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Ballmer and Microsoft: Credit Where Credit Is Due

Rob Enderle

Recently Steve Ballmer has been under a microscope. Dan Lyons wrote a Newsweek piece called the "Lost Decade: Why Steve Ballmer is no Bill Gates" and he is right. Ballmer is no Bill Gates. But then I could as easily argue that Bill Gates is no Bill Gates either. Gates is managing his own charitable foundation; in effect he now works for himself and his foundation is no Microsoft. I've seen this multiple times, an iconic CEO leaves and everyone who follows is compared unfavorably to him. But times change, companies change, and the conditions that made the iconic CEO no longer exist, and even if the CEO comes back, he or she doesn't reach the same heights.

 

Often, the poor saps that come in to replace these iconic CEOs when they retire tend to be criticized for not being that iconic CEO and get blamed for all the problems the iconic CEO created. Can you imagine what a nightmare the poor person who comes in after Steve Jobs will face? Jobs is no Bill Gates either. Other than cloning the legend of Steve Jobs, likely nothing else will be good enough.

 

Assessing Steve Ballmer

Ballmer got the job as CEO largely because he was a fundamental part of Microsoft's success, making Microsoft into an enterprise player. For much of the '90s people -- competitors and analysts -- pounded on the company and exclaimed it could never be an enterprise company. Certainly Netscape and even Apple never made it to those ranks, and the list of companies that have is short. Companies such as Acer and Apple don't even try anymore, and Sony's efforts have largely been pathetic. But Microsoft was successful and Ballmer was largely the reason by managing the sales staff and owning corporate customers.

 

When Gates stepped down, Microsoft was far from its peak. Lyons correctly points out that Microsoft's growth over the past decade has been substantially less than it was the prior decade. But in the '90s, the x86 computer market was emerging; by this decade, it was mature and mature markets grow more slowly. Aerospace is far off from its earlier growth; white goods were hot in the '50s, automobiles in the '20s, and TVs in the '60s. Expecting a mature business in a mature market to do as well as it did in an emerging market is just silly. The question is how it is doing against competitors.

 


Microsoft Comparatively

Lyons compares Microsoft unfavorably to Amazon, Apple and Google. Amazon is an online retailer, Apple a hardware company and Google the leader in Web advertising driven by search. Microsoft is an operating system and tools company. Granted it needs to embrace the concept of cloud computing and evolve, but to try to go after Amazon, Apple and Google likely would be suicidal because it would take the company too far afield from its expertise and the basis of its success. Microsoft can't be a better Amazon, a better Apple or a better Google. There is such a thing as fighting on too many fronts, and each of these companies is designed for different markets.

 

Jobs has done a great job at Apple, but he failed miserably with the Lisa personal computer and Apple has never been nor likely will ever be a major corporate technology supplier. Even on the desktop, Windows 7 after a couple of weeks is about to pass Apple in total market share. Did the iPod beat Zune, sure, but I'd argue Microsoft had no business doing that product. Its strengths lie elsewhere. Given that, who has done better against the iPod? Consumer tech companies like Sony, Creative Labs, Sharp, and Samsung sure didn't. And Nokia, the largest cell phone company in the world, got stomped by both Apple and RIM smartphones. Of course, Nokia now wants a piece of Apple's pie.

 

Amazon is even farther from Microsoft's core business than Apple. Amazon's primary cloud offering is S3, basically a simple storage backup service, and it is very good. Microsoft has Hotmail, MSN, Office Live, Windows Live, Instant Messenger, Hosted Exchange and Azure. I don't even see how you can compare the companies. Amazon is a great retailer and that's where its money comes from, not S3.

 

Google is clearly getting into Microsoft's face; but stop a moment. Its Chrome browser lags Firefox (it just grew to a whopping 3.6 percent against Firefox's 24 percent) , its Chrome OS doesn't even exist yet and Android is still largely more promise than reality (Apple kicks its butt, too). While Google is making some inroads with Apps, outside of search and advertising, it is still more promise than reality. We assume success, but how much ot it is outside its initial core market? Remember Netscape was supposed to be the next Microsoft and look how that turned out.

 

The one company I would compare Microsoft to is Oracle. Larry Ellison is one of the few founders who have come back and done well. But Ray Lane, the interim manager brought in to correct Ellison's previous screwups, fixed the company and put it on a successful path. In addition, Ellison created the office of the CEO and got some incredibly good people in to actually run the company. I'll bet, as a result, Oracle does vastly better than Apple does when Ellison eventually does retire. (And I'll bet the poor sap who replaces Ellison is found wanting for not being him.) Microsoft competes with Oracle just fine, and it is hard to argue one is any better than the other where the two firms cross, and this is clearly where Ballmer is strongest.


Wrapping Up: Giving Credit Where Credit is Due

I'm often stuck by how badly we measure CEOs. In my early years when I was at IBM, the company was regularly praised for its great management and financial performance even though its executives were selling off its future. It nearly collapsed two decades ago largely because the executive management did what financial analysts at the time wanted them to. They focused so much on quarterly results that they nearly destroyed the company. Louis Gerstner and Jerry York, who helped save Chrysler and who now sits on Apple's board, saved it. (I think Jerry did more of the heavy lifting).

 

I think Microsoft also is too focused on expenses and not on providing adequate resources to critical projects, but let's put this into context. We just saw the entire financial industry collapse because it was too willing to take risks and massively overspent. Of the two problems, I think you could agree, the former is preferred and a perfect balance is likely unachievable. I think Ballmer's problem is trying too hard to please too many people and making the job harder than it needs to be, but that is for another time.

 

So I get Lyons' point. Microsoft could be doing better, and I think Ballmer himself might even agree -- there is always room for improvement. But could anyone do a better job? I wonder. Jobs couldn't handle the corporate side or complexity; Larry Ellison wouldn't understand PCs (remember thin clients?), Jeff Bezos is a retailer, Eric Schmidt belly flopped at Novell (granted Novell was on its death bed when he got it), and HP's Mark Hurd is a hardware guy. Carly Fiorina, Michael Cappellas (turned around and sold MCI), Louis Gerstner? I don't think so.

 

I share Lyons' frustration with Microsoft, but it could also do a lot worse and the job running a complex company is far from easy. Ballmer inherited a lot of problems, he certainly has made mistakes, but I can think of no one that could keep a company as complex and unique as Microsoft running so well, either. Sometimes it's all about perspective -- and I include myself here -- sometimes we need to be a little less critical, and give credit where credit is due. Ballmer will never be Bill Gates. I just hope he finds a way to be the best Steve Ballmer he can be.


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