Microsoft has made some major concessions over the past decade which may seem weak on the surface. However, these calculated moves are powering Microsoft’s quiet comeback and cementing their position as the strongest tech company.
We all know about Microsoft’s web browser successor to Internet Explorer – Microsoft Edge. But did you realize that Edge is actually built on Google’s Chromium engine? This isn’t some minor connection either. The entirety of Edge is powered by the open source version of Chrome.
However, this original Edge browser was demolished so badly that Microsoft finally conceded defeat and announced they too would switch to Chrome. Since then, Microsoft discontinued the legacy Edge browser 2 years ago already. So it doesn’t seem like Microsoft will re-enter the browser engine space anytime soon.
Microsoft’s Concessions Span Multiple Sectors
It’s not just the browser space that Microsoft has conceded. In 2015, Microsoft ditched Windows and started using Linux for their backend server infrastructure. Since then, Microsoft has even launched their own Linux distribution.
The browser and backend concessions are two of Microsoft’s most notable capitulations, but they only scratch the surface. Microsoft has also thrown in the towel across smartphones, music streaming, Windows 8, smart assistants, and now even AI. Rather than push an in-house ChatGPT alternative, Microsoft has embraced ChatGPT itself from the outset.
Clearly, Microsoft has done a lot of conceding and losing over the past decade. Does this spell the end of Microsoft’s dominance? Will they become the next Cisco or Intel? The answer is absolutely not. Microsoft’s public concessions disguise the fact that they have emerged as the strongest tech company in the world.
Microsoft’s Hard Headed Old Approach
At first glance, Microsoft’s approach seems weak and pathetic. However, they are actually making all of the right moves now. For the past 20-30 years, tech companies have operated under the mindset that they need to control every aspect of consumers’ lives.
Take Apple for example. If you need an alarm, you should use an iPhone. If you workout, you need an Apple Watch and AirPods. For texting, use iMessage. Video calls require Facetime. And to track your sleep, the Apple Watch is a must have.
This philosophy doesn’t stop at the front end either. These tech giants want to control the entire backend tech stack too. If you’re building a new service, you should apparently be using Google’s servers, compute engines, cloud functions, databases and more. Basically, if a product has any association with technology, these companies want a piece of it.
You can’t blame them too much though. Their desire for endless growth pushes them to try and dominate every industry imaginable from semiconductor design to home thermostats. But there’s great irony here. True endless growth comes not from isolation, but from collaboration. And Microsoft has realized this.
It wasn’t long ago that Microsoft also had the mindset of conquering everything themselves. By 2000, Windows and Office had revolutionized computing and powered Microsoft’s massive ego. These products made Microsoft feel invincible, like they could take over any and every industry.
To some degree, this was true. Microsoft could put out mediocre products like Internet Explorer and still control 95% market share through their influence and desktop monopoly. This false sense of superiority led them to email, search, messaging, video conferencing, gaming, music and more.
Ultimately though, Microsoft hit a wall. Their terrible new products stopped sticking. Chrome destroyed Internet Explorer, Gmail obliterated Hotmail, the iPod humiliated Zune, and Xbox fell to PlayStation. For the first time ever, people simply did not want Microsoft’s offerings.
Microsoft Tries Again and Fails
Undeterred, Microsoft kept pushing anyway. They acquired Skype, launched Bing search engine, and entered smartphones. But once again, they were trounced in each sector. After 17 years of stagnation, failed products, and public hatred, Microsoft desperately needed a change.
Satya Nadella Brings New Humility
When offered the Microsoft CEO job, Satya didn’t pitch himself at all. He simply replied “Only if you want me to be CEO.” For most boards, this lack of enthusiasm would be disqualifying. Somehow though, Satya got the job and instilled a new humility across Microsoft.
Nadella’s first move was scrapping dozens of failed consumer projects like Windows phones. He replaced the despised Windows 8 and the geriatric Internet Explorer browser with Windows 10 and Edge. But this was merely trimming the fat. Satya didn’t even want to compete for consumers anymore.
Google, Apple, Amazon and Facebook now dominated consumers. And unlike Microsoft, people actually liked these companies at the time. So Satya decided to leave consumers alone, making Windows and Office free to end users.
Pivot to Cloud
Instead, Satya attacked the burgeoning cloud infrastructure market. AWS was the only player at the time, but they were brutally expensive. Satya focused on the budget enterprise cloud market with Azure. Today Azure crushes AWS on price, coming in around 5x cheaper.
Importantly, Azure also incorporates Linux instances to satisfy enterprise customers. For many companies, Azure’s combination of lower cost and Linux support was impossible to pass up.
But the cloud pivot was just the start. Satya tailored everything to enterprise customers. Microsoft acquired LinkedIn, the undisputed social network for recruiting and hiring. They ditched Skype and built Microsoft Teams as an enterprise video conferencing competitor to Zoom.
At this point, Microsoft gets less than a quarter of its revenue from consumers. Last quarter for example, productivity and cloud generated $37 billion in revenue versus only $13 billion from Windows, Xbox and Surface products. If Microsoft shutdown all consumer products, they would still be a trillion dollar company.
Microsoft’s Quiet Consumer Comeback
That doesn’t mean Microsoft is leaving consumers behind. Now that they don’t rely on consumers, Microsoft can take bigger swings than ever in consumer tech. But they can’t revert to their old “build everything” mentality. If they do, they’ll find themselves back in the same hole they dug 10 years ago.
The key isn’t trying to copy hits like the iPhone or Chrome. It’s about building upon these successful platforms to make them even better. After all, that’s what made those products succeed in the first place.
The iPhone improved cell phones, Chrome improved browsing, and Facebook improved social media. But Microsoft’s Zune and Windows Phone didn’t improve anything. They were simply redundant alternatives that consumers had no reason to buy into. This describes Google and Apple’s current strategy as well.
Collaborating with Chrome
Microsoft is avoiding past mistakes by embracing and improving winners instead of wasting resources trying to displace them. Rather than create yet another redundant browser, Microsoft adopted the leading Chrome browser and made it more efficient.
With 60 tabs open, Chrome consumes 3.7 GB RAM versus just 2.9 GB for the new Edge browser. Microsoft also lets you easily switch search engines to Google. So you get Chrome’s benefits paired with Microsoft’s legacy productivity suite. It’s the best of both worlds.
The same collaborative mentality extends to search and AI. Instead of forcing Cortana upon users, Microsoft is embracing the wildly popular ChatGPT. Early interest has been massive, with over 1 million signups for the new Bing chatbot integration in just the first 48 hours.
This new Microsoft probably won’t produce major consumer hits. But that’s not the goal anymore. By collaborating with existing winners, Microsoft cements itself as a quiet background juggernaut.
Time in the Market
Ultimately, Microsoft realizes you can’t constantly score flashy consumer wins. Sentiment changes rapidly. What’s sustainable is partnering with existing winners to claim a small slice of many pies.
This collaborative approach yields modest but steady returns. If ChatGPT declines, no problem – Microsoft is invested in hundreds of other winners. There’s a famous stock market saying: Time in the market beats timing the market.
Most tech companies try timing the market. Meta’s betting the farm on Metaverse, Apple is chasing cars and VR, and Google clings to search domination. Meanwhile, Microsoft just invests in the tech market itself.
It’s not flashy or exciting, but over the long run this strategy is unstoppable. That’s why Microsoft is the strongest tech company in the world today. Did you realize Microsoft was doing so well with this collaborative approach? Let me know in the comments. And don’t forget to like and subscribe for more tech questions answered logically.