Is Microsoft’s Nadella the tech world’s best CEO?
14 January 2019 | 0
Over the years, plenty of kudos has been directed at the people at the helms of big tech companies. Until recent hard times, Facebook’s Mark Zuckerberg, Amazon’s Jeff Bezos, Apple’s Tim Cook and Alphabet’s Sergey Brin, among others, have been fawned over by a compliant press and portrayed as visionaries and great leaders.
But the world’s best tech leader has not been lionised, not even now that the tech giant he has guided for almost five years remains relatively stable amid jumpy markets. We are talking about Microsoft’s unassuming CEO, Satya Nadella, who as often as not has been considered merely a steady, somewhat boring functionary. Take a look though, at what he has done at the company through 2018. He has successfully turned Microsoft from a plodding, increasingly irrelevant company into a tech powerhouse that is surprisingly nimble and more willing to change course than its competitors.
“Nadella has been willing to adapt to a changing world and scale back Microsoft’s investments in high-profile products that aren’t panning out — something Ballmer never did”
To fully recognise how much Nadella has transformed Microsoft, look back to February 2014, when he took over as CEO from Steve Ballmer. He was saddled with Ballmer’s decision to buy Nokia for $7.2 billion (€6.3 billion) to prop up a failing Windows Phone business — as well as the decision to pour immense amounts of money and time into a mobile operating system that no one wanted to use.
Less than a year and a half before that, the company had released Window 8, one of the worst versions of Windows ever built. Given the pace of change in the tech world, it is easy to forget how big a problem that was a few short years ago. Windows was still Microsoft’s cash cow, seen as the core of the company. Fatefully, Ballmer’s Microsoft had borrowed elements of Windows Phone’s Metro UI, but the way that Windows 8 was most like Windows Phone was that hardly anyone wanted to use it.
At the same time as the Windows 8 rollout, Microsoft had introduced the Surface tablet, which was widely derided as overpriced, underpowered and serving little purpose.
The company culture had stagnated, clinging to past days of Microsoft glory (and antitrust ignominy). Ballmer’s arrogant belief that Microsoft could solve any problem by using Windows as a battering ram still ruled.
Nadella had a lot to prove to employees, because he was only the third Microsoft CEO since the company’s founding in 1975 — and the first who had not been associated with the company’s one-time dominance of the tech world.
Nice guy, said the business press, one who was cloud-savvy and steeped in both tech and business experience. But no one was expecting to pile accolades upon his head any time soon.
By any measure, though, Nadella has been a roaring success. He took the hard choice to kill off Windows Phone (hard because no one takes such a massive write-off lightly), finally freeing the company from throwing billions of dollars down a rathole. Not only did that save Microsoft money, but it also allowed the company to use its developer resources for technologies more important to its success.
Less unexpectedly, he made the cloud central to Microsoft’s business, but the extent to which he let the cloud focus overtake the company’s Windows-centric focus was breathtaking, given the sacrosanct status the OS had always enjoyed. That has paid off big time. Microsoft is now a leader in cloud computing. The company’s commercial cloud revenue was $8.5 billion for the first quarter of 2019, up 47% compared to a year previous. And that understates the way in which the cloud permeates the company’s offerings. Office has been turned into primarily a cloud-based subscription service, and business is booming as a result. Windows has become, to a certain extent, cloud-based as well, because it is now delivered and updated via the cloud. Think of it as Windows as a service.
Meanwhile, Nadella has turned the Surface into a hit by changing its design and focus. Today, Surface hardware is a billion-dollar business, something that was unthinkable when the poorly designed tablet was first rolled out.
Nadella has been willing to adapt to a changing world and scale back Microsoft’s investments in high-profile products that aren’t panning out — something Ballmer never did. So he has thrown in the towel on trying to get Cortana to compete with Amazon’s Alexa and Google Home. Instead, Cortana will use its smarts behind the scenes to create ways to make Microsoft’s other products more useful.
Under Nadella, Microsoft has accepted open-source software and begun to work with it — anathema to Gates and Ballmer. The company’s popular SQL Server database, for example, runs on Linux. Here’s how John “JG” Chirapurath, a general manager with Microsoft, explains why the company decided to do that: “To keep flexibility and choice is absolutely critical. We can’t walk into a customer today and offer them a data platform that exclusively works with Windows or, say, C#. We’ve got to go in there and say, can we meet you on your terms, and what does that look like?” In pre-Nadella days, that would have been seen as apostasy.
The result of all this? Under Ballmer, Microsoft’s stock had stagnated. It has nearly tripled since Nadella took over, from $37 to around $100 now, depending on the day. Even during the December market crash, the stock held much of its value. And during a brief period in November 2018, Microsoft became the world’s most valuable company, as its stock price rose and Apple’s dropped.
Anyone who was really paying attention when Nadella took over as CEO should not be surprised by any of this. According to CNBC, Microsoft chairman John Thompson said at an event this summer, hosted by Lightspeed Venture Partners, that in Nadella’s first public appearance in 2014 as Microsoft CEO, “He made a pronouncement on day one — the world is about cloud first, mobile first. He never mentioned Windows one time. … What he was telling the world was we at Microsoft have to be ready to embrace the cloud, and we at Microsoft have to be more about our technology running on all platforms.”
Nadella has delivered on all that, and more. So you may not hear Nadella make grand public pronouncements. He is not being hailed as a visionary. But while CEOs at other big tech courses stumble, Nadella has crafted and overseen Microsoft’s transition from an also-ran to a front-runner. Even better times might be ahead.
Preston Gralla is an author, and contributing editor for Computerworld