What's next for the post-Ozzie Microsoft? No one knows.

October 26, 2010: 12:33 PM ET

As a giant of technology departs, it's time to start asking, what's next for Steve Ballmer's Microsoft?

When Microsoft (MSFT) announced Chief Software Architect Ray Ozzie would be moving on, some viewed it as another blow to a company with a bit of a vision problem. Ozzie was only the second person to be the company's CSA -- the first being founder Bill Gates, who took the role upon retiring as CEO, but gave it to Ozzie in 2006. Ozzie's not the only recent departure among the top ranks. Just last month, Business Division President Stephen Elop left for Nokia (NOK). James Allard, who led the XBOX and Zune projects, left earlier this year, too.

In many insider circles, Ozzie was seen as a visionary -- the Lotus Notes inventor had even been called "the next Bill Gates." So hopes were high, especially given his presentations and various memos over the years detailing his vision of how the company's software should evolve, most famously one titled, The Internet Services Disruption. Though the company credits him with bringing the company's cloud platforms Azure and Windows Live, up to speed, it's clear Ozzie in some ways never quite got his arms around all the company's efforts -- and it's fair to wonder whether any one person still can. Perhaps that's why CEO Steve Ballmer is retiring the CSA role, with no plans to replace Ozzie once he departs. (Or perhaps it's because Ozzie's far-reaching idealism clashed with Steve Ballmer's more short-term, business-oriented ambitions and there's no reason Ballmer would willingly start a similar relationship with another "visionary.")

In his 3,433-word farewell memo entitled "Dawn of a New Day," Ozzie reiterated his and the company's achievements over the last five years but also warned the company of the challenges ahead: a future beyond the PC.

"It's important that all of us do precisely what our competitors and customers will ultimately do: close our eyes and form a realistic picture of what a post-PC world might actually look like," he wrote.

Whether Ozzie's departure hurts the company's prospects or not at all, it begs the question: what's next? We sought the opinions of a few analysts, and also a few pioneers in cloud computing -- an area where Microsoft seems behind the curve -- who seemed to agree that the company has some serious catching up to do.

Zach Nelson
CEO, NetSuite

The current CEO of the "software as a service" company, who joined in 2002, wasn't surprised to hear of Ozzie's departure. (He'd actually forgotten Ozzie joined the company entirely.) For Nelson, Microsoft's problem is its legacy and lack of innovation. Though it continually develops new software, the software has either been built around devices that have become irrelevant -- in this case, Nelson argues it's the PC -- or the software itself hasn't stood out.

Nelson compares Microsoft's fate to IBM's, when the once mighty mainframe server-maker transitioned into a services-driven company. Microsoft should (and will) shift more towards services and consumer products.

"When Office moves to the cloud, I think they'll be in big trouble in the business market because that's their only outlet," he says. "The one application that drives the rest of business today is Office. When that moves to the cloud, why not look at Google, why not look at something else. Why not look at something for free?" As Nelson sees it, Microsoft will still have a large presence in the industry, but it won't be relevant to the future. The mantle will be passed to a new set of companies.

Walter H. Pritchard
Analyst, CitiGroup

Pritchard felt Ozzie's departure was inevitable. Whereas Nelson thinks Microsoft has fallen behind in the enterprise sector, Pritchard thinks the opposite. He sees the company placing more emphasis on enterprise and potentially less on the consumer side, attributing that change in strategy to the company's inability to keep up with rapidly-changing trends.

"In the consumer space, I would say the Microsoft strategy is evolving and not complete," he says. "They've got two big properties -- mail and messenger -- that attract a lot of consumers, but I don't think they're the first company that even those consumers think of when it comes to those types of services." Microsoft needs to figure out if it wants to be a large general-purpose provider of consumer services, and if it does, need to strategize accordingly.

Regardless, Pritchard predicts the company's enterprise revenue, currently more than 50%, rising significantly over the next five years.

Sasa Jorovic
Analyst, Janney Capital

For Jorovic, Microsoft is dying a death by a thousand cuts. The company has yet to successfully transition into popular areas of consumer tech like tablets and mobile. Sure, it's sold 240 million Windows 7 licenses since the OS launched a year ago but with Google (GOOG) pushing the idea that operating system software, namely its Android mobile OS, should be free, the Windows franchise could be one with an inevitable expiration date not too far in the future.

Moving forward, Jorovic thinks Microsoft's cloud-based services will become increasingly important and should be a higher priority for the company ("I don't think it's happening fast enough," he says.) He even goes so far as to suggest the company eventually drop its "sacred cow" (ie. Windows).

Says Jorovic: "They should consider it a declining business and move on to where the business is heading next."

Marc Benioff
CEO, SalesForce

In 2005, the straight-shooting CEO told SalesForce.com (CRM) employees that Microsoft, with its traditional Office software, was a dinosaur. Over the years, his opinion hasn't changed much. In 2008, he took the company to task again, claiming it was clinging to its past more than its future, trying to hold onto its monopolistic position around technology. And in a Gartner keynote last week, Benioff took the opportunity to comment on Ozzie's departure.

"Ray Ozzie left Microsoft," he said. "Just kind of vaporized. It happened much faster than a Microsoft upgrade. That's all I'm saying. I'm not trying to make any point. Ozzie invented Lotus Notes -- it was a breakthrough idea. It was conceived before Mark Zuckerberg was. Can we learn something from this?"

Perhaps Microsoft is wondering the same thing.

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About This Author
JP Mangalindan
JP Mangalindan
Writer, Fortune

JP Mangalindan is a San Francisco-based writer at Fortune, covering Silicon Valley. Since joining in 2010, he has written on a wide array of topics, from the turnaround of eBay to the evolution of net neutrality. A graduate of Fordham University, Mangalindan has also written for GQ, Popular Science, and Entertainment Weekly.

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