Foley on Microsoft

Nadella's Unsung Feat That Changed Everything

One of the cultural changes that has occurred on Nadella's watch that rarely gets little more than cursory scrutiny is Microsoft's attitude toward partnering.

• By Mary Jo Foley
• 09/28/2017

With Microsoft CEO Satya Nadella's book "Hit Refresh" just out, the word of the month -- and probably the rest of this year -- is "culture."

Since Microsoft gave Nadella the CEO nod in early 2014, much has been made of his impact on Redmond's culture, ranging from how Microsoft handles diversity and inclusivity, to how it approaches Linux. Nadella himself has gone on record, saying the most important task for all CEOs is how they create and curate their company culture.

One of the cultural changes that has occurred on Nadella's watch that rarely gets little more than cursory scrutiny is Microsoft's attitude toward partnering.

Shortly after Nadella became CEO, Microsoft hired Peggy Johnson from Qualcomm to head up strategic business deals and partnerships. And since then, Microsoft has inked deals with a wide variety of companies, ranging from Adobe to Volvo.

I remember when Microsoft's top brass treated coopetition like a dirty word. The "old" Microsoft would be more likely to try to cut off a com­petitor's air supply (hello, former Microsoft Vice President Paul Maritz) or simply take it over than try to find common ground.

I realize there still is an intricate partnership tango between any two rivals. Yes, Microsoft and Red Hat have come to terms that enable customers to use Red Hat Enterprise Linux on Azure -- but not with a lot of patent agreements involved. Sure, IBM is a Surface "Solution Integrator," but the Big Blue Apple ally isn't going so far as to resell Surface devices.

Undeniably, Microsoft these days is a lot more open to doing deals with companies that would never have been considered under previous regimes. But Microsoft's new partnering strategy deserves more nuanced scrutiny and analysis than simply, "Partnering more is better; Nadella is better."

Microsoft execs want and need more of an open source footprint in order to expand Microsoft's appeal to the increasingly open source-savvy development community. (At last count, Microsoft said one-third of the virtual machines running on Azure were Linux.) Once Microsoft officials decided that Azure needed to be not just a Platform-as-a-Service cloud, but also an Infrastructure-as-a-Service one, Microsoft's need to let Linux run on Azure was apparent. It took several years to get Red Hat on board. More recently, Microsoft and Red Hat extended their partnership in a way to give Azure and SQL Server customers access to the Red Hat OpenShift container platform.

The 'Softies also have come to realize that software vendors are some of its potentially most important and lucrative Azure and Office 365 customers. Adobe isn't hosting its cloud wares exclusively on Azure, as it still also is a customer of Amazon Web Services, but Adobe is putting more and more of its could wares on Azure and integrating directly with Office 365 APIs and services. Workday, likewise, is integrating its finance and HR apps with Office 365 and various Microsoft analytic tools. Microsoft forged a similar integration partnership with Dropbox and Office.

Microsoft's more partner-friendly culture doesn't mean every Microsoft competitor is destined to become a comrade in arms, however. Example A: Salesforce.com.

Back in 2014, Nadella and Salesforce.com CEO Marc Benioff were best buds, committing to integrate their respective product lines across multiple fronts even though they planned to continue to compete in the customer relationship management space. But just two years later, after rumored Salesforce.com takeover talks fizzled, Benioff was ready to complain to European antitrust authorities over Microsoft's LinkedIn purchase plans. Even a more culturally sensitive Microsoft can't win 'em all over.

Failing fast (and not punishing those who try new things), listening to new hires from the outside, caring more about being a "learn-it-all" than a "know-it-all." These are the kinds of "growth mindset" changes Nadella is known for and wants to be known for championing. But I think his attitudes toward partnering could be as, if not more, important to Microsoft's ability to compete and evolve in the coming years.