Microsoft’s Ballmer envisions future as a “devices-and-services” company

Steve Ballmer at WPC 2010

Microsoft CEO Steve Ballmer

In an interview with The Seattle Times, Microsoft CEO Steve Ballmer seems to suggest that the direction the company has gone with for its upcoming Surface tablet is going to increasingly be the direction the company is headed in.

Gone are the days of Microsoft as a software company. The future is “as more of a devices-and-services company.”

Quoth the CEO, in his interview with the newspaper:

I think when you look forward, our core capability will be software, (but) you’ll probably think of us more as a devices-and-services company. Which is a little different. Software powers devices and software powers these cloud services, but it’s a different form of delivery.

That’s a significant change from Microsoft’s previous philosophy of building the software (and the online services) and relying on hardware partner to build the products around it.

First of all, it’s important to note that Ballmer immediately clarifies his position to note that Microsoft is not aiming to do away with its relationships with Dell, HP, Lenovo, et al completely.

Doesn’t mean we have to make every device. I don’t want you to leap to that conclusion. We’ll have partners who make devices with our software in it and our services built in.

But it is an interesting state of direction from Microsoft that makes it seem like the direction it went with Surface may become increasingly the norm – a direction where it controls the user experience, from hardware to software to means of acquisition. A more Apple-like experience from Redmond, if you will.

The ramifications of this direction are still some ways away from being clear, but we can clue to the Surface introduction for some clues – and perhaps some caveats – to what more Microsoft-branded hardware, and more Microsoft-branded retail stores, may mean for its traditional channel partners.

For example, many Microsoft partners at this summer’s Microsoft Worldwide Partner Conference were buzzing about the possibility of the Surface tablet device in the channel. They probably left Toronto disappointed, at least on that front. While Surface was mentioned a few times, the closest anyone came to nailing Microsoft down on channel plans for the tablet was in CRN’s interview with Ballmer at the event. In a nutshell, Ballmer tells partners they’re welcome to include Surface devices in their solutions to business end users. In fact, he encourages it. They’re just going to have to go to the Microsoft Store or to purchase it. Just like their customers could.

It’s a strategy that will particularly need to change as Microsoft broadens the scope of hardware it provides, particularly into business-class devices. To some extent, the BYOD trend has meant that end users are trained to go to retail to get some computing devices, and they’ll later be shoehorned into the corporate network after purchase. But that approach isn’t going to fly with every device. And the company will probably not want to risk alienating too much of the massive community of solution providers on whom many of its key products – most notably Windows Server 2012, Office 2013, and Office 365 – are very dependent.

The tight wire Redmond will have to walk with its OEM partners – for a long time its staunchest allies and its most potent route to market for Windows – is even more precarious. Microsoft has acknowledged that the approach it’s taking with Surface may not be a hit with all of its OEM partners, with whom Redmond now becomes both a key supplier and a key competitor. If it adds more hardware to that mix, it runs the risk of crankier hardware partners. Worst case scenario: OEM revolt and the potential for another operating system – say, a Linux variant – to become a default installed OS for OEM endpoint devices.

It’s not likely that Microsoft would allow things to get to this extent. As previously noted, the company is very dependent on its solution providers for installation and maintenance of its server and applications software in businesses, and it’s doubtful that the extra dollars coming in on Microsoft-designed hardware would come close to offsetting the losses in Windows licenses the company would see if a block of major OEM partners decided to take their business elsewhere.

But if Microsoft is seeking to redefine its place in the ecosystem it largely created around itself, it needs to tread carefully.

After all, even in the BYOD era, even Apple has found that it needs to work with key partners – even if it does so quietly – to help it make sure its consumer products become first-rate citizens of the enterprise network.