But it is still not perfect
IT MUST FEEL good to be back on top—and this time, almost liked. Twenty years ago Microsoft was considered an evil empire, scheming for domination and embroiled in a bruising antitrust battle with America’s Justice Department. Five years ago, having dozed through the rise of social media and smartphones, it was derided as a doddery has-been. Now, after several stellar quarters—this month it reported revenue of $33.7bn, up by 12% year on year—Microsoft is once again the world’s most valuable listed company, worth over $1trn. How did Satya Nadella, the boss since 2014, pull off this comeback? And with American trustbusters starting on a new review of “search, social media, and some retail services online”—ie, Google, Facebook and Amazon—what can the other tech giants learn from Microsoft’s experience?
First, be prepared to look beyond the golden goose. Microsoft missed social networks and smartphones because of its obsession with Windows, the operating system that was its main moneyspinner. One of Mr Nadella’s most important acts after taking the helm was to deprioritise Windows. More important, he also bet big on the “cloud”—just as firms started getting comfortable with renting computing power. In the past quarter revenues at Azure, Microsoft’s cloud division, grew by 68% year on year, and it now has nearly half the market share of Amazon Web Services, the industry leader.
Second, rapaciousness may not pay. Mr Nadella has changed Microsoft’s culture as well as its technological focus. The cult of Windows ordained that customers and partners be squeezed and rivals dispatched, often by questionable means, which led to the antitrust showdown. Mr Nadella’s predecessor called Linux and other open-source software a “cancer”. But today that rival operating system is more widely used on Azure than Windows. And many companies see Microsoft as a much less threatening technology partner than Amazon, which is always looking for new industries to enter and disrupt.
Third, work with regulators rather than try to outwit or overwhelm them. From the start Microsoft designed Azure in such a way that it could accommodate local data-protection laws. Its president and chief legal officer, Brad Smith, has been the source of many policy proposals, such as a “Digital Geneva Convention” to protect people from cyber-attacks by nation-states. He is also behind Microsoft’s comparatively cautious use of artificial intelligence, and calls for oversight of facial recognition. The firm has been relatively untouched by the current backlash against tech firms, and is less vulnerable to new regulation.
True, missing the boat on social media means thorny matters such as content moderation pose greater difficulties for Facebook and Google. Still, others would do well to follow Microsoft’s lead. Apple has championed its customers’ privacy, but its treatment of competitors’ services in its app store may soon land it in antitrust trouble. Facebook and Google have started to recognise that with great power comes great responsibility, but each has yet to find its equivalent of Azure, a new business model beyond its original golden goose. Amazon, in its ambition and culture, most resembles the old Microsoft.
Even a reformed monopolist demands scrutiny. It should not be forgotten that Microsoft got where it is today in part through rapacity. Critics argue that in its battle with Slack, a corporate-messaging service which competes with a Microsoft product, it is up to some of its old tricks. A growing number of women at the firm are complaining about sexual harassment and discrimination. The new Microsoft is far from perfect. But it has learned some lessons that other tech giants should heed.