Foley on Microsoft

2016 Predictions: Microsoft Will Make Fewer but Bigger Bets

While Microsoft may not be quite as busy this year as they were in 2015, the impact of its moves should still make it a memorable year.

• By Mary Jo Foley
• 01/04/2016

One of Satya Nadella's pronouncements when he took the helm of Microsoft two years ago was to make fewer but bigger bets. I'd say Nadella and team have taken some solid steps and I'd expect to see even more consolidation and prioritization in Redmond in 2016.

Last year was a big one for Microsoft in terms of major new product deliverables and there'll be some significant new ones this year, too: Windows Server 2016, System Center 2016 and SQL Server 2016, to name a few. That said, I expect the next 12 months will be more about fleshing out the features of the existing hardware, software and service lineup than the introduction of a ton of brand-new products. Here are my specific predictions for 2016.

Windows Phone sticks around and gets the "Surface" treatment. Some wonder whether Nadella has the stomach for the continuing Windows Phone market share and revenue declines. Last year, Nadella stemmed the bleeding a bit by producing substantially fewer handsets targeted at specific audiences and cut even more of the employees Microsoft acquired when it bought Nokia's handset business. In 2016, Microsoft might take the next step by introducing a Surface-branded phone. Such a device would share branding, hardware elements and peripherals with the rest of the Surface family, according to the word on the street. Will that -- coupled with some new software tricks like Continuum dock/keyboard support and Windows Hello authentication -- do much to shore up Microsoft's still declining mobile-phone business? I'm not sure, but I bet Nadella will take a wait-and-see approach this year.

Productivity becomes even more of a North Star. Microsoft is continuing to pursue its mission to revert to a productivity, software and services company. In 2015, the company bought a number of productivity-focused firms; delivered a bunch of new productivity-focused experimental apps for all platforms via its Garage incubator; and rolled out a number of new productivity-first features for Office 365. I'm watching for Microsoft to step up its quest to discover and create the next big productivity breakthroughs. Watch for Microsoft to make its personal assistant Cortana more of a productivity aid across more services. I expect we'll see and hear more about GigJam, a new collaboration service that breaks tasks into "molecules of work."

Management tightens the "freemium" reigns. Microsoft's crackdown on the OneDrive team in 2015, resulting in the abolishment of previous "unlimited" storage promises, is likely just the first of a number of belt-tightening moves aimed at growing cloud/subscription margins. While Microsoft's freemium strategy is predicated on the company fielding interesting free versions of products and services that may ultimately convince customers to pay to unlock more fully featured versions, there's an internal realization that it must impose limits to the "free" part of the equation. Microsoft still hasn't done much to monetize its free consumer Skype service. It hasn't shown how its increasingly fully featured Outlook.com mail will help line the company's coffers. I expect we'll hear and see more of Microsoft's plans to wring dollars from these services.

Microsoft and Google do the partnership tango. Microsoft is on a partnership spree, as of late, with Business Development Chief Peggy Johnson playing frontwoman. Salesforce, SAP, Cyanogen, RedHat -- there's no Microsoft competitor that can't become a coopetitor -- except one obvious one: Google. Though Microsoft and Google came to a truce over their never-ending patent battles in 2015, the CEOs of the two companies never officially became BFFs like Salesforce CEO Mark Benioff and Nadella. I'm thinking something like this might happen in 2016. And, like the Microsoft-Salesforce partnership, there'll likely be more flash than substance to any deal. Maybe Google will concede to build a Windows 10 YouTube app. Or perhaps the pair will agree to create connectors between Google services and Microsoft's PowerApps technology. I really don't know what the tangoing twosome might devise, but I wouldn't be surprised to see some big event crafted for the occasion.