What the new Microsoft CEO should understand about the cloud computing market that Ballmer never did

Steve Ballmer is leaving Microsoft, and perhaps that is a good idea.  Microsoft’s lack of revenue and growth put pitchforks and torches in investors’ hands.  Well, they got what they wanted.  While Ballmer phases out in the next 12 month, I suspect Microsoft will put somebody in there ASAP.

Who knows, at this point, if it will be an internal promotion, somebody from the board, or an outside hire?  However, the new CEO needs to show up ready to fix some things that are clearly broken, including the innovation, or lack thereof, around Microsoft’s movement into the cloud.
The new CEO should concentrate on cloud computing as the core growth opportunity for Microsoft.  This, no matter if you think about focusing on Microsoft-powered tablets or games, or keeping the enterprise market share that Microsoft fought so hard to grow over the past three decades.  It all tracks back to the growth and usage of cloud-based resources.
The fundamental mistake that Microsoft made when they entered the cloud computing marketplace was to go after the wrong segment of the market; PaaS.  Then, when it looked like more investments were being made in infrastructure (such as AWS killing it), Microsoft steered toward an IaaS cloud in a very familiar “me too” move that Microsoft seems to be all too good at these days.
The core problems with Microsoft, and thus the first things the CEO needs to fix, are leadership and innovation.  Microsoft needs to rediscover the value of leading and innovating in the cloud computing space.  This is more about what’s not been done and where the market is going, than where others are succeeding and trying to replicate their success.
While a “fast follower” strategy is okay for some companies, Microsoft won’t be able to move fast enough to get ahead of their competition.  This is a bit different than in the past when Microsoft could quickly get ahead of the innovators (can you say Microsoft Explorer?), and dominate the market so much and so quickly that federal regulators came down on them.
I suspect Microsoft felt this strategy would work in the cloud computing space as well.  While I would not call Microsoft’s cloud strategy a failure these days, I’m not sure anyone believes that they could ever catch up with AWS unless they become much more innovative and learn to compress time-to-market for their public and private cloud computing technology offerings.
So, what are the core items that the new Microsoft CEO should understand, that perhaps Steve Ballmer never did?  It’s a rather simple list.
You can’t innovate through acquisitions.  While Microsoft has not done many cloud-related acquisitions, they have done a few.  The temptation is to drive further into the cloud, perhaps further into IaaS, by buying your way into the game.  Companies such as Rackspace, GoGrid, and Hosting.com would be likely candidates.
The trouble comes with the fact that, by the time they integrate the technology and the people, it will be too late.  The market will have left them behind, and the distraction will actually hinder progress.
If somebody else is successful in the cloud computing market, think ahead of what they are doing, don’t imitate.  No matter if we’re talking IaaS clouds, phones, or tablets, by the time some company is dominating a market, it’s time to think ahead of that company.  Don’t just rebrand and remake their same ideas.  You have to think ahead of the market in order to build the technology that will lead the market, generally speaking.
There is much about the cloud space that has not been tapped or dominated as of yet.  This includes the emerging use of cloud management platforms, resource management and service governance, as well as new approaches to cloud security and resource accounting.  Pick something not yet emerged in the cloud computing space, and work like hell to lead the market.
Think open, not closed.  While Microsoft has made some strides in interoperability and more open technology, they are not actively pushing their technology as open.  Indeed, interoperability and migration can be a challenge when moving from non-Microsoft technology, albeit, when you’re dealing just with Microsoft technology, the task is typically a nice experience.
This is perhaps the hardest thing for Microsoft to do, considering their heritage, and the fact that it’s an approach that has proven successful in the past.  However, I think those days are over.  Today it’s all about leveraging open standards, open source, and open and extensible frameworks, when considering cloud computing.  Azure will have to make more strides in that area to gain greater adoption.