Microsoft – Field of dreams.

If all you do is build it, they won’t come.

• Nadella’s recent memo says all the right things but reveals the vast amount of work that is needed to make this dream a reality.
• All through the 3,000 word memo it is clear that Microsoft intends to make the most of the assets it has and become a full ecosystem company.
• With its combination of corporate and consumer assets, Microsoft is unique in being able to address both the Digital Life Pie and the Digital Work Pie.
• With its mixture of software and services, it has an offering for almost everything that a user does in his personal and professional life but the key will be bringing it together.
• It is here where the hardware assets of Surface, handsets and Xbox come in.
• The idea is to use these as a showcase for how both Digital Work and Digital Life can work seamlessly on cool hardware.
• The boundaries are becoming blurred with many users using devices in both a professional and a personal capacity.
• At the end of the day Microsoft wants a user to feel that almost every digital need that he has can be taken care of in a seamless, easy-to-use and incredibly fun way.
• If this can be achieved, then Microsoft will have a unique ecosystem giving it both appeal and pricing power.
• This is the biggest driver for long-term revenue and profit growth.
• If Microsoft is to decouple from the PC and enterprise spending cycles, it is here that it will be achieved.
• However this is where the trouble starts.
• In order to achieve this, every asset that Microsoft has must be fully integrated with everything else.
• Every service must be fully aware of the other services that the user is signed up for and be able cater to that.
• The current state of Microsoft’s portfolio is very far adrift of this requirement and the required integration is going to be a herculean effort of messy plumbing.
• Examples of the problems are:
  • There is a personal and professional version of OneDrive but the two have nothing to do with each other.
  • Integration between Lync (Professional VoIP) and Skype (Personal VoIP) is almost non-existent.
  • The databases for many of the Personal Digital Life services remain separate from each other and do not share user information.
• Furthermore Microsoft must completely change the way markets its offering and deal with the fact that users have no real idea of what the Microsoft ecosystem can for them.
• The market is likely to remain fixated on a potential headcount reduction at Nokia, share buybacks and the PC market but the real future of this company will be decided by its ability to execute this vision.
• Microsoft has the right vision and my confidence that the culture can be changed continues to improve.
• Hence, I am increasingly optimistic that Microsoft can achieve this vision and as a result increasingly place Microsoft in my top 3 companies to look at when considering the ecosystem.
• These are Google, Yahoo! and Microsoft.