Microsoft Is Learning To Be A Partner But Keeping Its Competitive Edge

For all the talk of a new Microsoft, the company can still throw in a dash of the old. The only question is, which one will show up at any given time?

On the one hand, there’s little doubt the 40-year-old software giant is undergoing a cultural overhaul under Chief Executive Satya Nadella.

Once famously hard-edged and competitive, Microsoft in the past few years has surprised the technology industry with moves to better link its products to those of rivals. Conciliatory gestures toward the likes of Apple and Salesforce, far-fetched just a few years ago, have softened Microsoft’s public image.

That spirit is likely to be on display again beginning Wednesday this week, as Microsoft hosts its annual Build developer conference in San Francisco, an event where executives are expected to outline the company’s technology aims and how partner companies fit in.

 Beneath this surface, however, even a kinder, gentler Microsoft will still throw a few punches in the service of its core interests, say business partners and analysts who track the Redmond company.

Glimpses of that are visible in Microsoft’s two main corporate priorities: the push to spur adoption of the new Windows 10 operating system, and a bet-the-company effort to pull customers into Microsoft’s network of software delivered over the Internet — the much-heralded cloud computing.

In recent months, the company has irritated some Windows users with an aggressive push to upgrade to Windows 10, targeted flailing cloud-based note-taking startup Evernote with a new software tool, and briefly uninvited a cloud-computing competitor from a Microsoft conference.

“Microsoft is willing to break some glass along the way, as long as they don’t shatter it all,” said Patrick Moorhead, who dealt with Microsoft during stints at PC builder Compaq and chip-maker AMD, and now tracks the company at his private analysis firm. “They’re saying, ‘We’re going to move in this direction, we know we’re going to inconvenience some people, but this is the way that we think the industry is going over time.’ ”

New Windows

At last year’s Build, Terry Myerson, the Microsoft executive overseeing Windows, outlined where Microsoft was going with Windows 10, the then-upcoming version of the 30-year-old operating-system franchise. Microsoft, he said, aimed to have Windows 10 running on 1 billion devices within three years.

To meet that ambitious goal, Microsoft offered the software as a free update for home users, accompanied by a series of computer prompts to update. This year, those prompts switched for many to an automatic download and upgrade offer as part of Microsoft’s Windows software-update function.

The lack of an obvious “no, thanks” option rubbed some Windows users the wrong way.

Ron Loomis, a 68-year-old real-estate appraiser in Olympia, said he woke up one day earlier this month to find his home computer running Windows 10, an update he said he didn’t authorize. He rejected a prompt to approve the new software-license agreement, which reverted his system back to Windows 7.

After lunch, he found his PC again prompting him to try the new software.

“They seem pretty much to have decided that you’re going to have Windows 10,” Loomis said. “So what’s the point in asking?”

Microsoft says it offers users an option, not a requirement, to update and that the process requires people to affirmatively click through prompts multiple times. Ultimately, the company says, the software’s beefed-up security features and automatic updates are better for most users than older versions of Windows.

That hasn’t stopped people like Loomis from crying foul, arguing Microsoft is pushing a product they don’t want.

“They’re being aggressive in encouraging customers and compelling customers to make the move,” said Stephen Kleynhans, an analyst who tracks operating systems for researcher Gartner. “They really do want to get the older platforms out of the market.”

Cloud territory

Microsoft’s push also extends to the cloud, another commitment the company made last year at Build with a bold target.

Nadella said Microsoft’s range of business-focused cloud-computing products, including the Office 365 productivity suite and Azure data-center services, would be taking in $20 billion a year in revenue by 2018, a hugely ambitious goal for a set of businesses that, in many cases, didn’t exist just a few years ago.

To meet that target, Microsoft has lit a fire under its product groups, sales force and network of software resellers.

To entice customers to move to the cloud, Microsoft has started releasing some of its latest features first into its Web-based software variants, with those updates going to traditionally purchased versions later.

An executive of one Washington state software firm said the all-in move to the cloud was too quick for some software resellers who built their business off commissions for selling Microsoft’s out-of-the-box software.

“I see what they’re doing and why they’re doing it,” said the executive, who didn’t want to be named for fear of jeopardizing business relationships with Microsoft. “They want to move everyone to the cloud, which is recurring revenue for them. But it is not always a great choice for the consumer.”

For partners who’d rather continue to rely primarily on noncloud business, he added, “they’ve made it inconvenient in many ways.”

Old ways

Okta, a San Francisco startup that builds software that enables businesses to manage their employees’ logins to cloud-based services, is one company recently exposed to the Microsoft sharp elbows — albeit temporarily.

The company does much of its work helping companies log on to Microsoft’s Office 365 Web-based productivity suite. During the past two years, Okta has showed off its products at Microsoft trade shows.

That symbiotic relationship has a complication, though.

As part of its effort to replicate its roster of business software in the cloud, Microsoft recently ramped up its effort to sell its Enterprise Mobility Suite, a product that performs many of the same functions as Okta’s and competes head to head in that marketplace. In media interviews, fast-growing Okta hasn’t been shy about its ambitions to win in the nascent market.

Earlier this month, after Okta put down a deposit to exhibit its products at a Microsoft information-technology conference, the San Francisco startup received a letter from Microsoft revoking the sponsorship. The reason: “broad competition between our companies.”

After a news story on the decision — and resulting critical reactions — Microsoft reversed itself and said Okta could, in fact, sponsor the event.

For Todd McKinnon, Okta’s chief executive, the decision smacked of the Microsoft of yesteryear.

“It’s ‘openness and fairness’ where they’ve lost, and old tactics where they think they can win,” McKinnon, in an interview, said of Microsoft’s posture. “They think they can take their (server and desktop software) business and replicate it in the cloud. But they don’t have to lose for us to win. That’s an old-school mentality.”

Microsoft says the Okta decision was an oversight, something of a hiccup on the way to turning over a new corporate leaf. Some observers agree.

“It takes a long, long time to change a culture,” said Jeffrey Hammond, who tracks developers at researcher Forrester. “For some people, they resist. It takes years to turn over managers, directors, vice presidents.”

The technology industry is littered with complicated relationships and changing allegiances.

Microsoft’s first markets, programming languages and associated software, made it a partner of the likes of IBM and Apple. But as the company’s ambitions broadened and Microsoft grew into a software juggernaut in the 1980s and 1990s, those relationships soured.

Similarly, one of the big, early moves in Microsoft’s newfound openness came in 2013 when the company announced that its cloud-computing platform would support database software made by Oracle. It was a break in decades of occasional hostility between the companies.

Of course, that partnership didn’t mean an end to all competition.

This month, Microsoft fired an unambiguous shot at Oracle, announcing that it would release a version of its previously Windows-only database software for Linux operating systems, a corner of the market dominated by Oracle.

“Oracle could be, conceptually, viewed as a partner when (the first) move happened,” said Wes Miller, an analyst with researcher Directions on Microsoft. “Now it’s very clear. Microsoft is reminding people that they may be a partner, but they’re also a competitor. You just need to be aware of where you fall.”