Foley on Microsoft

Microsoft Needs to Put All Its Eggs in the Business Basket

While Microsoft has narrowed its focus in recent years, it may still be trying to wear too many hats.

• By Mary Jo Foley
• 10/27/2016

Back in 2013, I asked Microsoft's then-CEO Steve Ballmer why Microsoft didn't just want to be another IBM. Why keep trying to crack consumer markets when Microsoft's strengths obviously were in selling business products?

Ballmer repeated a common Microsoft refrain: Consumers and business users were inseparable. (Remember that good, ol' "consumerization of IT" argument?)

But these days -- given corporate decisions such as discontinuing (for now, if not permanently) the Microsoft Band fitness tracker and, more prominently, no longer trying to go head-to-head with Apple and Android phone makers in the consumer space -- it seems Microsoft is moving away from attempting to target consumers. Instead, it looks like Satya Nadella's Microsoft has decided that business productivity software and services is the right place for the company to focus.

The one exception to this is gaming. Microsoft continues to build gaming consoles and peripherals, while pumping out gaming software and services. As I've written before, this is because gaming is the biggest app category for mobile. Plus, gaming software and services are a way for the company to try to monetize Windows.

There are a few other smaller exceptions to an all-work-and-no-play focus from Microsoft. Office 365 Home and Personal subscriptions are aimed at consumers (though in some ways, as an extension of what they do at work). Microsoft execs still occasionally demo HoloLens scenarios that have nothing to do with work. The Skype and OneDrive teams still feature consumer case studies in their blog posts. The Microsoft Garage incubator team fields consumer-focused app experiments on a regular basis.

But Microsoft's biggest successes and potential successes are in business markets, not consumer ones. This is why Microsoft broadened its planned audience for HoloLens to not just include business users, but to lead with them. If Microsoft does ever move ahead with its Surface Phone as a Hail Mary for Windows Phone, its only real hope is to try to make those devices for customized line-of-business uses.

I understand that business users are consumers, too. I also realize that sometimes business users do what could be categorized as consumer-focused tasks and activities when at work and after work. But Microsoft's focus on making people more productive is first and foremost a business-targeted mission.

Notice that Microsoft isn't trying to build a self-driving car -- or even trying to put an embedded version of Windows inside those cars anymore. Instead, it's partnering with various automobile manufacturers to bring its productivity software and services to those vehicles. That's a smart way for the company to stay involved in an emerging market while still playing to its strengths.

I also believe Microsoft isn't going to build a consumer-specific version of the HoloLens to sell alongside the $3,000 developer edition that's already out there. Instead, Microsoft will provide its Windows Holographic platform to other companies that are better at building consumer-centric devices and let them take a crack at this.

There's a very vocal group of Microsoft customers out there who believe Microsoft needs Microsoft-branded consumer hardware, software and services to stay relevant. They're worried about Nadella & Co.'s commit­ment to Surface devices (which some believe are increasingly being developed and sold as exclusively business-targeted systems) and Xbox.

I don't see Microsoft dropping Surfaces or Xboxes. I do think there's a case to be made for Microsoft spinning off its gaming properties, but I have absolutely no reason to believe this is a plan or even a consideration by anyone in power at the company.

I'm not expecting Nadella to concede publicly that Microsoft is all about business. Just a year ago, he was still making the "dual-use" argument, regarding the need to target both business and consumer customers with its products. But I'm curious what the Microsoft of 2017 and beyond will look like, in terms of its business versus consumer customer base. My bet is its business focus continues to grow and its consumer focus will wane. And given Microsoft's strengths, I'd say that's the right direction.