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Decrypted: With Health, Microsoft Admits Defeat — and Adapts

Microsoft’s newly minted CEO Satya Nadella has no shortage of challenges ahead, with revenue streams from Windows and Office thinning. But the Microsoft Health signals a more forward-thinking direction for the company: focusing on the cloud.

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☲☰CRYPTED
Editor’s Note: For most of us, the wide world of technology is a wormhole of dubious trends with a side of jargon soup. If it’s not a bombardment of startups and tech trends (minimum viable product, Big Data, billion dollar IPO!) then it’s unrelenting feature mongering (Smart Everything! Siri!). What’s a level-headed guy with a few bucks in his pocket supposed to do? We’ve got an answer, and it’s not a ⌘+Option+Esc. Welcome to Decrypted, a new weekly commentary about tech’s place in the real world. We’ll spend some weeks demystifying and others criticizing, but it’ll all be in plain english. So take off your headphones, settle in for something longer than 140 characters and prepare to wise up.

In many ways, Microsoft has started to look like Nortel, a lumbering giant of a company that had been alive for so long that it couldn’t possibly die…until it stopped paying attention to changes in the market, and eventually did die. Nortel did a poor job of reacting to the wireless revolution, instead pinning its future on a wireline-based society that had moved on. Microsoft, arguably, has done a poor job of reacting to the public’s demand for devilishly fast smartphones, failing to recognize that today’s “personal computer” has a silhouette closer to a Pop-Tart than a chunky beige tower. Indeed, some pundits have suggested that Microsoft’s finest days are behind it — that once software moves fully to the cloud, cash cows such as Windows and Office will dry up in the face of free alternatives like Chrome OS and Google Docs.

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Newly minted CEO Satya Nadella has no shortage of challenges ahead. Microsoft is, in so many ways, hampered by its own success. It’s ill-prepared to envision a future where neither Windows nor Office contribute meaningfully to its operating profit. In recent months, thousands upon thousands of Microsoft employees have been shown the door, while Nadella has made difficult decisions to cut legacy areas of the company and focus more on something with no definitive future: the cloud.

It’s do or die for Microsoft. Sure, it could stay put and barely innovate for the next 30 years before it runs out of cash, but what kind of CEO would want to write that chapter in a firm’s history? Definitely not the kind of CEO who would spearhead the launch of an entirely new cloud-based health and analytics platform — particularly one that’s launching with support for operating systems engineered by arch rivals Google and Apple.

Another Fitness Tracker?

While smartphones and tablets have dominated the consumer electronics sector of late, the connected health subcategory has been quietly looming. Now, it’s surging. With Fitbit, Jawbone, Samsung, and Google all vying for a slice of the fitness pie, Microsoft has leapt in with two huge announcements. The first is Microsoft Health, which the company describes as a cloud-based “intelligence engine”. In a nutshell, it’s a database where information collected by fitness trackers can live and be distributed. Microsoft designed Health to talk not only with its own hardware, but with everything on the market.

Health will work with UP by Jawbone, MapMyFitness, MyFitnessPal and RunKeeper, even though Microsoft had no hand in designing these, nor did it partner with their developers. It has no financial stake in supporting them. But it has come to the realization that if it doesn’t open itself up to work with programs and software that people already love, it may lose its last great chance to add value in the new consumer electronics universe.

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Moving forward, it hopes to persuade even more fitness trackers and apps to funnel data into Microsoft Health, and while it did indeed announce a wearable of its own, Microsoft doesn’t care if you ever buy one. So long as you’re touching Microsoft at some point along the value chain, it’s satisfied. If this sounds remotely familiar, that’s because it is; Google invests untold amounts of money in making stellar apps for iOS. It could choose to be stubborn and attempt to strong-arm iPhone loyalists into switching to Android; instead, it simply takes its talents to where the demand already is.

Who’s Invited?

It was apparent early on that Nadella was’t one to favor walled gardens. For years, corporate workers wondered why Office wasn’t available at any price on the world’s most popular tablet. Just months after Nadella took his corner office, an entire suite of Microsoft’s productivity tools landed on the iPad, and it was absolutely fantastic. With the Health announcement, it’s now obvious that the iPad move was more than a token of goodwill — it’s Microsoft’s new way forward.

The Microsoft Health app launched simultaneously on Windows Phone, Android, and iOS. The significance of this should not be understated. The company could’ve easily shipped the Windows Phone version first as a nod to those relying on its own mobile OS, but the majority of the world uses Android and iOS. Microsoft’s reacting by developing for where the people are, not where it wants people to end up.

A Very Different Microsoft

It’s tough to swallow, but the Microsoft that’ll be around in a score will look very different from the one existing today. It’s already tough to convince enterprise clients to upgrade to the newest version of Windows each year; toss in the fact that Apple’s now ushering in yearly updates with a price tag of $0.00, and one has to wonder how much longer Microsoft’s gilded licensing scheme will last. And after years of trying, Windows Phone just isn’t catching up. The mobile war has been won, and the victors are Apple and Google. The only way that Microsoft can make a meaningful impact in the smartphone realm is to create for the platforms that consumers see as superior. 2010’s Microsoft would’ve never entertained such a notion. Today’s Microsoft isn’t just entertaining the idea, but executing on it.

Microsoft’s strengths are morphing, and for it to continue to rake in billions each quarter, it’s going to have to pivot heavily in the years ahead. It already injected a new revenue stream into the equation with its highly successful Xbox regime, and Microsoft Health seems to demonstrate a clear objective for what’s next: developing amazing applications that live in Microsoft’s cloud, but are there for anyone (and any platform or OS) to use.

They say if you can’t beat ’em, join ’em. It took Microsoft an awfully long time to embrace that mantra, but we’re seeing a cooperative spirit that we’ve never seen before — a spirit that just might catapult Microsoft into its next era of greatness.

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