“Don’t wait for your next job to do your best work.”
-CEO: Satya Nadella
Business Model Innovation
Platform as a service
Microsoft’s new service offerings are mobile first, and powered by the intelligent cloud. It has built a scalable tech platform powered by the Azure cloud computing framework to offer its technologies, products and services like enterprise ERP, CRM, and office productivity solutions through subscription based plans.”
Microsoft’s phenomenal financial success is a result of the company’s major initiatives to attract the developer community and create more open source systems and applications to generate community value. Acquiring GitHub for $8.5 billion was a step towards creating value from the collective minds of the global developer community. There are over 26 million developers using GitHub to collaborate and re-write the world in code.
Envisioning a world where every organization will eventually kneel towards technology, and perhaps become technology companies themselves, this acquisition was the first step towards aligning the developers with Microsoft’s vision of empowering people and organizations to achieve more. The company is opening many closed loops and intends to unfurl as an open source platform, apps, tools and services ecosystem.
For Satya Nadella, his role at the top of a leading technology company has been a difficult and challenging one. As a non-founder CEO, he had to make explicit his vision, values and strategy in a much more robust way than either Bill Gates or Steve Ballmer.
Satya’s rise to the top of Microsoft and his subsequent impact on company’s stupendous business success in the cloud space can’t be seen in isolation. The transformation at the leadership level is what has trickled down and is now visible in the amazing financial outcomes the company has achieved since the day he took over.
But what are the real core drivers of Microsoft’s successful transformation? Is it the cloud technology, the noise created all around popular business media of the need for organizations to ride the digital transformation wave, or just plain old luck?
Our research shows that Satya’s focus on an inspired vision, nurturing the growth mindset and making the organization people-centric in-and-out lie at the heart of this massive financial success.
When Ballmer first asked Satya to spearhead the cloud division, it was still nascent and the organization had no clear-cut strategy to make it big in this space. However, Ballmer was prepared to make a zero-sum bet. This leadership support enabled Satya to focus on non-financial KPI’s like customer satisfaction and usage growth versus traditional KPI’s like gross margins. For any new business, there is always a path to profitability, It may not be obvious at first, but staying on the path and learning from your stakeholders eventually tells you the right fitment of the value your product delivers, and the price customers are willing to pay for it.
Microsoft’s success in the cloud is an outcome of this slow and steady ‘people-centric’ mindset. While the business didn’t really contribute much to the firm’s overall growth or profitability in the initial years, it is the relentless focus towards harnessing tech know-how, setting the right vision and speaking to customers not to sell, but to discover their core needs that sets the service apart.
The company has ended fiscal 2019 with $38 billion from its enterprise cloud offerings. It has now become the world’s largest enterprise cloud company, surpassing Google cloud’s revenue ($8 billion) 4X, Salesforce.com’s revenue ($13 billion) 3X and its largest competitor in this space, Amazon AWS ($25 billion) 1.5X.
Microsoft realizes that the journey from possibility to reality is fraught with unknown challenges but have figured out that the way forward isn’t a closed-door company but an open source, collaborative and community-driven ecosystem.
Acquiring GitHub to support and deliver best in-class solutions, platforms, infrastructure and services to the global developer community was a step towards it.
Microsoft is betting on a future which is connected, and by looping in the developer community at GitHub and the global professional community with LinkedIn, it lays the foundation for a business-developer collaborative ecosystem.
We foresee Microsoft to leverage more of such strategic acquisitions, to continue building their cloud and mobile technology and to make its technology and systems available to the open source community. The future for Microsoft is a world driven by data, and empowered by Microsoft’s cloud, productivity and open source ecosystems.