Category Archives: Microsoft

The new Microsoft

Clearly Satya Nadella has made a huge difference at Microsoft since taking office in 2014. The stock in 2016 hit an all time high since 1999. So investors are happy. Here are the key changes he has made since taking the role as CEO:

  • Skipped Windows 9 and went straight from Windows 8 to Windows 10, a great release. However revenues from Window is declining with the reduction of PC sales.
  • Released Microsoft Office for iPad. Also releasing the Outlook product on iPhone & Android.
  • Embraced Linux by joining the Linux Foundation, previously anathema to Microsoft’s window-centric culture.
  • Spent $2.5B to buy Mojang, the studio behind hit game Minecraft.
  • Introduced Microsoft’s first laptop, The Surface Book.
  • Revealed Microsoft HoloLens, the super-futuristic holographic goggles.
  • Created the new partner program to provide Microsoft products on non-Windows platforms. Hired ex-Qualcomm exec Peggy Johnson to head the bus-dev group.
  • Enhanced company morale and employee excitement.
  • The biggest gamble was the purchase of Linked-In last June for a whopping $26.2B.

It’s important to understand the significance of the Linked-In purchase. Adam Rifkin (I worked with him twelve years back at KnowNow, a smart guy) recently wrote an article on this topic. I like his comment that in a world of machine learning, uniquely valuable data is the new network effect. The right kind of data is now the force multiplier that can catapult organizations past any competitors who lack equivalent data. So data is the new barrier to entry. Adam also makes a statement that the most valuable data is perishable and not static. Software is eating the world and AI is eating software meaning AI is eating data and popping out software.

Now let’s map what this means to the Linked-In purchase by Microsoft which sees the network effects of Linked-In’s data. What Google gets from search, Facebook gets from likes, and Amazon gets from shopping carts, Microsoft will get such insights from Linked-In’s data for its CRM services. Adam makes a point that the global CRM market in 2015 was worth $26.3B – almost exactly what Microsoft paid. It is the fastest growing area of enterprise software. Hence Marc Benioff of SalesForce was not very happy with this acquisition.

The new Microsoft is ready to fight the enterprise software battle with incumbents like SalesForce, Oracle, SAP and Workday.

The top five most-valued companies are Tech. – almost

On this first day of August 2016, I saw that the top most-valued companies are tech. companies, and the fifth one is almost there. Here is the list.

  1. Apple ($appl): $566 billion
  2. Alphabet ($goog): $562B
  3. Microsoft ($msft): $433B
  4. Amazon ($amzn): $365B
  5. Exxon Mobile ($xom): $356B
  6. Facebook ($fb): $353B

The big move is Amazon’s beating Exxon Mobile (used to be number 1 for many years) to the fourth spot. The switch came after Amazon posted its fifth straight quarter of profits last week as the oil giant’s profits tumbled 59 percent during the same rough period. If Exxon continues its drop, then Facebook will beat it in days.

This is quite remarkable! Other than Microsoft and Apple, the other 3 companies are much younger, Facebook being the youngest one. Their rapid rise is due to the growth of the Internet with its associated areas of search, e-commerce, and social networking. Interestingly Amazon survived the dot-com bust of the early 2000-2001 time unlike Yahoo, AOL, etc. Contrast this to the $4.8B valuation of Yahoo’s core business acquired by Verizon last week! Also, the fastest growing and most profitable of Amazon’s 3 businesses (Books, any commercial items, and AWS) is the cloud infrastructure piece called AWS (Amazon Web Services) with a run-rate of $10B this year. This is way ahead of Microsoft’s Azure cloud or Google’s cloud solutions. 

The importance of cloud is obvious as Oracle just paid $9.3B last week to acquire Netsuite, a company that was funded by Larry Ellison. With a 40% ownership of Netsuite, he gets a hefty $3.5B from this deal. Paradoxically, Amazon lead the way to cloud computing – not IBM, not HP, not EMC/VMWare, and not Microsoft or Google. So no wonder, Amazon is reaping the benefits!

Microsoft + LinkedIn @ $26.2 billion cash!

This is big news this morning – Microsoft buying LinkedIn at $26.2B cash. LinkedIn’s stock is soaring by 47% as we write while Microsoft stock is falling! This is one of the biggest acquisitions since Dell’s acquiring EMC few months back. So how does this work?

Well, Satya Nadella explains the importance of a professional network in their scheme of cloud offerings, from Office360 to Dynamics. Imagine walking to a meeting and viewing all the attendees info from their LinkedIn profiles. He said, “It helps us differentiate our CRM product with social selling. It helps us take Dynamics [Microsoft’s suite of business management software] into new spaces like human capital management with recruiting, and learning, and talent management.”

LinkedIn had a bad quarter and the stock was going south by as much as 40%. So there was some anxiety on where the company was heading in future. They saw this opportunity to be part of a larger company and the board quickly jumped into this offer, as it seems. As far as the synergy is concerned, time will tell how they integrate and make it look like a seamless cloud offering. Reid Hoffman, chairman of LinkedIn will stay as an advisor, but his new role is yet to be defined. Jeff Weiner will continue to stay as CEO reporting to Nadella.

This certainly strengthens Microsoft’s cloud presence and adds value to the Dynamics business more than the Office360 side. But use of Office360 suite in creating and managing documents/profiles may add to the growth of that business. If they can make it a success, Satya Nedella’s leadership will have a new feather in his cap.

Stack Fallacy? What is it?

Back in January, Tech Crunch published an article on this subject called Stack Fallacy, written by Anshu Sharma of Storm Ventures. Then today I read this Business Insider article on the reason why Dropbox is failing and it is the Stack Fallacy.  Sharma describes Stack Fallacy as “the mistaken belief that it is trivial to build the layer above yours.”

Many companies trivialize the task of building layers above their core competency layer and that leads to failure. Oracle is a good example, where they thought it was no big deal to build applications (watching the success of SAP in the ERP layer initially built on the Oracle database). I remember a meeting with Hasso Plattner, founder of SAP back in the early 1990s when I was at Oracle. He said SAP was one of the biggest customers of Oracle at that time and now Oracle competes with them. For lack of any good answer, we said that we are friends in the morning and foes in the afternoon and welcomed him to the world of  “co-opetition”. Subsequently SAP started moving out of Oracle DB and was enticed by IBM to use DB2. Finally SAP built its own database (they bought Sybase and built the in-memory database Hana). Oracle’s applications initially were disasters as they were hard to use and did not quite meet the needs of customers. Finally they had to win the space by acquiring Peoplesoft and Siebel.

Today’s Business Insider article says, “…a lot of companies often overvalue their level of knowledge in their core business stack, and underestimate what it takes to build the technology that sits one stack above them.  For example, IBM saw Microsoft take over the more profitable software space that sits on top of its PCs. Oracle likes to think of Salesforce as an app that just sits on top of its database, but hasn’t been able to overtake the cloud-software space they compete in. Google, despite all the search data it owns, hasn’t been successful in the social-network space, failing to move up the stack in the consumer-web world. Ironically, the opposite is true when you move down the stack. Google has built a solid cloud-computing business, which is a stack below its search technology, and Apple’s now building its own iPhone chips, one of the many lower stacks below its smartphone device”.

With reference to Dropbox, the article says that it underestimated what it takes to build apps a layer above (Mailbox, Carousel), and failed to understand its customers’ needs — while it was investing in the unimportant areas, like the migration away from AWS. Dropbox is at a phase where it needs to think more about the users’ needs and competing with the likes of Google and Box, rather than spending on “optimizing for costs or minor technical advantages”.

Not sure, I agree with that assessment. Providing efficient and cost-effective cloud storage is Dropbox’s core competency and they are staying pretty close to that. The move away from AWS is clearly aimed at cost savings, as AWS can be a huge burden on operational cost, plus it has its limitations on effective scaling. In some ways, Dropbox is expanding its lower layers for future hosting. It’s focus on enterprise-scale cloud storage is the right approach, as opposed to Box or Google where the focus is on consumers.

But the Stack Fallacy applies more to Apple doing its own iPhone chips, or Dell wrongfully going after big data. At Oracle the dictum used to be, “everything is a database problem – if you have a hammer, then everything looks like a nail”.

In Memoriam – Ed Lassettre

I was out of the country when my old colleague from IBM days, Ed Lassettre passed away last November. I only found out earlier this month about his demise from a mutual friend from IBM Almaden Research. Ed was one of the best computer software professionals I knew and respected.

He was at IBM’s Santa Teresa Lab (now called Silicon Valley Lab) when I started there back in 1981 after my five-year stint at IBM Canada. That year he got promoted to a Senior Technical Staff member (STSM), the very first at the lab to get that honor. Subsequently he became an IBM Fellow, the highest technical honor. His reputation of being one of the key software engineers for IBM’s MVS operating system preceded him. Ed had spent a few years at IBM’s Poughkeepsie Lab in upstate New York. He did his undergraduate  and post-graduate studies at Ohio State University in Math. He had deep insights into the intricacies of high performance computing systems. When we were building DB2 at the IBM lab, Ed was providing guidance on its interface with the operating system.

Subsequently I went to IBM’s Austin Lab for two years in the mid-1980s to lay the foundation of the DB2 product for the PC (which at the time lacked the processing power and memory of the large mainframes). Hence our design had to accommodate to those limitations. The IBM executives wanted someone to audit our design before giving the green signal for development. I could not think of a better person than Ed Lassettre to do that. At my request Ed spent some time and gave a very positive report on our design. He had great credibility in the technical community. Many times, I sought his views on technical matters and he provided timely advice. His wisdom was complemented by a tremendous humility, a rare feature in our industry.

I had left IBM back in 1992 for Oracle and lost touch with Ed. Later on I found that he had retired from IBM and joined Microsoft Research. He was a good friend of the late Jim Gray, also at Microsoft Research at the time. Ed retired from Microsoft in 2013 at the age of 79! He was quite well-known in the HPTC (High Performance Technical Computing) world.

RIP, Ed Lassettre, a great computer scientist and friend! You will be missed.

2015 – Year of Open Source explosion

Open source software – software freely shared with the world at large – is an old idea, dating back to the 1980s when Richard Stillman started preaching the gospel calling it free software. Then Linus Torvalds started working on Linux in the early 1990s. Today, Linux runs our lives. The Android operating system that runs so many Google phones is based on Linux. When you open a phone app like Twitter or Facebook and pull down all those tweets and status updates, you’re tapping into massive computer data centers filled with hundreds of Linux machines. Linux is the foundation of the Internet.

Cade Metz recently wrote in an article, “And yet 2015 was the year open source software gained new significance, thanks to Apple and Google and Elon Musk. Now more than ever, even the most powerful tech companies and entrepreneurs are freely sharing the code underlying their latest technologies. They recognize this will accelerate not only the progress of technology as a whole, but their own progress as well. It’s altruism with self-interest. And it’s how the tech world now works. This is not just a turning point, but a tipping point – says Brandon Keepers, head of Github.”

Apple, for the first time, decided to offer its Swift programming language (used to build apps for your iPad, iPhone, and Mac) to the open source. That means applications built on Swift can be deployed on machines running Linux, Android, and Windows OS. Previously Apple’s language Objective-C was only meant for Apple devices. This new move by Apple will enable developers to use Apple’s development tools across competing platforms.

Microsoft, another champion of proprietary software during the 1980s and 1990s, decided to open source its .Net software. That way, .Net can be used by developers to build applications for Linux and Apple’s operating system too. Even IBM decided to open source its own machine language IBM SystemML to Apache Spark.

Over the past 15 years, Google has built a wide range of data center technologies that have helped make it the most powerful company on the ‘net. These technologies allow all of the company’s online services to instantly handle requests from billions of people, no matter where in the world they may be. Typically, Google kept these technologies to itself, forcing others to engineer inferior imitations. Map-reduce and HDFS are examples, that grew out of Google’s file system and algorithms. But last year Google decided to open source TensorFlow, the software engine that drives its artificial intelligence services, including its image and speech recognition and language translation tools. Google realized that it could tap into a much larger team of researchers to enhance TensorFlow, much faster than done internally.

Elon Musk went even further. In mid-December, he and Sam Altman, president of Y Combinator, unveiled OpenAI, a $1 billion nonprofit dedicated to the same breed of AI that Google is developing. They have promised to open source all their work.

Yes, 2015 was the year Open Source really reached new heights!

A new CEO at Microsoft – Satya Nadella

Microsoft announced this morning the appointment of a new CEO – Satya Nadella. He has worked at the company for the last 22 years and since last week, the rumors have started that he was the one picked by the board after five months of search. Being from the same country of origin, it gives me immense pleasure to see Satya climb the ladder to the top of the 4th. largest corporation (in terms of market value) in the world, besides being the number one software company. I don’t know him, but based on what I read, he seems like a very talented and capable leader.

Mr. Nadella comes from Hyderabad, India where he went to the Hyderabad Public School (HPS), fellow senior schoolmates are Shantanu Narayen, CEO of Adobe and Srikar Reddy, CEO of Sonata Software (where I am an advisor) and many other leaders. Then he attended Manipal Engineering College for his bachelor’s degree in electrical engineering. He did his masters degree in computer science at the University of Wisconsin, followed by an MBA from the U. of Chicago. While working at Microsoft he completed his MBA degree, traveling back and forth between Redmond and Chicago. During his 22 years he went up rapidly managing various teams at Microsoft, from XBox to Bing search engine to finally lead the cloud and server division. He grew that division’s revenue from $17B to $21B in three years. Microsoft’s only growth business is the back-end infrastructure software business (Sharepoint, Azure Cloud, SQL Server, etc.). The consumer stuff (Windows 8, Office,..) are in decline as the computing industry shifts from PC-centric model to a cloud model of serving billions of smart client devices. Clearly Microsoft is behind in that game to competitors like Google, Apple, Samsung, etc.

More importantly, changing course at Microsoft has proven to be difficult. Ray Ozzie tried few years back, but failed. Working through the contentious groups has been quite hard. The board pins their hope on Satya Nadella to address this issue as he steers the company on the new course of cloud computing, big data, and myriads of smart devices. He clearly recognizes the deficiencies and wants to bring an entrepreneurial culture back to Microsoft. It has talent and lots of money to spend.

We wish Mr. Nadella success in his new role.