Microsoft defends its Empire
Microsoft
Corporation is an American multinational corporation headquartered in Redmond,
Washington, that develops, manufactures, licenses, supports and sells computer
software, consumer electronics and personal computers and services. It is one
of the most profitable companies with estimated earnings of 15.2 billion as on
2008. Much of the software that Microsoft sells is loaded into the servers of
Pcs and is used by individual users. But with the growth of the internet over
the past decade it has become essential for the company to make its software
more internet friendly. Customers were using programs and software from various
devices like mobile, laptop, desktop, netbooks, kindles etc. and they want a
cloud computing scenario from which they can access their files on any device.
Furthermore the company is also feeling the heat from the competitors that sell
cheap or free web alternatives.
Looking into the
customer demand and also the dwindling profits, CEO, Steve Blammer has come to
the conclusion that the company should overhaul its business model by moving
towards renting the software rather than selling it. This was because there
were lot of companies that were renting the applications to end users at
nominal price and Microsoft was losing the market share. Moreover, he wants more internet based
features to be incorporated into the office suite applications (word, excel,
power point and the outlook)
With this vision,
Blammer recruited Stephen Elope, a veteran of Adobe system and Juniper
Networks. HE joined the company in 2008 and was assigned to overhaul the
business group by using internet more aggressively as a way to deliver and
improve Office’s capabilities.
As soon as Elop joined Microsoft he
began showing off a flashy video of how Office could enhance customer’s
productivity. HE created a concept of “looking-glass wall” that will enable
people located miles and continent apart to communicate and that too with real
time translation if needed. He doubled the workforce in the Research and
Development lab and also prioritized the investments made on products. He
doubled the investment into “Sharepoint”, the application that can be used to
share documents and collaborate on “wikies”. He turned the “Sharepoint”
business into one of the highest revenue generating stream for Microsoft. Elop
also invested into the ‘cloud’ which enabled customers to access Microsoft
software from giant data centers in the internet rather that storing it in
their own servers.
In the latest
version of Office, users can move cursor over the name of a college and can
check of the person is online. In addition to that it also offers the option of
calling, emailing or setting up a meeting and also has features for social
networking for tracking co-workers with specific skills. These recent features
have had positive impact on the corporate customers of Microsoft (Pearce & Robinson, 2011).
Steve
Blammer’s Futuristic Vision
Steve Ballmer joined Microsoft in 1980 and was the
company’s first business manager and became CEO in 2000, He was the most
successful CEO for the company because Microsoft tripled its revenue and
doubled its profits, under his leadership. He wanted Microsoft to shift its
primary focus from traditional, perpetual licenses to a yearly subscription
model. He knew that the key to success was customer freedom and so Microsoft
have to customize its product offering for individual users’ with different
usage models Blammer believed that, Microsoft needs to stand for
something unique and he envisioned that Microsoft as a front runner in
innovation with its web and platform products which was a huge departure from
their traditional product types.
Blammer had a vision to build one of the most
robust cloud infrastructures in the world and he concluded
thatlaunching successful online services and platformswas the best way to maintain profitability and fend
off threats from cheaper competitors such as Linux and other open-source
operating systems like Google Docs. He wanted Microsoft to deliver its software
through the browser to thousands of customers. He thought that cloud computing
will be a big hit among customers as it means no upfront investment in servers
or software licensing and low maintenance costs compared to conventional
hosting. Blammer knew that
in order to fend of the competitors, Microsoft office needs to have better
features for internet users. He believed in
continuous change and had dream of bringing radical innovation to most of the
products of Microsoft.
Microsoft
Subscription Model
Microsoft has
adopted subscription model with its cloud service product which enabled
customers to access, edit and store their files on the servers in Internet.
This means that the Office user do not need to store the application their
personal servers but rather pays a monthly or yearly fee in return for access
to the software. The customer cannot use the program if subscription lapses but
the documents are kept safe for future use. This model allows customer to
increase productivity, including staying up-to-date with productivity features.
There are many benefits for customers due to this
subscription Model. It requires a smaller investment up front and subscribers are always up-to-date with latest and most
complete applications. Furthermore they can also access their files from
different devices as the files are stored in “Cloud”.
Risk
associated with Subscription model
The cloud-based computing model presents execution and
competitive risks. One of the major risk that Microsoft faces with its
subscription model is the fact that customers will more likely prefer to use
the free and open source applications that are provided by other companies. Microsoft’s competitors are rapidly developing and
deploying cloud-based services for consumers and business customers. Pricing
and delivery models are evolving. Devices and form factors influence how users
access services in the cloud. Microsoft needs to devote significant resources
to develop own competing cloud-based software plus services strategies. It is
also uncertain whether these strategies will attract the users or generate the
revenue required to be successful. In addition to software development costs,
the company is also incurring costs to build and maintain infrastructure to
support cloud computing services (Microsoft, n.d.).
Furthermore to this,
Customer satisfaction is the key and if the customers are not satisfied with
the product then the customer will simply stop paying money to Microsoft. This
subscription model gives more freedom to customer as they can simply choose to
stop using the products of Microsoft. Microsoft now needs to invest more into
call centers as this concept is new and many users will need support. It is
also important to reduce the number of bugs in its programs. Microsoft
may experience outages, data loss if they fail to maintain an adequate
operations infrastructure. Similarly,
since the operation is based on internet services, the low speed and
reliability of internet is also an external factor that might hamper the use of
this subscription model. It is also vastly more difficult and costly to
negotiate, integrate, and manage multiple payment processor relationships to
remain compliant globally (Vodnik, 2013).
Stephen
Elop’s role at Microsoft
From January 2008 to September 2010, Elop worked for Microsoft as the head of the Business Division responsible for the Microsoft
Office and MicrosoftDynamics line of products, and had a role as a member of the
company's senior leadership team He headed Microsoft's Business Division that
released Office 2010. He also aggressively
pushed the mandate he got from Blammer to overhaul the business strategy by
using the internet more aggressively as a way to deliver and improve office’s
capabilities.
Elope put the big
idea into action and devoted his time to develop the cloud computing system. He
led the business division to develop giant data centers which was necessary for
the Microsoft subscription model. He was also champion of the co-authoring
which enabled users from various geographical locations to create and work on
power point presentations simultaneously. Elope also prioritize investment for
different projects and invested into projects that were the most profitable. He
turned the Sharepoint into the highest revenue generator for Microsoft by
doubling investment into it.
Microsoft (n.d.).Risks
and Uncertainity. Retrieved on 29th March, 2014 from: http://www.microsoft.com/investor/EarningsAndFinancials/Earnings/RisksAndUncertainities/FY10/Q4/RisksAndUncertainties.aspx
Pearce, John
A., & Robinson, Richard B. Jr., (2011). Strategic Management:
Formulation, Implementation and Control (12th ed.). New York, NY: McGraw-Hill
Companies Inc.
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