Microsoft CEO Steve Ballmer's to-do list for 2012 should include acquisitions, a strong tablet launch, and a move into services.
Microsoft remains the world's biggest software company, but it might not be for long unless it reestablishes itself, and its brands, as the products of choice for tech users in the consumer and enterprise markets. Once the unquestioned king of personal computing, Microsoft has become almost irrelevant in key markets like mobility and search, and even seemingly once unassailable franchises like Windows and Explorer are under threat.
Here are some moves the company must make next year if it hopes to regain some relevance.
1. Launch a tablet.
There may be no more pointed an indicator of what ails Microsoft than its fumbling when it comes to tech's hottest market--tablets. At the Consumer Electronics Show way back in January, 2010, CEO Steve Ballmer showed off a range of prototypes meant to assure the public that Windows would be a player in slates. But those efforts turned out to be so kludgy that even longtime ally HP ditched its plans for a Windows tablet and opted for webOS.
Two years later, Microsoft has yet to launch a legitimate entry. What's worse, there are indications that it could be another two years before a capable Windows tablet hits the mainstream.
By then, rivals like Apple and Google will have third-generation systems into the channel, and even peripheral players like Amazon and Barnes & Noble will have carved out solid niches. Forrester analyst J.P. Gownder believes that if Microsoft can't get a solid contender into the tablet market until 2013, it might be too late. "On tablets, Windows 8 is going to be very late to the party," said Gownder.
Microsoft needs to get a tablet out next year, not in 2013, or the race may be over.
2. Ship Windows 8.
On a similar note, Microsoft needs to get Windows 8 out the door next year. There can't be Windows 8 tablets without Windows 8, and the moribund PC market also could use the new OS in time for the 2012 holiday season. Consumers and even many business pros will only continue to purchase traditional desktops and laptops to the extent that they mirror the experience they have gotten used to on their smartphones and laptops, an experience that is all about touch and apps.
With its Metro interface, borrowed from Windows Phone, Windows 8 presents a more mobile look and feel, whether it's running on x86 or ARM chips. As Windows chief Steven Sinofsky noted at Microsoft's recent BUILD conference, many attendees who were given touch-based systems to play with continued to try to interact with their non-touch PCs by pressing the screen.
"People say touch is only for small devices or lightweight things. I promise you the minute you use a touch device with Windows 8, by the time you go back to your laptop or desktop you're going to be hitting that screen. You'll have fingerprints all over your monitor if it doesn't support touch," Sinofsky said
3. Jump into services.
Microsoft will ultimately need to come to terms with the fact that its customers are becoming less willing to pay for the type of software from which it makes most of its money--operating systems and desktop applications. Nobody buys an iPad because it runs iOS, they buy it for the Apple experience. Android does have some brand recognition as an OS, but it's free. Microsoft's other big software cash cow, Office, is also feeling pressure from free or low-cost offerings in the form of Google Apps and, to a lesser extent, from OpenOffice-based products like IBM's Lotus Symphony.\
o compensate, Microsoft needs to ramp up its efforts in enterprise tech services. The explosion in new computing form factors and architectures, from mobility to social networking and the cloud, means integration will remain a major challenge for IT shops for the foreseeable future, and they'll need help with all that heavy lifting and should be willing to pay for it. At the same time, all this Web 2.0 stuff has many companies rethinking their business models, a trend that provides an opportunity for high-end business consulting services.
IBM successfully made the transition to services and consulting once it saw that PCs were becoming a commodity. Microsoft needs to follow the same path now that software is becoming commoditized. It has the cash to pursue an acquisition of an Accenture, with whom it already has a services joint venture, or a Cap Gemini.
4. Lead With Xbox.
Despite its troubles over the past year, Microsoft has had one resounding success--the Xbox Kinect system. The company sold 10 million units in the four months after it launched the device on Nov. 4, 2010. Kinect features motion and speech recognition technologies that let users control the Xbox through physical gestures and vocal commands. In addition to filling Microsoft's coffers, Kinect has elevated the Xbox brand into the leading gaming and entertainment system.
The company needs to leverage that brand recognition across its other lines. It could start by launching a line of consumer phones and tablets that, even if they run Windows under the hood, carry the Xbox livery. That could be the beginnings of a strategy under which Xbox is the face of Microsoft's consumer products, while Windows remains the brand for the enterprise. In the consumer space, Windows has become your father's Oldsmobile, but in business it remains a trusted name that implies security and compatibility.
5. Take the Yahoo plunge.
Microsoft has toyed with acquiring Yahoo for the past several years, at one time making an offer as high as $33 per share. The Web portal could now be acquired for less than half of that. Reports indicate that Redmond may in fact be part of a consortium, which also includes Silver Lake and TPG Capital, that is looking to acquire a chunk of Yahoo.
Microsoft should go all the way. It already handles search for Yahoo via Bing, and despite Yahoo's missteps over the past couple of years, it remains the Web's most popular portal. Microsoft's own MSN, meanwhile, is an also ran. Yahoo could give Microsoft a much needed (and far less confusing) platform to pitch cloud services such as e-mail and apps to consumers and small businesses.
The new year is just around the corner Mr. Ballmer--have at it.
