Microsoft in 2013: Big changes, big surprises, and a unifying vision

Devices and Services at Microsoft's Build conference Credit: Microsoft

2013 was a big year for Microsoft. It launched a fresh wave of products, rebranding its server and management tools as its CloudOS, along with a rapid refresh of Windows 8. These product changes came alongside a major reorganization, a change at the top, and a big acquisition. And that was only part of Microsoft's year.

There always used to be one 800-pound gorilla in the enterprise IT world. First it was IBM, then Microsoft. Now, as the shifting tides of technology blend the consumer and enterprise worlds, there are many giant apes, all looking for somewhere to sit. Apple, Google, Amazon, Facebook, and many others have joined Microsoft at our desks, and the enterprise technology space has become a lot more complicated.

We'll skip over Steve Ballmer's resignation as CEO. While it came as a surprise, it's another phase in the company's transformation. In nearly 40 years Microsoft has only had two CEOs, and as it changes from a PC software company to a devices and services business there's a need for a change at the top. As successful as Ballmer has been (and he's been a successful CEO by many measures) he's associated with the company's old platform business, and new leadership is needed to navigate the company through a decade-long change. We'll find out who gets the job in 2014, but we're not expecting significant divergence from the strategy shift Ballmer began in 2013.

That strategy shift, "One Microsoft," is key to the company's future. It's not just rearranging the deck chairs on the Titanic, it's a significant change in the way Microsoft operates and how it reports its earnings. A switch from business units to functional management won't take place overnight, as it requires a wholesale change in corporate culture, but from the Microsoft staff we've spoken to, it's one that's already starting to take hold. It's easier for teams to share resources and ideas, and for different parts of the business to work together, resulting in faster delivery and more coherent product decisions. 

Here are some of the ways that organizational change is manifesting itself in Redmond.

Stack-ranking ends. One of the biggest surprises of the year came in the fallout from the resulting corporate reorganization: The end of the much criticized stack-ranking employee evaluation system, in which a fixed percentage of employees in each group were ranked as least valuable players.

Buying Nokia for supply chain expertise. If Microsoft is to become a devices business it needs a supply chain. The $900 million Surface write-off was a sign that Redmond hadn't built the deep end-to-end supply chain that its competitors have. So the purchase of Nokia's devices and services business actually made a lot of sense. The old platform business would never have bought a hardware company (even if it helped use offshore cash in an acquisition). For devices and services Microsoft needs Nokia's phone business expertise to navigate the complexities of working across the world, of buying components and managing manufacturers and their factories, and of getting hardware into consumers' hands.

A developer program for Windows Phone. Nokia has taken Microsoft's Windows Phone from near zero to a global number three over the last year, with a growing range of Lumia devices. But Microsoft's underdog status has caused problems where it comes to updates, requiring complex carrier approvals before its two 2013 updates were delivered to phones around the world. That all changed this fall, when a long-promised and much-delayed developer program suddenly arrived, giving early access to new releases.

While ostensibly for registered application developers (hence side-lining operator approval processes), it also opened up access to OS updates to a wider audience, thanks to the earlier launch of Windows Phone App Studio, a web-based application development tool that let anyone with a Microsoft account design and share simple phone applications. That meant that anyone signed up to the App Studio could download the Preview for Developers app and get the latest OS updates on their phones.

Windows Phone App Studio is an interesting development in its own right: a consumer-focused development platform that uses the web to build simple apps that work with common feeds. It's not a complex tool, but gets users thinking about apps and how to build them - and at the same time gives them a route to using more complex desktop development tools.

There wasn't a major update to Windows Phone in 2013, though there were signs that pointed to some features of the upcoming Windows Phone 8.1 release, as well as leaked screenshots pointing to a notification center among other major changes. Those signs included an unbundling of the Xbox Music app from the OS, and the start of the merger of Microsoft's Windows 8 and Windows Phone stores, as well as Nokia's new Camera app.

Rapid refinement of Windows 8. On the desktop Microsoft Windows 8 continued to struggle to gain acceptance. So it wasn't completely surprising that Microsoft chose to release its Blue update, Windows 8.1, for free. In addition to bringing back a version of the Start button, Windows 8.1 tweaked the Start screen and made it easier for Windows Store and traditional desktop apps to work side by side. It also made significant number of features and APIs to its new WinRT development platform, bringing it closer to the familiar Win32 desktop development environment. It also added support for 3D printing, bringing Microsoft into the growing world of makers by giving them a way to go straight from modelling tool to physical object.

The real surprise, of course, was just how quickly it came out. There'd been signs that Microsoft was switching to a continuous development model, and Windows 8.1 showed just how quickly the company had switched to a new way of working. Refinements and changes that in the past would have taken several years to roll out were available less than a year from the Windows 8 release. It's clear that there's a significant change of cadence inside Microsoft (Azure's roughly three-week release cycle shows just how fast Redmond is moving these days).

Windows 8.1 is going to be followed by an update release in the spring of 2014, which is expected to bring its WinRT and Windows Phone's WinPRT development models together. Further out there's a set of releases code-named Threshold, and a common core model for all Windows releases.

Xbox: A service pipe to the living room. If Microsoft is going to be successful as a devices and services business, Xbox is its tool for learning how at-scale consumer services run. With Xbox One it introduces a whole new set of services,  including using Azure to host AI systems and offers large-scale analytics for game companies.

As Xbox became Microsoft's living room and media platform, gamers misunderstood many of its initial gaming-as-a-service features. So, taking advantage of its new continuous development ethos, Microsoft rolled back many of its planned features. Even so, much of what Xbox offers the future Microsoft is still there, and its place in the living room for the next decade will allow Microsoft to deliver a wider range of services to home users. We're still waiting to see what Microsoft does with its recent home automation acquisitions. Could they be part of Xbox in 2014?

Office as a service. The shift to services is key to Microsoft's future, and its most ambitious move is its shift to sell its Office suite of productivity apps and servers as a service. With over 2 million subscribers for the Home Premium edition, Office 365 is already a $1.5 billion business for Microsoft -- and one of its fastest to the magic billion dollars. That's a good sign, as it means that there is a market for cloud-delivered personal productivity software and associated services. It's also allowing Microsoft to expand its services in new ways, with natural language-based intelligence tools and 3D animated data visualizations.

Truly cross-platform. Delivering software from the cloud also means there needs to be a cross-platform element to Microsoft's offerings. That's another area Office 365 is pioneering, with apps for iOS and Android alongside the more familiar Windows and Mac OS releases.

The current crop of tools (apart from OneNote) are really file viewers with some basic editing features. But as Microsoft starts to deliver more services we're going to see more in the way of cross-platform apps, especially in 2014 with the "Gemini" wave of Office clients, which will include a tablet-friendly touch design and should see full iPad and Android tablet Office clients alongside Windows Store apps.

A cross-platform Microsoft was showcased by the announcement that the company would partner with Xamarin, giving MSDN subscribers access to Xamarin's cross-platform development tools from inside Visual Studio. With Xamarin using C# to deliver native apps on Android and iOS, developers using Microsoft's tools are now able to target iPad, iPhone, Android, MacOS, Windows Phone and Windows from the same project. While they'll need to develop device specific user interfaces, it simplifies building apps for multiple devices - without having to learn extra languages.

Internet Explorer. For web developers, Internet Explorer took a big jump forward in 2013, with the arrival of IE 11. Expanding IE's standards support, there's now support for WebGL,  bringing real-time 3D graphics to Microsoft's browsers. With increased standards support it's easier for web developers to build one site that works with all browsers -- as long as they stop trying to treat IE 11 as if it was still IE 6 (after all, Windows XP ends support in early 2014).

2013 was definitely an eventful year for Microsoft. With a new CEO likely to arrive in the early part of 2014 there's scope for even more change to come. It'll take time for the reorganization and the One Microsoft policy to take hold, but as they do, we're going to see more results from a functionally focused Microsoft where one part of the company can build on the work of another.

The future is a world where consumer and enterprise businesses become harder and harder to distinguish from each other, and Microsoft's ability to blur the lines between the two will be vital to its future. With Azure learning from Xbox, and Windows from Bing, there's scope for a cross-fertilization that will reshape how we look at Microsoft, and how we think about technology in the enterprise.  

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