Missteps Under Ballmer May Have Hit a Tipping Point

Microsoft's CEO has been in hot water over a variety of issues, including Microsoft's position in the tablet market (see video).


Fri, August 23, 2013

CIO — UPDATED: An accumulation of blunders under Steve Ballmer's leadership may have hit a tipping point this year, leading to Friday's groundshaking announcement that Bill Gates' former right hand and heir, as well as Microsoft's fiercest cheerleader, will step down as CEO within the next 12 months.

In recent years, Ballmer has been the target of critics over a variety of issues, including their dissatisfaction with the company's stock performance, Google's dominance in search advertising, the perception that Microsoft reacted late to cloud computing and its weak position in the tablet and smartphone OS markets.

"There have been a whole series of market shifts that Microsoft has either missed entirely or misjudged their importance," said Al Gillen, an IDC analyst.

Rebecca Wettemann, a Nucleus Research analyst, said Ballmer should have exited the stage several years ago, because he has lacked the vision to see market fluctuations and failed to properly execute on opportunities.

"This gives Microsoft a chance to start a new chapter and hire a CEO who has vision to lead the market, and not follow it, which is what Microsoft has been doing," she said. "It must be someone who isn't looking just at how we move people to the next version of Office, but how we innovate to drive value to customers."

It should be noted that Ballmer posted a very good track record over the course of his tenure for revenue and profit growth, said David Johnson, a Forrester Research analyst. But the company has paid dearly for its slip with tablets and smartphones, which has affected not only its sales to consumers but also its enterprise business, due to the trend of people bringing their own devices to work, or BYOD.

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"In many ways Microsoft lost touch with consumers just as the age of consumerization was dawning," Johnson said. "It was a bad time to take the eye off the ball."

In a [blog post], Johnson's colleague Ted Schadler gave credit to Ballmer for diversifying Microsoft's business from mostly desktop software into areas like server software and enterprise development tools but added that "the world has moved faster that Microsoft's licensed software business model could respond" and that it's a good time for Ballmer to hand over the reins.

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Most recently, Ballmer has been in hot water over Windows 8, a major upgrade of its flagship OS that many perceive as a flawed release. Billed as a product of historic importance, Windows 8 represents Microsoft's attempt to improve Windows' anemic participation in tablets and smartphones, where Android and Apple's iOS dominate.

However, Windows 8, which began shipping in October, has been heavily criticized due to its radically redesigned user interface, which is based on tile icons and optimized for tablets and other touchscreen devices.

Windows 8 also has a more traditional Windows desktop interface for running legacy applications, but many consumer and enterprise users have complained that toggling between the two interfaces is clunky and inconvenient. There has also been an outcry about the removal of the Start menu and button.

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Microsoft plans to release an update for the OS, called Windows 8.1, in October. It addresses these complaints and several others, but there is a concern that the fixes may be too little, too late to salvage the OS's reputation and that it might end up being a fiasco like Windows Vista.

Some critics maintain that attempting to build a single OS for desktops, laptops and tablets was a strategic mistake because Microsoft has ended up instead with a product that isn't good enough for any of those devices. Apple's strategy, by contrast, has been to have Mac OS for its desktops and laptops, and iOS for the iPad, iPhone and iPod.

"If Windows 8 had been a huge success and the business was growing by leaps and bounds, and Microsoft was winning share in the tablet market, there'd be a lot less pressure for Ballmer to leave," Gillen said.

Another focus of criticism for Ballmer has been what many consider a bad strategy related to the company's Office cash-cow franchise of refraining from releasing a full-fledged version of the suite for iOS and Android. Seen as a move to protect Windows, critics of this strategy say Microsoft is leaving billions of dollars on the table by not giving users of iPads and Android tablets a full version of Office.

Ballmer has also shouldered the blame for the controversial and so far not very successful decision to have Microsoft manufacture and brand its own tablet, the Surface, an attempt to mimic the model popularized by Apple with its combination of iOS and the iPhone, iPod and iPad devices.

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