Fi on the Kindle to drive e-book sales, Microsoft also offered free wireless on all devices running Windows F. Nadella promised that such a bet would win returns in the form of consumers locked into Windows Live accounts and services.

Long in development, Windows F finally shipped in 2018. But while Microsoft gained a significant number of young users in their teens and 20s, the company couldn’t capitalize on their usage, and as shareholders grew impatient with the large losses Microsoft took on Windows F, advertisements grew increasingly ubiquitous on Windows F devices. Many high schools banned Windows F because students lost too much time watching the ads, which would seize control of the device for up to 90 seconds every 15 minutes. The product was eventually rebranded Windows G (for “gold”), after an internal memo leaked saying that the name “unflatteringly suggested failure as well as other F-words.”

Increased investments in search and other Internet services similarly failed to gain the company traction against competitors Google and Facebook. An attempt to move the venerable Office suite to the cloud and to a subscription model resulted in the alienation of many corporate customers, many of whom remained with Office 2013 into the next decade.

A frustrated Ballmer himself launched a fevered invective against Nadella in an infamous 2020 interview, exploding at one point, “Don’t ask me why they promoted the s--t!” Rumor has it that the 66-year-old Ballmer has been angling to reclaim the job he lost to Nadella nine years ago and that in the absence of any strong internal candidate, the board has settled on Ballmer as its top pick.

David Auerbach is a writer and software engineer based in New York. His website is http://davidauerba.ch.

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