Satya Natella’s recent company-wide email, while lacking specifics, shed some interesting light on the direction Microsoft will take under his guidance. Steve Ballmer’s “Devices and Services” strategy is being evolved into “Mobile-first and cloud-first” with an emphasis on productivity and collaboration. One clear message from the email was a renewed focus on the enterprise customer, while not completely ignoring the consumer, especially in ackowledging the dual-use personas increasingly prevalent in the way we adopt mobile technology. Again, a meaningful pivot from Ballmer’s recent direction. In reading the email one could not help think that the key messages were formulated with Google in mind more so than Apple.

From an enterprise mobility perspective, this is important. Much like other enterprise-first vendors who attempted to emulate Apple’s influence over consumers, Microsoft fell into a trap that often left them exposed. While it is hard to ignore the consumer’s influence in enterprise technology today – especially in all things mobility – creating consumer cache much the same way Apple does is a losing proposition. Yes, Microsoft needs to directly develop or influence the development of devices than inspire and us consumers can get excited about (and the Surface Pro 3 is such a device). However, Microsoft needs to do so while focusing on the enterprise customer, its primary source of revenue and profitability. Focusing on developing solutions that support containerization or dual-use scenarios addressed by Natella is one way of bridging the gap or blurring the lines between enterprise and consumer use.

Some of the key takeaways from our enterprise mobility perspective include:

Productivity for all. Productivity was mentioned by Natella 20 times in his email. This was clearly not a coincidence. Some of Microsoft’s core assets – from Office to Skype, from Sharepoint to Cortana – are designed with that purpose in mind. From an enterprise mobility perspective, workforce productivity enhancement remains the number one investment driver and priority. Microsoft clearly is in a sweet spot here and making these assets available across multiple (non Windows) platforms (iOS, Android) are necessary and solidify Microsoft’s already strong position in this category. Microsoft can lead and innovate here, just not under the traditional models.

Renewed and Cohesive Commercial/Enterprise Emphasis. It is perhaps unfair to call these efforts renewed as the commercial unit – representing approximately 50% of revenues – has been performing well of late. With a boost from the Windows XP migration (90% of enterprise desktops are now on Windows 7 or 8 according to Microsoft), Server and Office revenues up 6-10% and Sharepoint, Lync and Exchange revenues up double digits and most importantly cloud services revenues up substantially, business performance has been strong. However, what is notable is the under Balmer, there is sufficient anecdotal evidence to suggest that enterprise customers seemed to receive second class service from Microsoft. From our experience (and this is understandably under the narrower enterprise mobility scope) we have had numerous conversations with F250 enterprise accounts over the past three to four months with many expressing frustration with the lack of clarity (especially around platform/OS direction) coming from Redmond. All have substantial investments in Microsoft products and services and remain committed to Microsoft. However, similarly, many expressed that Microsoft has been extraordinarily to recently conduct business. Many should welcome Natella’s with open arms.

Windows takes a back seat. While Windows remains a core OS/platform, especially in the enterprise, today’s reality is a multi-platform one. Microsoft cannot continue to act arrogantly as it did when it was the only game in town. Natella’s announcement of Office on iOS and opening up Azure for Android development (notice the brand shift from Windows Azure to Microsoft Azure) in addition to Microsoft’s change in OS licensing policies for small display devices all point to a more open Microsoft. Windows 8 has not been a success (69% of enterprise respondents to a recent survey indicated that over the next 18-24 months Windows 8 would not represent an investment priority) and, while growing, Windows Phone 8 still represents less than 10% of the smartphone market. While no one expects Microsoft to abandon Windows by any stretch, their flexibility to support alternative platforms will benefit them long term.

A clearer industry or vertical strategy and message. Although not implicit in Nadella’s message, we are seeing greater emphasis around vertical solutions from Microsoft, including frontline mobility solutions. To take this initiative to the next level, Microsoft needs to start realizing the potential vertical solutions through its “mobile-first, cloud-first” approach. As said by Nadella, “there will soon be more than 3 billion people with Internet-connected devices – from a farmer in a remote part of the world with a smartphone, to a professional power user with multiple devices powered by cloud service-based apps…”.  From education specific solutions – such as the collaboration with Intel and Panasonic to deliver a purpose built two in one for the K-12 segment – to mobile endpoint solutions in hazardous oil & gas environments to delivering business critical logistics solutions for last mile parcel delivery, Microsoft’s vertical reach is impressive and offers plenty of room to grow and become a power-player.

Coauthored by Research Associate Natalie Buckner