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What Microsoft CEO Steve Ballmer Told Yammer Cofounder David Sacks

When Microsoft was considering acquiring Yammer, Ballmer told Sacks a story that gives insight into how the Microsoft CEO sees the company's future in the enterprise space.

Call it a Trojan Horse strategy: The tens of millions of users who take their mobile devices to the office—iPhones, iPads, Android devices—and with them, all the apps, email and storage programs, and other cloud-based services they use at home, have sparked a revolution in the workplace. It's a trend known as the "consumerization of IT," and it's opened up the enterprise space to a number of fast-growing and disruptive upstarts such as Box, which allows users to share files and collaborate in the cloud.

But the Trojan Horse strategy is nothing new, at least according to Microsoft CEO Steve Ballmer and Yammer cofounder David Sacks. Over the summer, Microsoft acquired Yammer for $1.2 billion. The service, which serves as an internal social network for employees, is breathing new life into Redmond's enterprise strategy, which has long relied on the company's incumbency in software products that include Windows, Office, and SharePoint. But when Microsoft was considering acquiring Yammer (and, vice-versa, Yammer was imagining what it'd be like to get acquired by Microsoft), Ballmer met with Sacks and his cofounder on separate occasions, and revealed a story that gives insight into how the Microsoft CEO sees the company's future in the space.

"One of the things we talked about was the consumerization of the enterprise," Sacks recalled recently to me at SXSW. "He told me a story about how in the early days of the PC, the way that Microsoft got into companies, it wasn't through the IT department, which was then beholden to mainframes and the previous generation of computing. It was really average employees who brought PCs into work—that's how they got into the enterprise. So I think he very much sympathized with our strategy—this consumerized, bottom-up strategy that we have. He liked it obviously, and wants to do more with it."

It's a funny way to think about the past. Now, it's commonplace for us to bring our iPhones and Android tablets to work to avoid having to use—gasp!—an office-sanctioned BlackBerry. But back then, according to Ballmer, it was the same story, just instead of small mobile devices, employees were bringing bulky PCs into work. It's what's gave Microsoft a chance to take on the incumbents in the space, according to Ballmer.

Ironically though, Microsoft is now the company many IT departments are "beholden to." But thanks to the cloud and consumerization of IT, Microsoft's grip is slipping. For one, few consumers are buying Windows Phones and Surface tablets, and adoption of Windows 8 has been slow and unimpressive, especially in the enterprise. Startups like Box, Workday, and Salesforce are giving the enterprise alternatives to the dinosaurs in the space, and the more employees continue turn to Android-based products from Google or iOS-based products from Apple—the iPad is said to own a whopping 96% share of enterprise tablets—the less they'll turn to Microsoft.

Since Microsoft can't rely on its traditional suite of products forever, it's going to have to rely on other software. If not Word, services like Yammer are key to its success in the enterprise—to that Trojan Horse strategy working for a new generation of consumers.

Sacks said that willingness to disrupt itself is core to Microsoft's DNA.

"One of the things that we learned during the courtship process is that [Microsoft's] culture is very self critical," Sacks told me. "There constantly asking what else they should be doing better or differently, and that's how they got to Yammer. Some of people who are the biggest champions of the Yammer deal within Microsoft are the people who work on SharePoint. It's a multibillion-dollar business, but they were not content to rest on their laurels."

Sacks added, "They wanted to move to the next stage with consumerization and social, and that's what led to the Yammer acquisition."

[Image: Flickr user Shannon Kokoska]

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  • Jason Pace

    Why anyone would listen to what David Sacks has to say on this matter is beyond me -- he just made tens of millions of dollars on an acquisition and he's doing the mouthpiece thing for Microsoft per his agreement with them. His point-of-view on this is so tainted that anything he says should be considered paid marketing.

  • Mark Stuckless

    Ballmer is completely out of touch with reality and his tech analysis predictions have been wrong so many times.  Especially when predicting how MS is going to fare.  Microsoft has begun its tailspin.  Sure its still a big behemoth and will take a while to fall to earth, but the fall has begun.  Buying Yammer is not going to stop the decline.  Microsofts needs to get rid of Ballmer and his hubris.  He really is that uncool and full of it.

  • NateVodich

    Neither Microsoft, nor Yammer are good at consumerisation. If you look at Asana or Bitrix24 - these are the guys who understand consumerisation. Who uses Yammer in non-enterprise setting? Nobody.

  • Info Dave

    "Sacks said that willingness to disrupt itself is core to Microsoft's DNA."

    Funny, I've never thought about Microsoft that way. 

  • Guest

    No, Microsoft is not self-critical.  You get dumped to the bottom of the stack rank and fired for questioning anything.  They will be nice to Yammer for awhile and then they will bring in the bowl of Kool Aid to drink from that is totally against what Yammer used to be.