Steve Ballmer's successor will have to do plenty to revitalize Microsoft. Here's what should be at the top of his list: Stopping the company's unhealthy reliance on Windows as the centerpiece of almost everything it does.
Microsoft has long relied on Windows to bully competitors and push its way into new markets. It was a technique perfected by Bill Gates, and helped the company gain a dominant browser share, as well as put an end to the dominance of competing productivity software including WordPerfect, Lotus 1-2-3, and Harvard Graphics. Steve Ballmer as CEO simply continued on the path set by Bill Gates. But it's been years since the strategy worked. By relying on it, Microsoft has fallen far behind in Internet search and mobile computing.
That's why Microsoft needs to finally end its reliance on Windows. And with a new CEO coming onboard, now is the perfect time to do that.
The first thing a new CEO should do is release versions of Office for Android tablets and the iPad as quickly as possible. Microsoft is holding out on doing that because it hopes that if Windows tablets can run Office but its competitors can't, that will give Microsoft an edge in tablets.
We've seen how that's turning out: Dismal sales of Microsoft's tablets, including a $900 million writedown on unsold Surface RT tablets.
Microsoft is forgoing serious revenue by not releasing versions of Office for Android and the iPad. Morgan Stanley analyst Adam Holt believes that Microsoft could get $2.5 billion in new Office revenue by releasing Office for the iPad. And Gerry Purdy, principal of MobileTrax, says that Microsoft could gain an additional $1.25 billion in revenue in the first year Microsoft releases Office for the iPad and Android tablets, and $6 billion in annual revenue by 2017.
I think those estimates are overblown, because Microsoft would likely include those versions in its subscription-based version of Office, rather than only sell them as standalones. Still, it would bring serious new revenue to Microsoft.
Beyond that, it would fend off the challenge from Google Docs and Google Apps. If Office ran on every OS and device, there would be less reason for people and businesses to switch to to Google.
I'm not alone in thinking this. J.P. Gownder, a principal analyst at Forrester Research told Computerworld:
"You're hearing these calls now [to released Office for the iPad and Android tablets] because there's a perception, rooted in some reality, that Ballmer was the one who claimed Office as part of the platform wars.
"This is really a good time to renew the call for Office on iOS and Android tablets. It's clearly the best product in its class, and this is one of those classic moments where Microsoft could keep that momentum, where they can seize the day on platforms that show no sign of slowing."
Windows 8 is another example of Microsoft relying too heavily on Windows, and flailing as a result. The idea was that if people got used to the Windows interface on their computers, they'd want to buy tablets with that same interface. It failed on two accounts: People didn't want to buy computers with the new interface, and they didn't want tablets based on that interface, either.
When it comes to tablets, Microsoft should start from scratch and design an operating system designed solely for tablets. Then it should fix Windows and make it an operating system designed solely for running traditional computers. As with iOS and Mac OS X, Microsoft should have tight links between the two. But the operating systems should be distinct.
Some analysts have been calling for Microsoft to de-emphasize Windows, and instead focus on the Microsoft brand. Among other things, they recommend dropping the price for Windows licenses so that Windows-based tablets and smartphones could sell for less. After the Microsoft reorganization, IDC's Al Gillen wrote that Microsoft needed to be willing to cannabalize its own sales by cutting prices for tablets and smartphones by dropping Windows licensing fees, even if that eats into PC sales. He wrote:
"Historically, Microsoft has resisted internal cannibalization, and while such a move may still seem like a grim option, it remains infinitely more attractive than allowing competitors to do the cannibalization on Microsoft's behalf."
His recommendation for Microsoft about Windows was short and to the point:
"Microsoft will be a lot healthier and prepared to create and compete in new markets, rather than just defend its legacy markets, when the brand 'Microsoft' becomes more important [and] prominent at Redmond than the brand 'Windows.'
I think he's right on target. The question is, will the new CEO at Microsoft agree?