Digital transformation focus creates larger opportunity: Nadella

Microsoft CEO Satya Nadella at WPC 2016.

Microsoft CEO Satya Nadella at WPC 2016.

TORONTO — Microsoft partners who are thinking of getting their share of the five per cent of gross domestic product (GDP) or so that’s under the purview of IT are thinking too small, according to Microsoft CEO Satya Nadella. Kicking off Microsoft’s Worldwide Partner Conference 2016 here Monday morning, Nadella suggested his partners should be looking at a much bigger goal as it relates to the percentage of GDP they can impact, inlfuence, and build profit upon.

Namely, all of it.

“For the first time, wherever there’s [Cost of Goods Sold] expense — in every car, in every elevator, every sensor, every traffic light, every retail location — it’s all going to be digital. That’s the opportunity ahead of us. The entire GDP is going to be impacted by digital services going forward,” Nadella told partners. “Everyone in this audience has an opportunity to tap into this revolution.”

It’s an aspirational goal to put it mildly, and one that might not be fully realized anytime soon — but it’s a bold stake for Microsoft to claim. And it comes as there’s a unique change going on. Nadella said that increasingly, for every customer, the focus isn’t just on using digital technologies to reinvent their companies, but on building their own technological differentiation. That level of customization and specialization, Nadella said, can only be delivered by the channel.

“Every small business in every part of the world is going to be a digital company, thanks to the people in this room,” Nadella suggested.

Of course, while more and more tech giants are using the language of digital business transformation, and how it’s the end-goal for adding value via technology, each giant has their own interpretation of the areas of crucial importance in terms of said digital transformation. Unsurprisingly, those interpretations tend to run very close to those companies’ existing or emerging focus areas. In the case of Microsoft, Nadella said there are three key areas — in Microsoft parlance, they are “reinvent productivity and business process,” “build the intelligent cloud,” and “create more personal computing.”

On the first pillar, Nadella said the company’s “dream has always been “transforming how work is done,” and he keyed in on the level of integration possible between collaboration and interaction tools like Skype and Office 365, business systems like the newly-announced Dynamics 365, and social networks (because Microsoft is purchasing LinkedIn.)

The Dynamics 365 announcement figured prominently in Nadella’s outlook, calling it an opportunity to take what happened with office productivity with Office 365, and bringing it to business applications and processes. He touched on the ability of partners to build role-specific micro-services and micro-applications around business processes, and new interfaces into Dynamics as a result of the move to the cloud, and the ability of partners to “build the apps that are needed to any particular role.” But the “most transformative part,” Nadella said, is “the dat.”

“With everything in the cloud, we can expose the cloud for others to build on and expand,” he said. “That’s what’s going to make the difference.”

In a recurring revenue age, the move towards cloud apps is great for partners because most apps are built “in a constant feedback loop or writing and re-wiring” applications as needed.

Roudning out his discussion of productivity and business processes, Nadella touched on what Microsoft is calling “Conversation as a Platform,” the idea that more and more systems and apps need to be re-written and re-designed to take advantage of new types of inputs and outputs — an area he would later expand upon greatly in his cloud discussion. The idea, Nadella said, is to integrate that natural-language interface with the ability to access both data (calendar, CRM information, etc.) and analytics. In the example Nadella showed, he was able to look at his calendar, drill down on the details of a meeting with a (granted fictitious) customer, and then delve further into both that customer’s existing business with Microsoft, and its potential future business with Microsoft, all through the “Cortana” interface.

Around the “intelligent cloud,” Nadella said that we are in “a golden age for cloud apps,” owing to the sheer number of cloud, mobile, analytics, IOT, and SaaS apps that are being produced or that need to be produced, and because they are now “infinite and easy to provision,” and of course, the company’s Azure platform is the underlying structure the company would prefer for partners to build upon.

The company announced its latest partnership on the cloud front, with GE CEO Jeff Immelt appearing to hype the arrival of GE’s Predix software on Azure. But perhaps Nadella’s biggest thrust on the cloud front was pitching partners on the power of Cortana, Microsoft’s “personal digital assistant” technology that, while named for a character in its Halo franchise of video games, first appeared on Microsoft Phone and has quickly proliferated from there.

But Cortana is probably most relevant for what the technology represents — as Nadella said, “decade of research in speech, in natural language understanding, in computer vision,” and in other new ways people will interact with technology in the future. For example, Nadella held out a test application built for McDonald’s that uses natural language recognition to filter our the noise in a drive-through window environment, and not only record customer orders, but punch those orders directly into the restaurants’s systems.

“That’s the next frontier, the next platform of the intelligent cloud that we all can do, and that we need for innovation,” Nadella said.

Building “more personal computing” may be a smaller focus area when it comes to the partner base for which selling a device — be it a Surface, a Dell or Lenovo notebook, or an Apple iPad — is increasingly unimportant as far their business goes, but Microsoft still has a case to be made.

And while Windows 10 (“One OS across al your devices from Raspberry Pi to Hololens!”) is a key part of that message for Microsoft and its partners, and Nadella said he sees “huge opportunity for everyone in this audience” around the enterprise adoption cycle around Win10, “which has really begun in earnest,” The Microsoft message in this area centered around its new Hololens device. Although new to the market, the company presented an impressive demo showing how Japan Airlines is using the augmented reality (or in Microsoft-speak “mixed reality”) to reduce training costs. The particular example given was allowing mechanics to get updated on the latest changes to maintenance procedures for jet engines without requiring them to get up close and personal with said jet engines. The demonstration was impressive, but the message behind it was even bigger — Hololens is far from a toy for business. The company, Nadella said, sees it as a way for a variety of businesses to rethink a variety of processes and procedures in ways that technology could not previously impact.

“Look at the applicability of this technology in building your business applications,” Nadella told partners. “It will really be the most transformative thing.”

WPC continues in Toronto through Wednesday.