Microsoft’s New Age of Cloud Computing

During Dean Parson’s talk on Azure last Friday, he showed a video demonstrating “the evolution of Microsoft.” I was expecting to hear about Microsoft’s shift towards cloud computing under CEO Satya Nadella’s direction. Instead we watched a circa 1990s video about Microsoft’s technology, which showed by contrast how advanced our technology is today. Before showing the video, Mr. Parson also talked about how the “Azure Pillars”, or differentiators, were productive, hybrid, intelligent, and trusted. However, I wished he would have delved into why Microsoft made the shift into cloud computing, and not just what the slogan is and the customer success stories behind it were.

When Satya Nadella became Microsoft’s CEO in 2014, he had to pick-up and re-innovate the company from previous CEO Steve Ballmer’s run. Mr. Ballmer had very different acquisition strategy from Mr. Nadella; he invested in old technologies, such as purchasing Nokia for $7.6 billion, AQuantive (online advertising) for $6 billion, and Yammer (a similar service to the now popular Slack) for $1.2 billion. [1] Balmer also focused the company’s energy on Windows, the operating system.

Starting in 2014, Mr. Nadella shifted the strategy and culture of Microsoft. His acquisitions have focused on bringing large communities of users together. In 2014, Microsoft acquired Minecraft for $2.4 billion. [1] In 2016, Microsoft acquired LinkedIn – the largest data source of working professionals – for $26 billion. [1] Recently, Microsoft acquired Github for $7.6 billion. [1] All of these acquisitions show Mr. Nadella strategy in building communities, and not investing in old, outdated technologies.

In terms of shifting the internal company direction and mindset, Mr. Nadella has focused on cloud computing and a more open culture, and it has paid off. He realized that the cloud was essential for moving forward in the technology space. According to a VentureBeat article written in 2017, Microsoft’s commercial cloud revenue grew to become 60% of their revenue, meaning the company has successfully shifted into a cloud company. [2] Azure’s revenue has increased by 94%. [2] Azure has become the heart of the company, and Windows has taken a backseat. According to an Economist article written in 2017, the company has a more vibrant tone since Mr. Nadella became CEO in 2014. [3] Mr. Nadella is more patient and gentler than his predecessor, although still competitive, and encourages a more open culture. Employees are no longer evaluated on a curve, and for the company’s annual retreat all heads of companies that Microsoft has acquired can attend, not just the traditional longtime executives. [3] I actually interned at Microsoft the summer of 2016, the same summer Microsoft acquired LinkedIn, and I felt the effect of this more open and gentler culture. The employees seemed genuinely excited by their work, and inspired by Mr. Nadella’s vision for the company.

Cloud computing is an exciting space, and Mr. Nadella greatly changed the future of Microsoft by investing in Azure. What do you think Mr. Nadella next move will be?

If you are curious to hear Satya Nadella’s view on cloud computing and the future of Microsoft, this is a great 30 minute video on the topic!

[1] https://www.cnbc.com/2018/06/04/microsoft-ma-nadella-vs-ballmer.html

[2] https://venturebeat.com/2017/02/01/microsofts-successful-transformation-from-microsoft-to-microcloud/

[3] https://www.economist.com/business/2017/03/16/what-satya-nadella-did-at-microsoft