Microsoft rocked the tech world today with the announcement that it is spending about $7 billion to acquire Nokia. The move has a variety of potential benefits and ramifications, and many of those could have an impact on how your business relates to Microsoft in the years to come.
For many small and medium businesses, the chaos that seems to surround Microsoft may seem like cause for concern. Businesses don’t like change and uncertainty, but the tech landscape has shifted and Microsoft needs to adapt or die. Whichever direction Microsoft goes, it will mean change for the businesses that rely on Microsoft products and services.
Purchasing Nokia puts Microsoft in direct control of its own mobile future. Who knows what the true motive for buying Nokia is or Microsoft’s ultimate goal?. Microsoft has already gotten into the device market with the Surface tablet line, and it recently restructured its business units to focus more on devices, so acquiring Nokia to get directly involved in manufacturing smartphones makes some sense. That’s more or less the pitch Microsoft made to investors as its rationale for buying Nokia.
Perhaps it has something to do with the impending change in Microsoft leadership. Steve Ballmer recently announced his imminent departure, and Nokia’s CEO—Stephen Elop—is an ex-Microsoft executive considered by many to be a frontrunner for the role.
Rob Enderle, principal analyst with the Enderle Group, thinks the move may have been necessary for the fate of both Nokia itself and the Windows Phone mobile platform. “Given Nokia was really the last company providing a Windows Phone line—but still in trouble—it makes sense that the two firms tie more tightly together," he says. "Starting over from scratchshould Nokia fail would have been excessively expensive, and they are gaining share.”
Enderle also concurs that buying Nokia might be a move to acquire Elop and smooth the transition of leadership. “This should give them Elop as a viable replacement for Ballmer," he says. "The board appears focused on mobile as the way to expand, and Elop knows Microsoft and its problems. He could more effectively hit the ground running.”
Microsoft has been between a rock and a hard place for a few years now, and it’s probably going to get tougher before it gets easier—if it ever gets easier. As the world has migrated away from traditional PCs to mobile platforms, Microsoft has been faced with a seemingly impossible dilemma: plow ahead with the status quo to keep its core customers happy and die a slow death or evolve to remain competitive in an increasingly mobile tech world and risk losing major sources of revenue.
Microsoft has been slow to recognize challenges to its dominance and even slower to adapt and try to address those challenges head on. Its efforts so far—Windows Phone, and the Surface tablets—are well-engineered and have received a fair share of praise from analysts, media, and consumers. Yet the reality remains that they’ve failed so far to shift Microsoft’s waning relevance.
The silver lining for Microsoft is that as hard as it is for the tech juggernaut to shift direction, it’s almost as difficult for Microsoft customers to shift gears. In spite of Microsoft’s lethargy, no rival has stepped in to seize the opportunity. There are alternatives out there, and some businesses have abandoned Windows, or Microsoft Office, or other Microsoft products and services, but the competition is generally lacking and doesn’t offer a clear, compelling reason to change.
Can Microsoft rise from the ashes and retain its dominant role for small and medium businesses, or is it just too little, too late? Check back in a year or two and we’ll see how it’s going.
Updated at 2:20 p.m. PT with a video report from IDG News Service.
Tony is principal analyst with the Bradley Strategy Group, providing analysis and insight on tech trends. He is a prolific writer on a range of technology topics, has authored a number of books, and is a frequent speaker at industry events.
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