I have lost confidence in Steve Ballmer's leadership

This just isn't my week for being right. On Tuesday there was confession: "I was wrong about Apple iPad." Today, I make another: I was wrong about Microsoft's CEO. Yesterday's Windows Embedded Handheld announcement shattered my remaining confidence in Steve Ballmer. About three weeks ago, I asserted: "Steve Ballmer is the right man to turn around Microsoft mobile." If yesterday's announcement is indicative of Microsoft's mobile strategy, then I was wrong. He isn't the right man, and I must now question if he should even continue leading Microsoft.

Since January, when I posted "Microsoft, don't give up on Steve Ballmer just yet," people have asked by way of Betanews comments, e-mail or Twitter how I can stand by the man, and I have been sharply criticized for the stance. Perhaps I like Ballmer's character too much. He is a rarity among corporate CEOs. Ballmer wears his heart on his sleeve. The man struggles to contain his excitement or to resist speaking his mind, despite years of media coaching. Ballmer is a "tell it like it is" kind of man, and I find the quality appealing.

Ballmer also focuses on customers, which is another commendable trait. Under his leadership, Microsoft changed employee evaluation and compensation metrics; they're tied to customer satisfaction. But perhaps Ballmer is too customer focused; he caters too much to core enterprise customers, such that he can't lead Microsoft into new markets.

Ballmer Should Fire Himself from Mobile

Yesterday's Windows Embedded Handheld is good example of too much enterprise focus -- to a fault. It's a terrible move for Ballmer, who only recently took over responsibility for Microsoft's mobile strategy. At a time when competitors are consolidating or have consolidated their mobile operating system versions or brands, Microsoft is fragmenting them. The company will have in market Windows Mobile Classic, Windows Embedded Handheld (which for now really is Windows Mobile 6.5), Windows Phone 7 and whatever the hell KIN or Zune run. That's four or five different mobile operating system brands, depending on how Zune is counted. Ballmer does talk about future mobile operating system consolidation, but 2011 or beyond is too late. There simply are too many brands, regardless of the underlying platforms, and competitors are gobbling up market share too fast.

By comparison, upstarts Apple and Google are doing much better. Apple now has some fragmentation based on hardware features but still a fairly stable platform around iOS, and there is a single operating system brand. Developers benefit from single iOS versions made available to all customers about the same time. However, disparate form factors -- iPhones with different hardware capabilities and differences from iPod touch and iPad -- present some challenges to developers. Google let Android fragment, but that is rapidly reducing as v2.1 becomes more widely available. Android also is a single brand.

Windows Embedded Handheld is a fool's game. Microsoft might hold on to some enterprise embedded device customers, but it's a losing strategy. Apple and Google will offer better alternatives -- of course by different strategies. Apple will leverage the tablet and synchronicity with iPhone for many handheld device uses. Google will license Android for other handheld devices.

Apple and Google major advantages over Microsoft:

• Single operating systems that run on multiple mobile device categories
• Applications stores providing off-the-digital-shelf functionality; buy the app, connect the service
• For Apple, tightly integrated hardware, software and services stack that is easily administered and deployed
• For Google, free, open-source software that can be easily customized to support specific or general business needs

Platforms live and die in part because of applications. Apple and Google have plenty. Microsoft's major applications are increasingly its own. As I've so often written, computing and informational relevance is changing from the Office-Windows-Windows apps stack (which is nearly all enterprise based) to mobile devices connected to the cloud (often through apps). Long term, Microsoft's enterprise-focused apps stack can only make the company into something like IBM in the 1990s. The old apps stack will remain profitable but steadily decline in computing and informational relevance.

Ballmer disappointed the hell out of me yesterday. Rather than the vision I hoped for, he stayed the river's course. Microsoft will challenge the rapids. Did Ballmer not read the warnings about the waterfall! I've got some unsolicited advice for Ballmer:

• Fire yourself from mobile
• Hire a visionary to fix the problems you have got
• Create an internal mobile startup group separate from Office and Windows to create something that works

I stood by my man, but he failed me.

Charting Crisis' Course

Many Ballmer critics look to his early 2000 ascension to the chief executive's chair as the beginning of Microsoft's demise, which is overstated. The company is a money machine. Microsoft decline is strategic, not economic (at least not yet). Additionally during the May 2008 D6 Conference, Chairman Bill Gates admitted that for years he and Ballmer really were co-leaders. Gates couldn't let go. Microsoft made many mistakes during the early and mid noughties, but Ballmer doesn't deserve blame for all of them (Gates has his share), and the chief executive did right by emphasizing customer service and making annuity licensing a priority. From a business perspective, the licensing changes were brilliant. Customers lock into two- or three-year "Software Assurance" contracts, which is like money in the bank. Software Assurance smoothed out Microsoft's revenue stream and insulated the company from economic downturns.

Ballmer's big problems really started in September 2005, when he reorganized the company under three divisions run by several presidents (there would later be five divisions). The reorganization also accelerated Microsoft's already increasing layers of middle management. I can understand Ballmer's reasoning. People want to advance in their jobs. The reorg created structural nooks for growth and advancement all the way up to, eventually, five president positions.

Microsoft's course since September 2005 is troubled. What is now the Online Services Businesses moved from the black to red, and has continuously lost money since. The Windows Live rebranding was catalyst. Microsoft held to a tightly-focused mobile enterprise strategy that relied too much on Office and Windows dependencies and focused too much on chasing Research in Motion. Once a mobile OS leader, Windows Mobile now ranks No. 5 in smartphone market share. The Windows Vista fiasco happend on Ballmer's watch, even though he inherited the leadership responsible.

The Business and Server and Tools divisions have done reasonably well since the reorg and the Windows group has regained some of its mojo. But the successes and victories share something in common: Microsoft executives looking in the wrong direction. Ballmer is seemingly obsessed with competitors like Google or extending Microsoft's enterprise reach -- to a fault.

Ballmer's problems accelerated in 2008:

• He attempted a forced, $44 billion takeover of Yahoo (and failed)
• Gates stepped down from day-to-day operations
• The stock market crashed in September

These three events led Ballmer and his leaders to tactically push Microsoft to further entrench in the enterprise, which granted generates nearly all the company's profits. In December, I asserted: "Microsoft isn't losing its consumer edge, it was game over long ago." I wrote: "Microsoft has been retreating from the consumer market for some time, following a deliberate strategy that is creating a circa-1980s IBM...Microsoft is using its strengths to preserve the status quo, isolating the company to the enterprise."

Some people will look to Xbox and Zune and argue that Microsoft does indeed care about consumers. Oh, yeah? I personally like Zune hardware and software, but they're market failures. If Microsoft was truly committed to Xbox, the company would do more than change the box design or release (in about five month) a new game controller (Kinect). The base hardware-software platform is five years old; it's not advancing. I see lots of iteration around services, but nowhere as much hardware innovation.

Something else: Microsoft's most ambitious visionary is seemingly silent. Chief Software Architect Ray Ozzie once espoused a cloud vision that promised to be open and interoperable. Clearly the Office and Windows hawks have killed the cloud services doves. The Microsoft cloud is now little more than an adjunct to preserving the Office-Windows-Windows Server enterprise applications stack. Gates brought on Ozzie, but left him behind. Now the Office-Windows-Windows Server obsessed Microsoft leadership has cast off Ozzie's vision into the clouds; it floated away.

Summing up, Microsoft is more enterprise-focused now than ever, with Ballmer's leadership team missing something hugely important: Consumers matter more than business or technology decision makers, because they're greater influencers. Every computing wave since the dawn of the personal computing era came to business through consumers. Employees brought the first PCs, cell phones, digital cameras PDAs, wireless routers, laptops or smartphones into their offices. IT organizations only adopted them later. Apple has demonstrated the power of the consumer to drive radically new products into businesses; iPhone is there, and iPad will follow. Microsoft executives are looking the wrong way, so they don't see the waterfall beyond the rapids.

If I look back at the totality of my Microsoft reporting and commentary since September 2005, the Ballmer leadership problems are clear. I just didn't want to see them. I like him too much. Mobile is the future of computing and information, but Microsoft's mobile strategy is fumbling along to ruin. It hurts me to say that I have lost confidence in Steve Ballmer's leadership.