Microsoft has even bigger problemsthan the new XP

As Microsoft abandons their Windows 10-focused strategy in favour of one built on Azure, AI, and "the intelligent edge," they're trying desperately to put past failures behind them and focus on the future. As of this week, that's not going as smoothly as they might have hoped.

From Gizmodo:

Microsoft employees are putting pressure on their management to cancel a contract with U.S. Immigration and Customs Enforcement, part of a backlash against the agency’s policy of separating children from their families at the U.S. border.

In an open letter to Microsoft CEO Satya Nadella sent today, employees demanded that the company cancel its $19.4 million contract with ICE and instate a policy against working with clients who violate international human rights law. The text of the employee letter was first reported by the New York Times and confirmed by Gizmodo.

“We believe that Microsoft must take an ethical stand, and put children and families above profits,” the letter, signed by Microsoft employees, states. “We request that Microsoft cancel its contracts with ICE, and with other clients who directly enable ICE. As the people who build the technologies that Microsoft profits from, we refuse to be complicit. We are part of a growing movement, comprised of many across the industry who recognize the grave responsibility that those creating powerful technology have to ensure what they build is used for good, and not for harm.”

Yesterday, as word of the contract between ICE and Microsoft’s Azure cloud platform spread within Microsoft’s ranks, some employees were incensed—and considering quitting. Now, Gizmodo has learned, those outside the company are having second thoughts about working with a tech giant that’s a “proud” and willing collaborator with ICE.

Mat Marquis, a writer and developer, announced on Twitter that he was canceling his contract with Microsoft in protest against its ICE contract.

“It would be easy to think of coding as neutral—we solve puzzles,” Marquis told Gizmodo. “[...] It’s important, though, to consider the bigger picture for the things we help to build—how can it be misused, who am I supporting with it, who benefits from it and who bears the costs? I didn’t work with the Azure team; I would never have ended up there, considering my skillset. But the decision to work with an organization is a decision to help them achieve their goals, and Microsoft has shown that they’re willing to lend their name to ICE’s goals. I will not.”

Microsoft eventually responded to employees' concerns with some of the blandest PR pablum I've seen in quite some time, as if anxious to prove that they've learned nothing from their past mistakes, at least organizationally. Judging from the Microsoft employees' open letter, though, it would seem that consumers aren't the only people who are fed up with this shit, and ready to force some ethics on a giant multinational.

What's next for Windows?

With news from Redmond that the head of their Windows and Devices Group is moving on/being moved on, speculation is swirling about what this might mean for Microsoft's future. Fortune has an interesting take on that question:

The current reality facing Nadella is that Microsoft’s mobile strategy in hardware and software failed and tying everything to Windows for a boost didn’t help. But Microsoft’s Azure cloud business is booming, as is the growing revenue from business software subscriptions like Office 365 and Dynamics 365. In its most recent quarter, the three months ended Dec. 31, revenue from Office 365 increased 41%, Dynamics 365 rose 67% and Azure sales jumped 98%. At the same time, revenue from Windows commercial products dropped 4%, Surface computer sales gained 1%, and Windows sales for PCs rose 4%.

The new idea for 2018 is to tie everything more closely to the cloud and the fast-growing Azure unit. The WDG is being disbanded and band leader Terry Myerson is retiring from Microsoft. When the WDG was formed under Myerson, he took over mobile efforts from Stephen Elop, who left the company. It will be interesting to see if Myerson’s directions are erased as quickly as he moved away from Elop’s failing strategy.

Much of the Windows software effort, called the Windows Platform Team, will move under cloud and enterprise software leader Scott Guthrie’s group, along with several AI initiatives. Guthire also gets charge of AI speech, vision, augmented and virtual reality (what Microsoft calls mixed reality) efforts. Putting those teams, which face fierce competition from the likes of Amazon (amzn, +0.94%), Google (googl, +3.46%), and Apple (aapl, +1.00%), together with Azure could help them catch on as cloud services.

While Fortune make a special point to reassure folks that Windows 10 is doing "just fine," I don't think there are too many ways to read Microsoft's latest moves as anything other than an admission that their prior decades' Windows strategy is a failure. Microsoft have repeatedly tried to leverage Windows' dominant position on desktops and laptops into a dominant market position in, basically, every aspect of our data/information age lifestyles, only to find little to no traction with consumers, and only slow uptake from businesses.

Microsoft are not going to be Apple, or Google, or Amazon, and it looks like they may be tired of trying. Exactly what cutting their losses might look like, or what that might mean for consumers who, let's face it, mostly don't want to and/or can't afford to convert their bought-and-paid-for PCs into expensive-subscription machines. Whether MS are now planning to stop pushing Windows 10 so damn hard, and start adopting a more consumer-friendly stance with Windows, generally, will be interesting to see.

Just remember, folks: Linux is an option here, and ChromeOS is also coming.

Microsoft to lay off thousands of sales staff, again.

I've been wondering, in print, for months, just how long Microsoft were going to be able to keep up appearances even as their flagship products failed to thrive. With Windows 10 languishing below 27% usage share for yet another month, and the Universal Windows Platform, Edge, Bing, and mobile along with it, it seemed like only a matter of time before the cracks would show. The question wasn't so much "if?" as "when?" And the answer seems to be "soon."

From TechCrunch, via Slashdot:

Microsoft is poised to layoff thousands of employees worldwide in a move to reorganize its salesforce.

A source with knowledge of the planned downsizing told TechCrunch that the U.S. firm would lay off “thousands” of staff across the world. The restructuring is set to include an organizational merger that involves its enterprise customer unit and one or more of its SME-focused divisions. The changes are set to be announced this coming week, we understand.

Microsoft declined to comment.

Earlier this weekend, the Puget Sound Business Journal, Bloomberg and The Seattle Times all reported ‘major’ layoffs related to a move to increase the emphasis on cloud services within Microsoft’s sales teams worldwide. Bloomberg said the redundancies would be “some of the most significant in the sales force in years.”

Microsoft have made something of a habit of July layoffs, but one shouldn't mistake regularity for normality. Laying off thousands of staff every year is not normal, something which becomes immediately evident once you start looking at the reasons behind Microsoft's massive layoffs of the last two years.

Last year, Microsoft announced that it would cut 2,850 jobs — including at least 900 from its sales group, according to The Seattle Times — having two months earlier said it would let go of 1,850 staff related to its smartphone business. In July 2015, it made 7,800 job cuts and wrote down $7.6 billion of its Nokia acquisition.

Assuming that this year's round of layoffs happens as expected, this will be the third time in three years that Microsoft have responded to failure (first, their smartphone struggles; second, their smartphone division's ultimate failure; and now, their lack of an effective strategic focus) with massive layoffs. This is why layoffs normally happen in troubled organizations: to reassure shareholders that the troubles are only temporary, that the organization is committed to "controlling costs," as part of their drive to "return to profitability," which always strikes me as odd. It's as if they're tacitly admitting that they can't actually grow, and can only realize profits by cutting costs.

I really can't stress enough how unusual it is for a corporation of Microsoft's size to feel the need for massive layoffs in multiple consecutive years. Successful firms do not do this, or need to do this -- their successes speak eloquently of potential profits, all on their own.

Also, Azure seems to be thriving, in exactly the way that Windows 10 isn't. From The Stack:

Azure has been performing well, with revenue growth almost doubling during the third quarter and 93% sales growth. However, as the service continues to face strong competition from the likes of Amazon Web Services (AWS), Microsoft is eager to channel its efforts into the booming cloud market.

Microsoft still trails AWS, which generated $3.7 billion in revenue in 2016 – placing it far ahead of the next five big cloud players.

In a recent research note, analyst Brent Bracelin forecasted that Microsoft Azure could overtake AWS in revenue this year, which would see it take the lead position for the first time. Bracelin commended Microsoft for ‘unmatched product depth and breadth.’

While I think that forecast is overly optimistic, the point remains that Microsoft's shift of sales focus to Azure makes sense, since Azure is the one Microsoft product that's arguably succeeding. That doesn't necessarily mean that they should downsize their sales efforts in other areas, though... unless their efforts in those areas were not yielding returns commensurate to their expense. And it's at this point that one must remember that the main focus of their sales and marketing efforts for the last two years has been Windows 10 and its by-products, almost exclusively.

Shifting their corporate message from "all Windows 10, all the time" to one that's more focused on a push to catch up to Amazon Web Services could be a smart move, but only if Microsoft as a whole shift strategy from one that relies on leveraging a nonexistent Windows 10 desktop monopoly into dominance in other areas. If their overall strategy doesn't change, then it's tough to see how much it will mean for them to catch Amazon in the cloud computing space.