Microsoft in Malvern: Will new boss deliver?

Since India-born Satya Nadella took over as CEO of Microsoft last winter from Steve Ballmer, shares of the software giant best known for Windows, Excel and Exchange have gained $100 billion on the stock market. The company is now worth nearly $400 billion, as much as Google; among American companies, only Apple and ExxonMobil are worth more. Nadella's oracular, Jobs-like lines excite investors; some highlights from Microsoft's summer conference call:

Our industry does not respect tradition. It only respects innovation.

Over the next five, ten years, I see a world where computing is ubiquitous and all experiences are powered by ambient intelligence.

Silicon, hardware systems and software will co-evolve together and give birth... Nearly everything we do will become more digitized: our interactions with other people, with machines, and between machines. The ability to reason over and draw insights from everything that's been digitized will improve the fidelity of our daily experiences and interactions.

We want to build products people love to use. And as a result, you will see us increasingly focus on usage as the leading indicator of long-term success.

This is the mobile-first and cloud-first world. It's a rich canvas for innovation and a great growth opportunity for Microsoft.

We will continue to zero in on the things that customers really value and Microsoft can uniquely deliver.

DP Brightful (christened for Martin Des Porres, the African saint) is Microsoft's new mid-Atlantic boss, heading offices in Malvern, Washington, Richmond and Pittsburgh that sell to companies like Merck, Vanguard, PNC, Capital One. At the Microsoft Technology Center in Malvern, a showroom-studio for Microsoft-based "solutions" and a base for the company's pharma slaes, I asked Brightful what's changed under Nadella, beyond the 18,000 layoffs, the cutbacks at Nokia phones, the shutdown of Xbox Entertainment Studios and other cost-cutting moves.

Satya is outstanding. He's a very different leader from Steve (Ballmer). Steve is energy. You want to knock down walls for Steve, he gets pumped up, he's a force of nature. Satya is different from that. He's more [like Microsoft founder Bill] Gates. Satya is subdued, and he's a visionary. A brilliant technical mind with his finger on the pulse.

In Atlanta, at a big sales meeting with 15,000 sellers, he articulated the company and the product groups and the core decisions – the future he can see. 'Cloud-first mobile-first' is how he describes it. Obviously Wall Street is responding to that. They wanted to hear the new CEO and his compelling vision for customers.

Because this is changing. I've been a tech for 24 years, with Microsoft the past 17, and just up until last year the thing with IT, what customers generally wanted, was, 'How do we automate the business processes, how do we streamline the business, take technology to drive out costs and make the business run more efficently, more smoothly?'

But in the past year there's a big shift in CEOs. They come to Redmond (Microsoft headquarters), and they tell us, what they and their boards are all asking their chief information officers is, 'How do we use cloud, mobile, social, big data in particular, to transform the way we do business and our fundamental business model?'

A canonical example, what boards are concerned about, is what happened to Blockbuster. They dominated video rental. So when a couple of guys pitched them this idea that would change how they relate to customers, they kicked them out. The guys started Netflix, and put Blockbuster out of business. Our customers are asking us, 'What's the Netflix idea for our industry?'

They still want the database to run. We still make billions on that. We don't want that to dry up. But what's really on their mind is, 'How do you use all this technology to grow the business?'

'It's a cloud-first, mobile-first world' – that's Satya's vision. And it connects with customers, they get it. Satya describes a world where you see this blurring of the lines between the tech we use at home and the tech we use at work, coming together in what he calls the digital lifestyle. That resonates with our customers.

So that's why we have this Envisioning Center – the one here in Malvern is geared toward healthcare. Our device, Connect, it takes a picture of you and recognizes your face. We hooked it up to Xbox, the first application was for games developers, it's done really well. And now the business folks are saying, ''This has a lot of uses besides entertainment.' A customer walks into a branch. The box scans them and puts up a message for the branch manager: 'He's a high net worth individual.'

We acquired Skype. You know what will be really interesting with Skype? The customer goes into a room, they can talk to an adviser through the box, high-fidelity video, and talk to an adviser who gets all that information about them through face recognition. Once that relationship is developed, once people are comfortable, the customer doesn't have to come in. We can do it remotely.

How do we deliver our value in a modern way? We bring people here, to the Envisioning Center, the Technology Center. We incubate ideas with them.

A financial CIO told me, 'We don't think of ourselves as a banking company anymore. We're a software company that specializes in banking.' That' shows how they are thinking about technology. It's the center of what they do.

The current generation has the comfort level with the technology, the expectations from technology: this has gotten to the point where all these traditional products and services we consumed over the decades will be codelivered and consumed through technology.

That's what grew me back to this position. I was running Cloud 365 for the U.S. (Microsoft's multi-device office and services system.) When Karen (Del Vescovo, Brightful's predecessor as mid-Atlantic boss; she now runs Microsoft's small-business group for the whole eastern U.S.), moved on, my boss Jack Braman (Microsoft East vice president for sales) said, 'Look, DP, the future is about taking all this stuff and transforming customer businesses.' I thought it could be interesting.

I grew up in corporate IT then went into consulting. You get to sit down and help customers solve problems with technology. You come back with the architecture. We got a solution.

Our job now is, they want great cloud-based experiences, device-agnostic, to use all their products and services, on all their devices and Windows. But. They also want insight, and fresh modern ideas, from us, on things that can really make an impact on their business. That gets me out of bed every day.

So we have this great on-premise legacy we do, and love, and make billions of dollars from. But Satya is saying, 'It's a cloud, mobile world,' moving forward.

We don't see our large customers say, 'We're gonna throw everything out.' It's totally evolution. We know the cloud and mobile will be the preponderance ten, 15, years from now. Not so much today.

But in our last quarter, April to June, more than half our software licenses, customers were buying the cloud-based version instead of the on-premise version. They get it.

Customers say, 'Why would I build another data center? I can go to your cloud and get it all tomorrow.' Younger people say, 'Why would I go buy all that, when I can just swipe my credit card and I have that service immediately? And if employees leave I can just de-provision and stop paying for them.' Through the cloud.

We have Give Day, we invite in local nonprofits, we did it here in Philly for the National Federation for the Blind, the local chapter. We have volunteer software developers from Microsoft and a number of companies. Over a weeknd we build them for free a high-quality highly professional website. We train their people on how to use social media and social marketing and how to get your brand out there.

You know what Delve is? (He opens it in his laptop) Here it is , it searches for you. This is a real Ah-ha! moment. Because it's in the same cloud with me, it knows who works for me, who I used to work for, who I email typically, what's trending around me, shared by me, liked by me. It begins to learn.

This is what Satya is talking about when he talks about machine learning. Our office machine learns, and comes back with the documents you might be interested in (onto the desktop when you open it.) It's right like 70 percent of the time. It looks for hot topics and pulls them together in one user interface. I click on Jack and see what Jack' interested in and who he's connected to. His direct reports, peers, managers... Here's Jack Braman, here's Karen Del Vescovo, what do they know? It's really an interesting way to go in and see who's connected to whom.

There's millions of documents on our Intranet. We can't just look through them all. This comes back on your screen and makes it easy. This is what makes big data useful. Necessary.

Tim Pash, manager of the Microsoft Technology Center in Malvern, one of more than 30 worldwide locations where Microsoft shows off its software in partners' gadgets and helps corporate customers "find solutions". He walks us into a demonstration room:

Have you seen Perceptive Pixel? It's a touch wall screen. We overlay it on Excel, which is [one of] our business intelligence tool: 95 percent of company reporting ends up in Excel. You can do so much with it. The Windows 10 unveiling included the concept of using it in alternate desktops for alternative purposes. And you can make this the basis for a real conversation with your sales force. (He demonstrates: writes data points on the glowing wallboard: they convert instantly to columns of figures, bar charts, trend lines.) This has unlimited contact points, but it also eliminates distractive touch.

(We walk to another room) Here's Mike Gannotti's studio. His day job is he's business productivity architect for the Microsoft Technology Center, focused on business productivity and Office and the surrounding ecosystem. He makes those segments here.

He started to invite other groups in Microsoft and our partners to be guest speakers. And now he's become a world-renowned media expert with 60,000 social media followers. He's one of the top 10 Sharepoint gurus in the world. He's created a pulpit where we can demo anything new and exciting coming out of Microsoft using a fairly modest set of equipment. With this greenscreen we can put any backdrop behind it.

He broadcasts every Monday and Friday livestream off phillyMTC.com/MTCvideos. Watch it in realtime or on demand. Right from the horse's mouth with a local flavor. He's slipstreamed Microsoft Azure capabilities into his broadcast. With that Realtime closed-captioning of content, the caption data makes it searchable. You get a first-mover advantage with the legal disclosure requirements.

It's a liberating thing if you can attend a meeting at home or from your iPhone, with the camera on or without it.

(Walking on through the building) Over here we have a Microsoft Lync smart-room system. When you have a set of highly-compensated executives and you don't want to waste the first 10 minutes of every meeting screwing around with the technology, you invest in a room like this. You have dedicated hardware, and a one-tap experience: you're in. For a relatively modest investment of a $20,000 setup, it pays for itself, if you're dealing with five or seven executives compensated at $100 an hour. We sell Lync room systems that use smart hardware in their boards. We're bringing Skype into Lync through the Xbox in your living room. You can lay down Skype and use the Xbox sensor as a high-def camera to join the meeting. We'll be demonstrating that soon.

(Isn't this scary for everyone who depends on legacy systems?) We know what it's like. We've had to change a lot of processes to embrace the cloud, from product engineering, to marketing and sales compensation.

We've had to move products from a three-year cycle to a two-week cycle. That creates a lot of waves on our business model.

It's one of the biggest bets Microsoft has made. It seems to be working, given our stock price lately.

Bill Emmert, technical director at the Malvern facility: Customers come to us to reduce challenges and risks in our environment. This allows us to give them a view of how it might look running on the Microsoft platform.

We're doing this a little differently. We don't say, 'Here's the feature, here's the function.' We do it scenario-based. Here's a day in the life, here's somebody who's mobile working out of an airport or train station or their home office overlooking Philadelphia. Or a manufacturing floor, or a bank branch or a doctor's station in the hospital. We do many scenarios.

We don't talk about the products. We talk about the tasks each individual has to do. Your vice president sales and marketing has to pull together a project team. She'll grab Greg who's working at home. They start with a chat over Lync and escalate it to a telephone call – or a desktop sharing. They work from where they are and have cohesiveness as an organization. It lets the customer really think where the potential is.

We're here to help customers solve problems. Hopefully it's in our software. (Even if they get it somewhere else) we still did our job, to help customers. We're seeking solutions that will help them understand where there business is going to be in thre or five years. After the demo they go to what to buy.