Microsoft in 2012: the good, the bad and the no shows

It was a packed 2012 for Microsoft. Here are some of the more notable developments coming out of Redmond this past year.

Microsoft certainly had an interesting 2012. Starting early this past spring and continuing through the first quarter of 2013, Microsoft will deliver over a dozen strategically important products for the desktop and mobile markets that essentially will reinvent its technology portfolio. With more than half those products delivered the company has had some hits, flops, no shows and one or two we won’t be able to categorize until the market votes with its dollars later next year. In no particular order, here are some of the more notable and interesting developments coming out of Redmond involving both the company’s products and personnel over the past year.

The arrival of the 'Cloud OS'

The tight integration of Windows Server 2012 with the Azure cloud environment was perhaps the most emphatic statement Microsoft could make about proving it was "all in" when it came to committing to the cloud. In fact with its arrival, Microsoft referred to the bundle as "the Cloud OS." Right from the start the company touted the tandem as the way for its ISVs and users to build private clouds as well as develop, deliver and manage applications and services from those clouds. But even as the company’s mighty marketing machine kicks into gear, reviews have been mixed. While some IT shops now using Azure were drawn in by significant improvements, others say they aren't making any serious commitments because of Microsoft’s failure to lay out a clear vision of how the product will evolve.  

When Windows Server 2012 was released in September, which many called the most ambitious release of the product, Azure integration was only one of hundreds of additional enhancements. The number of cmdlets in PowerShell reached 2,300 and it works with Active Directory and cloud-based servers. Hyper-V 3.0, a key building block for Microsoft’s virtualization strategy, has two new tools, Replica and the Extensible Switch, that extend a virtual network's functionality and the ability to copy VMs.

Microsoft declares itself a devices and services company

CEO Steve Ballmer’s statement in October that Microsoft is now a “devices and services” company had a certain flair for the obvious, but the public declaration of it felt dramatic nonetheless. Essentially Ballmer’s message was: Microsoft’s future lies beyond Windows and Office. This is a scary scenario for a company that derives a huge chunk of its $69 billion in revenues from those two franchises. But the company has already ventured into this brave new world with the Surface. Plus, Windows Phone 8 and the desktop Windows 8 are heavily service-oriented operating systems, with products like SkyDrive and Office 365. And, as mentioned on this list, the company has redoubled its efforts with Windows Azure to make it a stronger cloud platform from which to deliver cloud services to a range of devices.

So far, not so good

Windows 8 and the Surface tablets have stumbled out of the gate hardly achieving mass appeal, and Windows Phone 8 is in no danger of breaking into double digits share of the smartphone market any time soon. Further stalling momentum of these products is the no-show of Office 2013 on iOS and Android, which company officials believe gives them a significant boost over Apple and Google.

Unlike the golden days of the PC, Microsoft will not have a couple of years to establish Windows 8 as a meaningful force in the fast paced mobile market. The next 12 months will determine if Microsoft can keep up.

Microsoft goes for the hosted providers A-list

Since releasing its Office 365 collaboration suite in 2010, Microsoft has harbored ambitions to be a top-tier, hosted services provider. But by September 2011, just three months after it went live, the company suffered two outages. It was hardly a jack rabbit start. In November of this year the company had two more outages in the span of just five days, this time causing many to lose email access. This only served to further shake the confidence of its customers.

Not only are customers concerned but now IT consultants are pulling back. Many consultants have pitched Office 365 as a solid -- reliable -- alternative for companies looking to save money and ease administrative burdens. But now some are hesitant to recommend a service that could end doing more harm than good for their reputation.

These failures could be chalked up to growing pains as Microsoft ventures into a new market, and shouldn’t prove fatal to the company’s ambitions. Clearly the company needs to avoid such failures if it hopes to be taken seriously by larger IT shops in 2013.

The tablets come down from the mountains

Microsoft tried to redefine its hardware story in 2012 with its Surface tablets. Known for its widely regarded mice, keyboards and Xbox hardware, the company never shipped a full-fledged computer, always relying on hardware OEMs for that task.

While the two systems are still buoyed by a blizzard of television ads, Microsoft appears reluctant to release any concrete sales numbers. This has led to rampant speculation about just how well the devices are doing. Add to that the less-than-enthusiastic reviews from technology critics, who said software slowness and lack of legacy apps took the shine off a nice piece of hardware

But this is the early days still. Some have a glimmer of hope pointing to the upcoming Surface Pro with Windows 8, as opposed to lower end Windows RT-based device that uses the ARM processor. Also encouraging are follow-ups to the first two models due later in 2013.

Microsoft raises prices to push IT to the cloud

On December 1 Microsoft hiked client access license (CAL) prices across its suite of on-premise server-based products -- including Exchange and SharePoint -- by as much as a hefty 15%. Microsoft defended the increase saying it better supported unlimited mobile devices accessing its products. But what is really at play, some believe, is Microsoft’s attempt to accelerate adoption of cloud-based versions of its bread-and-butter server applications. Apparently, the company got tired of talking about how much cheaper Office 365 was compared to its on-premise products, and took more decisive action.

But this has left companies with only two stark options: pony up the dough; or move to the cloud. The problem is many customers are still hesitant to move to the cloud for a number of reasons. The hope is the additional cost savings will tilt the playing field in favor of Office 365. In the past Microsoft has effectively used cost cutting to undermine competitors, but can it do the same to one of its own?

Windows Phone 8 is looking good, but will anyone notice?

With the new adaptability of the Windows 8 operating system, Microsoft released a version for its new Windows Phone 8 that sported a more modern look. As was the case with the Windows-8 based Surface, Phone 8 was backed up with an enormous marketing push in anticipation of the holiday season. But also like the Surface, its future success is not clear.

Now months after its release Windows Phone still has a number of unanswered questions. First, where are the apps? Microsoft's Windows Store catalog has grown immensel, but there are still huge holes that Apple and Android phone OSes can drive trucks through. One problem dogging Microsoft has been the inability to lure developers. Second, how will the company attract customers away from Apple and Android to grow its market share? If Microsoft could establish a developer base that delivers first (or, better, exclusively) on the Windows Phone platform, that would be a start.

With the company's newfound position as a serious device maker, will 2013 be the year the Surface Phone, well, surfaces? Rumors have floated of a Microsoft-built phone since the launch of the Surface, but none have come to ground.

Office 2013's no show

After months of Microsoft officials yacking about what a competitive advantage Office 2013 would give its Windows 8-based tablets and phones , the company shipped those product in late October sans Office 2013, delivering only a preview version. While Microsoft has made what they say is the finished version available only to its volume customers, everyone else is still waiting. And they may have to continue waiting until January or February. This is dangerous ground Microsoft is walking on, of course. The longer the company waits to deliver Office 2013 for not just its own Surface tablets, but versions for Apple and Google’s best-selling devices, the more it increases the chance it could cripple the financial fortunes of its most profitable franchise.

Did the wrong Steve leave Microsoft? Part I

In the hours following the unexpected departure of Steve Sinofsky was unexpectedly leaving the company, sentiments similar to Michael Pusateri's poured in on social media: the wrong Steve may have left. Sinofsky ruled the two most profitable Microsoft franchises (Office and Windows) with an iron fist for much of the past decade until this past November. While he likely didn’t win any popularity contests inside the company, clashing with other Microsoft execs including the other Steve (Ballmer), he did made the trains run on time delivering Windows 7 (in the wake of the Windows Vista debacle) and then Windows 8 and Windows Server 2012. The latter two figure to determine the strategic technology direction of operating systems for Microsoft far into the future.

Taking over for Sinofsky is Julie Larson-Green who has led a number of software and hardware initiatives within the company, including managing the user interface design for Windows 7 and Windows 8. The change was made to reportedly promote a more rapid development of hardware and software, so it's likely IT pros could see the results of the organizational shift as soon as 2013.

Did the wrong Steve leave Microsoft? Part II

A growing number of critics say yes. Over the past several years since Steve Ballmer took over the day-to-day operations of Microsoft, the company has made a series of acquisitions that have failed to yield any significant financial return or technology advantage: the $8.5 billion acquisition of Skype and the $6.5 billion purchase of aQuantive leap to mind. Ballmer has also been blamed for missing rich opportunities in the mobile and social media worlds allowing Apple and Google to establish an enormous lead. Instead, Ballmer chose a head’s down approach to innovation, plowing billions into Microsoft’s decades-old greatest hits, Windows and Office. That said, he still has a chance to redeem himself by coming up with the right plan to convince corporate America to buy its Windows 8 mobile products. Ballmer won’t have a lot of time to make that happen, smart money says he has maybe another year. Bill Gates once said he couldn’t envision anyone 50 or older, including himself, running Microsoft. Maybe he will be proved right.

Ed Scannell, Jeremy Stanley, Matt Gervais and Toni Boger contributed to this report.


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