Microsoft has a radical new business plan - and it's hidden in plain sight, according to
a recent article by Ed Bott on ZDNet.com.
"Microsoft is reimagining its entire business model, and they’ve laid out the details for anyone to inspect," Bott says. "You just have to read between the boilerplate sections in the company's most recent 10-K."
In his article, Bott explains how every publicly held corporation who trades its stock in the U.S. is required to file a detailed annual report (Form 10-K) at the end of each fiscal year.
As Bott says, these forms "make corporate lawyers and executives squirm, because they’re required to divulge details they would never discuss with journalists."
How lucky for us...
In August 2011, Bott used the 10-K to predict that Microsoft would get into the hardware business, this was confirmed with the June 2012 announcement of the company's upcoming Surface devices.
Bott just finished his assessment of Microsoft's current 10-K and he's got another three predictions about how Microsoft is going to reinvent itself once again.
1. In the "Risk Factors" section of the 2011 10-K Microsoft used the words 'services' 44 times, Bott says. In the 2012 edition, the word appears 73 times.
In the 2012 10-K Microsoft refers to an "increasing focus on devices and services" and concludes with a statement that reads, "A growing part of our strategy involves cloud-based services used with smart client devices."
Bott predicts a major part of Microsoft's business model moving forward will be providing cloud and other subscription based services.
It seems it's not just MSPs who are moving towards a recurring revenue model these days...
2. The second point that Bott makes in his article is that Microsoft's move into hardware with the Surface isn't a "bluff or hobby."
He points out that some industry analysts think the Surface is just a way for Microsoft to 'jolt' it's partners into action and get them to develop and deliver better and interesting products.
Bott says this isn't the case. He argues Microsoft won't keep the price of the surface high to avoid "canabalizing sales from Lenovo, Dell, and HP" as other analysts predict.
Instead Bott points to a section of this year's 10-K that says:
"A well-established ecosystem creates beneficial network effects among users, application developers and the platform provider that can accelerate growth.
Establishing significant scale in the marketplace is necessary to achieve and maintain competitive margins. The strategic importance of a vibrant ecosystem increases as we launch the Windows 8 operating system, Surface devices, and associated cloud-based services.
We face significant competition from firms that provide competing platforms, applications and services."
Bott's message to OEMs in light of this: "Deal with it."
He says Microsoft "isn't interested in hobbies or side projects" and the company is going to "go big, or go home" with a massive marketing push for the Surface and possibly other upcoming hardware that hasn't been announced yet.
3. Bott says Microsoft "has a reputation for being to slow to respond" to new products and offerings in the market. He says the 10-K suggests that is no longer the case.
Here's a section from the document that Bott highlights in his article:
"Many of the areas in which we compete evolve rapidly with changing and disruptive technologies, shifting user needs, and frequent introductions of new products and services. Our ability to remain competitive depends on our success in making innovative products that appeal to businesses and consumers."
The section about "frequent introductions" seems to suggest Microsoft is ready to put up a fight against it's competitors who Bott suggests have "gotten fat (and maybe lazy)" in recent years because they are used to a slow response from Microsoft HQ.
Bott has done some impressive sleuthing and I think the article is a informative and worthwhile read. If he is as correct about these latest predictions as he was about the Surface, then we're in store for an interesting 12 months ahead from Microsoft.
