In a striking move with huge implications, Microsoft CEO Steve Ballmer earlier this week jettisoned long-time senior executive Bob Muglia from atop the company's core enterprise-products business.
Saying that different times and different opportunities require different talent and different visions, Ballmer made it clear that he believes that Microsoft's disjointed enterprise-software strategy no longer meets the needs of forward-looking CIOs.
And to demonstrate his own commitment to forcefully and immediately reverse that position, he was willing to push aside highly regarded 22-year company veteran Bob Muglia.
Clearly, there's a lot more going on here than just a personnel switch. And one of the most intriguing interpretations I've heard on this says that Ballmer is planning to recombine some of Microsoft's currently disparate enterprise products and go-to-market efforts into a much more highly focused effort to match or at least emulate the broad and unified enterprise-stack approaches currently offered by IBM and Oracle and in part by SAP.
Josh Greenbaum, principal at software consultancy Enterprise Matters, offers up this sophisticated interpretation of the strategic intent behind Ballmer's ouster of Muglia:
"Microsoft is going to reorg around its own 'stack' business, and in doing so take a major new tact in the battle for the enterprise," writes Greenbaum in a blog post called Bob Muglia Leaves—is this the Beginning of a Major Enterprise Realignment at Microsoft?.
"The new tact will be Microsoft's own version of the stack wars, in which Azure, fueled by the Dynamics ERP products and partners' enterprise software and services, becomes the leading edge of an increasing focus on direct sales to the enterprise.
"This won't obliterate the thousands of partners from the mix, but it will create a major shift in how Microsoft goes to market, particularly with respect to the large enterprise: much more direct and more in line with what IBM, SAP, and Oracle are able to do with their stack offerings."
Greenbaum's idea makes a great deal of sense because while Microsoft currently offers a wide range of enterprise-class products and technologies, those tools and applications are often taken to market in a fashion that aligns more closely with Microsoft's internal structure than it does with customers' needs and preferences.
Right now, it's like the predicament in which Scarecrow from "The Wizard of Oz" finds himself after his run-in with the flying monkeys in the bellhop outfits: he can still talk a great game but he's unable to move because one of his legs is over there and another is over here while his arms are in still different places. And somebody's gotta put all the pieces back together again.
For Microsoft, that's doubly true if Ballmer expects to be able not only to infuse his company with a more cohesive and aggressive set of enterprise offerings, but also if he expects that those goods and services will be able to compete with what IBM and Oracle and SAP are already offering and in ways that CIOs have come to expect.
Greenbaum's analysis says that the key behind Microsoft's effort will be Azure:
"As I have said before, the synergies between Dynamics and the products that Muglia oversaw was growing significantly, and that overlap will continue as Azure moves forward to claim a significant piece of the cloud market. Indeed, the growing realization that the cloud is taking over the mindshare (though not walletshare—yet) in the enterprise has been sharpening the focus of executives across the industry. And while Muglia was great at building a strong STB and a strong partner channel for the products, would he necessarily be the right guy to help shift gears and help position Microsoft for a C-level dialogue about the new enterprise a la Microsoft? I don't think so."
If, as Greenbaum persuasively argues, Ballmer is indeed taking Microsoft into the stack wars, then it's going to need some allies—and I think it's #1 wingman is going to be Hewlett-Packard. It was exactly one year ago that Microsoft and HP, with significant fanfare, agreed to collaborate to the tune of $250 million in the joint development of enterprise technologies that the companies said would span from infrastructure to applications.
On top of that, a few months ago, HP contested an assertion I'd made that HP was falling precipitously behind in the red-hot market for optimized systems. HP countered that it's very close to releasing a wide range of these highly engineered hardware-software products in concert with a range of software partners, principal among them Microsoft.
I wouldn't be surprised to see a formal announcement of those big plans from HP and Microsoft very very soon—this month, perhaps?—and such news, combined with last year's $250-million pledge, would surely indicate that Microsoft intends to continue collaborating closely with HP in deep-seated enterprise strategies.
It would match HP's purposes as well, given that its long-time strategic alliance with Oracle has for all practical purposes completely unraveled and left the door open for other big-time software partners such as Microsoft and also SAP to step in and fill the void left by Oracle (for the full story on that, see Global CIO: Silicon Valley Crackup: Oracle & HP Killing 25-Year Alliance?).
The HP-SAP partnership is already broad and deep and both companies would like to enhance it—but that aim could quickly run up against the law of diminishing returns, as I wrote about recently in Global CIO: Are HP And SAP Perfect Match Or Train Wreck?.
If all of these scenarios outlined above play out, here's the impact Greenbaum expects it will have on Microsoft: "The stack components don't go away—they become an essential part of the sale—but they have to take second fiddle to a higher-value offering. That offering in Microsoft-land will not come from STB, but from—and here's where I go out on a limb—a realigned Microsoft that is selling a much broader strategic vision of what the enterprise wants and needs: a vision much more like Oracle and IBM than ever before."
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