Redmond Review

Can Microsoft's Reorg Save its Mobile Strategy?

Microsoft is making a big bet that eliminating traditional divisional boundaries will help it be more efficient and build better products. It had better be right.

• By Andrew J. Brust
• 08/08/2013

Microsoft's mobile strategy has been taking a serious beating lately, brought on by a $900 million write-down of Surface RT inventory, and actual tablet revenue lower than the write-down itself. Can Microsoft make it in the tablet market? Will Windows 8 ever get market traction? Will Windows RT survive? In other words, what is Microsoft's mobile strategy and will it work?

To decide, start by looking at the notoriety and quantity of available apps for Microsoft's platforms. Major apps are missing, with no ETA in sight. Aggregate app counts underwhelm as well, with the iTunes App Store and Google Play each having almost four times the apps available in the Windows (8/RT) Store and Windows Phone Store, combined.

Issues exist on the pricing side, too. Windows 8 and Windows RT machines are very expensive compared to their Android, and even iOS, counterparts. The $399 iPad 2 and $329 iPad Mini, with their huge number of apps, come in cheaper than even the newly reduced Surface RT with keyboard. And the $229 second gen Google Nexus 7, which also has an impressive array of apps, comes in substantially cheaper than the relatively thick, low-resolution Acer Iconia W3, even after its recent price cut.

Speaking of Acer, the OEMs have been another problem for Windows in the device arena. Many of the Windows 8 machines available at launch offered the same uninspiring designs as older-generation PCs and lacked touch displays. This encouraged customers to use Windows 8 as if it were Windows 7, making the Start screen an impediment that offered little compensating value, encouraging customers to complain. And complain they did.

Three's Company
As if all this weren't enough, there are three separate Windows operating systems, between phone and tablet form factors. Of the three, two (Windows RT and Windows Phone) are designed for ARM-based processors, creating some heavy and self-imposed challenges. Some mobile apps are available on Windows Phone, but not the Windows 8/RT platform; other apps exhibit the same problem in reverse. Developers that do support both platforms must put in extra effort and commitment. Getting developers to support a fledgling OS is already a tough sell; getting them to support two is a bit like Mission Impossible.

And with Intel's Haswell generation Core CPUs getting better battery life, not to mention the Bay Trail generation Atom chips getting faster, one wonders whether Windows RT was worth it. After all, not only has the Surface RT sold poorly, but Asus, Lenovo and Samsung have pulled back on their Windows RT offerings, and HP and Acer never even started.

But Windows RT is necessary for the future. Since it runs on the ARM chips present in virtually every smartphone, it can bring the Windows mobile platforms together. At the same time, it serves as necessary motivation to Intel to deliver faster x86 chips, with lower power profiles. The decision to create Windows RT made -- and makes --- sense.

But the execution was weak. In fact, it was almost tragic. Why did Microsoft bring Windows RT to market before a native Windows Store version of Office was ready? Why did Redmond push Windows RT before customers could benefit from it and before OEMs could make money from it? And why did Microsoft set sales targets so high for Surface RT, especially when its price was, and still is, uncompetitive?

All for One
The root cause of most of these gaffes was the Windows Division's policy of secrecy. It sabotaged the launch of Windows 8, by preventing the Office team from developing native apps, impeding OEMs from having the right kind of hardware and making it tough for independent developers to have really high-quality apps in time. These issues are starting to abate now, but we're almost a year in.

This is frustrating, to be sure. But while Microsoft looks naïve to us, Microsoft personnel think we're naïve for expecting too much, too quickly, when internal progress is hampered by internal politics we're not privy to, including those that brought about the secrecy policy. Such politics are a terrible waste, and they have seemed intractable for a very long time. I believe these politics, and the way they hamper Microsoft's effectiveness, are exactly what underlie the reorganization of Microsoft, made public on July 11.

Under the banner of "One Microsoft," Steve Ballmer wants Microsoft to start functioning like a single corporate entity instead of a federation of separate ones. Divisional boundaries are to be erased, channels of communication to be opened. Secrecy policies that impede strategic cooperation should be eliminated, as should competing operating systems for the same CPU architecture.

The question is whether the re-org will work. Will Microsoft personnel be relieved of paying the tax of political maneuvering and be free to invest it back into working innovatively and competitively? Microsoft's done the hard work of shifting its policy to the cloud and mobile, i.e. to services and devices. But the policy change has to be accompanied by an increase in agility, morale and effectiveness.

With the transformation the re-org is designed to bring about, Microsoft could leapfrog its competition. Without it, Microsoft will probably suffer a very slow, but measureable, decline. I'm monitoring the situation obsessively; .NET developers should too, as the outcome will determine the platform's long-term viability.