In the span of six days, Microsoft’s new CEO Satya Nadella has totally shaken up the company.
First, he announced Office for iPad, releasing a touch version of Office for Apple’s tablet before Microsoft had a touch version of Office for Windows.
Then during Build, Microsoft’s conference for developers, Microsoft announced that Windows would be free for all devices with 9-inch or smaller screens. Basically, Windows is free to tablet- and phone-makers, just as Android is free to device-makers. Really, Windows is more free than Android, since nearly every Android device-maker has to pay a patent license fee to Microsoft.
In between those two announcements, Nadella enacted a mini-reorganization at Microsoft, shuffling the executive ranks.
These are major changes for Microsoft. For years, analysts and pundits have been telling Microsoft that its business model would not work for phones and tablets. In the past, Microsoft charged computer-makers about $100 for a Windows license. For phones it was charging less, between $15 and $20.
With Google producing a more popular operating system and charging nothing for it, there was little incentive for a phone-maker to use Windows. The same thing applied to tablets. But in Microsoft’s world, it made no sense to give away its software. It's not an advertising company like Google. Google makes money when you use the Internet; Microsoft makes money when you pay for its software.
Now, with Windows free, Microsoft is going to try to make money on services and other software that come with Windows. It’s a risk, but the alternative is watching Android completely take over the planet. Just as people have been telling Microsoft to give away its software, they’ve been begging Microsoft to get Office on the iPad. Analysts estimate it could generate billions in revenue.
Even if it doesn’t generate billions, it's important for the future of Microsoft. A whole generation of computer users growing up on tablets could get used to the idea of going without Office.
Credit for these decisions should not accrue solely to Nadella. Former CEO—and media punching bag—Steve Ballmer set much of this in motion before he left. But Nadella is a considerably different leader at Microsoft. He's less bombastic. He's a little boring, frankly. But that’s OK: Not every executive needs to light up the stage.
What Nadella has said during both his presentations this week seemed more realistic. Nadella says that Microsoft is no longer the dominant force and that it needs to act like a hungry startup. With these changes, it’s not just talk from Nadella. Microsoft is acting like a different company.