WPC 2014: Microsoft Has a "Challenger Mentality" in Mobile First, Cloud First World

In a lengthy and rousing Worldwide Partner Conference opening keynote on Monday, a string of Microsoft executives laid out the firm's strategy for the coming year and beyond, expanding on a previously published open letter by CEO Satya Nadella. The key theme was a new focus on productivity across all devices and platforms, and not just Microsoft's.

Today's keynote occurred in front of over 16,000 WPC attendees who gathered at the Verizon Center arena in Washington D.C., a few short but hot and humid blocks from the Walter E. Washington Convention Center. It featured a wide variety of upper-level Microsoft executives, but the star of the show, as usual, was COO Kevin Turner, who provided a healthy dose of reality combined with a string of barbed comments for the firm's competitors.

Turner explained that in the "old world" of the PC, Microsoft and Windows commanded over 90 percent of the market and set the agenda. But in today's mobile first, cloud first world, while Microsoft still owns over 90 percent of the PC market, it only accounts for 14 percent of all personal computing devices. This is a "new reality," he said. But it is also an opportunity.

"When you have 90+ percent share, you protect and preserve," he said. "At 14 percent, you challenge. It's a new mindset. A challenger mindset."

It's not all bad news on the device side. He noted that Windows Phone was the fastest growing mobile platform, was the number two platform in 14 markets, and was outshipping iPhone in 24 markets, for example. Nokia sold 12 million Lumia 520s in the past year alone. And Surface Pro 3 has been very positively received, even by some of Microsoft's harshest critics. He called the device the "best 2-in-1" in the market, a device that can beat both the MacBook Air and the iPad.

To improve matters, Microsoft made the "hard decision" to charge no royalty on any version of Windows that runs on a device with a screen size of 9 inches or less. (This includes phones, tablets and traditional PCs.) "We saw 31 new device wins the week we announced this licensing change alone," Turner said. "And it's accelerated every week since then. The proliferation of Windows is happening because of that strategic change."

On the cloud side, Microsoft is of course much better positioned. Office 365 is now Microsoft's fastest growing business ever, and is on a $2.5+ billion per year run rate. Azure is the only cloud platform that excels in both Platform as a Service (PaaS) and Infrastructure as a Service (IaaS) duties while offering unique enterprise and hybrid deployment capabilities the competitors don't—and in the latter case can't—match.

As Satya Nadella had previously explained in an open letter to employees, Microsoft's primary focus going forward is on productivity, and in this it has the ability to match its productivity services and apps with all popular platforms, mobile and otherwise. The firm didn't show off coming versions of Office Touch for Android tablets and Windows, though it did reiterate that these releases were coming and showed off coming Office for iPad management features.

Microsoft corporate vice president Brad Anderson noted that this focus required a "fine balance" between allowing users to be productive on the devices they prefer and delivering the corporate data security and protection that businesses demand. To that end, the firm is evolving a line of separate products and services into something called Enterprise Mobility Suite that will help businesses efficiently manage all types of devices while keep corporate and personal data and apps separate.

"We are going to win in productivity," Mr. Turner said. "And we're going to do it with first party hardware and 3rd party partnerships, and not be closed and proprietary. We're having dialogs, discussions and agreements today that were not possible just a few years ago. And we have new OEMs and new partners that we also compete with. This is good for customers, and good for partners. We are embracing the realities of the mobile first, cloud first world."