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Why Microsoft Will Win the Enterprise Computing Market

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There has been more negative than positive talk about Microsoft MSFT over the past few years. But the world's largest software company has put on a brave face as it moved through transitions on multiple levels. Consumer and business use of computing underwent a metamorphosis during this time with ownership, security, delivery and sharing of computing resources touching a new paradigm and necessitating radical changes at the company.

While nowhere near complete at this time, these changes included a complete overhaul of business operations and processes and the departure of Steve Ballmer who held Microsoft's reigns for practically as long as we've known the company.

But it's not too soon to take stock of how far it's come in these efforts by focusing on its strengths and ruthlessly cutting off all that was beside the point (such as the Nokia acquisition which it wrote down and the letting go of a ton of Nokia and other staff).

Microsoft is redoing its image as a sharper, leaner, more versatile and collaborative player and its partners and competitors are taking notice.

Important Decisions Microsoft Has Taken

Building The Brand : One of the most important assets a company like Microsoft has is its brand. And Microsoft had to take steps to ensure that the brand was not damaged too much even as the products changed. This was easier said than done given the successive flops with Windows 8, failed Surface devices and sagging popularity of Windows phones. But Microsoft persevered, moving on to introduce the completely revamped Windows 10 OS, increasingly successful Surface 3 and Surface Pro 3 devices (soon also the rumored Surface 4), and a new phone strategy. The resultant Microsoft-consistent experience is intended to build mindshare.

Focus On First-Party Devices : When Microsoft entered the tablet market, there were two successful business models in operation. One was Google's GOOGL licensing model, where multiple device makers used its OS to flood the market with devices of varying capabilities and prices. The other was Apple's AAPL walled garden that married software with hardware to charge premium prices. High-end premium hardware from Apple was a big concern for Microsoft's enterprise business considering Apple's brand value and companies transitioning to a BYOD model. On the other hand, deviating from the licensing model could alienate its hardware partners. Microsoft went with the Apple model for tablets, while sticking with its partners for other devices. This was one of its most crucial and important decisions for three reasons. First, it is easier to compete when the competitor is clearly defined and visible. Second, Microsoft had clout at enterprise customers (IT departments are comfortable with Microsoft and corporate workloads run on its software) which in combination with a strong product family would be a force to reckon with. Third, hardware partners weren't totally discarded. Recently, Microsoft announced a first-party focus for its phone business as well.

Developing The Partner Base : In the last earnings release, Microsoft promised to take its global Surface reseller base from the existing 150 to 4,500 within a few months. The company certainly seems on track, announcing that PC maker Dell would resell its Surface tablet. Dell has been a long-time friend (Microsoft spent $2 billion to help it go private a few years back, something Michael Dell won't be forgetting soon). Media reports (not yet confirmed by Microsoft) say that Hewlett-Packard HPQ will do likewise. This is quite a breakthrough given that everyone feared their estrangement when Microsoft decided to make the hardware. But timing makes all the difference: the hardware market has seen a sea change since and is not a very profitable business for these companies. So if they can sell related high-margin services instead, it would be a win-win situation. The result will be a cohesive experience for enterprises since they already know and use the HP and Dell sales channels and support services.

Platform Approach : Enterprise customers are greatly dependent on productivity tools, usually Microsoft Office. Earlier, Microsoft limited Office to Windows devices, hoping to spur Windows sales. But this strategy was changed as it also represented lost opportunity on Apple and Google powered devices and helped them popularize competing software. So the company announced Office 365 for everyone, a cross-platform approach that solved this issue. Microsoft currently bundles new services, free storage and other benefits with Office 365 to push additional cloud services to users and keep them locked into its own ecosystem.

Tying It All Together

These decisions are built on Microsoft's inherent strengths as well as its emerging challenges, as follows-

What's Going For Microsoft : The company's software is the incumbent, legacy system that corporate customers and IT departments are totally familiar with. Changing the entire system or transitioning workloads is both time consuming and expensive, so there needs to be a very good reason to change. Microsoft is trying to ensure that such a reason doesn't exist. The company has the most comprehensive list of services to take care of enterprise needs of every size. From OS to devices to productivity and cloud computing prowess, Microsoft can already cater to the current needs of all enterprises. It was also the first to recognize that an enterprise user base would find a larger screen much more useful, so it was the first to launch a 12-inch device, thus setting a trend. A Microsoft tablet thus offers a complete computing experience in a tablet form factor. The company continues to build on these capabilities and partnering with whomever necessary to put the user first. . It is also taking an aggressive approach to pricing wherever necessary.

What's Going Against Microsoft : Perhaps the biggest concern for Microsoft is competition from Apple at the high end and Google at the low end. Both these companies offer an OS and productivity tools. Google entered the enterprise segment slightly before Apple and is quickly building up an ecosystem of its own. It also offers cloud infrastructure services. Apple being the latest entrant (only after its tablet sales started sagging) has relied on partnerships, first with IBM IBM and then Cisco CSCO to build domain-based apps and resell its iPads into their user bases.

Apple's brand is already well-recognized, so its partnership with these tech behemoths could help it take some share. Google on the other hand, has some serious compute capabilities that can facilitate cloud adoption supported by low-end Chromebooks, so it is also in a position to wrest some share.

Considering the market situation and current capabilities, Microsoft is well ahead of its peers and finally looks like it will win in this turbulent market.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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