Steve Ballmer gets consumerization, but Microsoft is having a hard time adjusting

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Microsoft CEO Steve Ballmer gets the consumerization concept, but acknowledged the difficulty his company faces embracing it.

In an interview posted on MIT Technology Review, Ballmer responded to questions about Microsoft’s consumer strategy. He's right when he says that the consumer and business markets aren’t separable.

“E-mail is e-mail, real-time communication is real-time communication, handwriting and phone and these things are the same, and I don’t need one for work and one for home. There are some core services that people will want to use in their professional personas as well as their personal personas,” he said. “That tablet that I use to watch movies in my hotel room and to e-mail—is it a consumer device or a business device? I claim trying to separate those would cause you to make bad choices.”

He said that there are devices and productivity, communications, and entertainment services that Microsoft adds value to in different ways depending on whether they are geared toward the consumer or the enterprise, “but at their core they’re 80 percent the same.”

In fact, Microsoft has always been predominantly a consumer company -- 65 percent of PCs and 70 percent of Office suites are sold to consumers, according to Ballmer. But even though sales lean toward consumers, Microsoft's popular image is an enterprise company, as former executive Joachim Kempin recently argued in a blog post at ReadWrite. With PC sales stagnant and non-Microsoft tablet sales booming, Microsoft has clearly lost some of its appeal among consumers.

Here Ballmer suggested that the company was hamstrung by its model of working with OEMs.

“We’ve been talking about pen computing for years, but it was hard to do that with OEMs who were not equally incentivized,” he said. With Surface Pro, which comes with a pen, Microsoft is “trying to lead a bit,” he said.

He goes on to say that Microsoft has “a model that allows OEMs to move with us,” but that may be wishful thinking -- in fact, some of the biggest OEMs, including HP and Lenovo, have just started making their first Chromebooks, and HP is rumored to be considering Android tablets as well. Rather than leading with the Surface, Microsoft is annoying long-time OEM partners and so far failing to attract buyers in any significant numbers.

Ballmer also admitted that the company's pure consumer products – particularly those that integrate both hardware and software, like Xbox and Kinect -- have done more to capture the imagination of consumers. "In cases where we’ve embraced end-user needs and really sort of dived in, like the things that we’ve done with Kinect and the Xbox, I think we’ve done a heck of a job," he argued. 

Microsoft has indeed been successful with the Xbox and Kinect, but they so far have very little business application. The Kinect does have a development program for third parties to build applications that use the Kinect in conjunction with PCs, some of which are business-focused, but that segment is tiny.

While it’s heartening to see that Ballmer understands the consumerization trend, he didn’t offer many answers in this interview about how Microsoft can respond to it.

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