As reported by Gigaom, Nadella is now the new Microsoft CEO.  He replaces Steve Ballmer.  The official announcement is here and more information, including Nadella’s email to employees, is here.

The rub is that many see this promotion as a clear message that Microsoft is more committed to the cloud than ever.  As you may recall, in 2013, Nadella was named executive vice president for the cloud and enterprise group

Nadella is seen as technologically savvy and good with people, but perhaps a little bit light on the vision and business side.  Bill Gates will provide more assistance to the company, including insights into strategy for Nadella.   At least for the next year or so.

The challenges are huge for Nadella.  The Windows Phone did not give the iPhone and Android phones a run for their money, as Microsoft had hoped.  The movement of Office and Windows to the subscription cloud is slow, and could hurt the existing legacy base.  More importantly, Azure went PaaS then IaaS, and now has Google, HP, and IBM on its butt, as well as the hugely successful AWS public cloud.

The bright spot is that recent numbers from Microsoft were pretty good.  The company seems to have the resources it needs to make some effective changes to existing products and cloud services.  It certainly has a loyal following of users and developers.

So, what happens now?

My core issue is with innovation.  Microsoft is strong in the emerging cloud computing space, but not at all innovative.  The initial push of Azure was to replicate existing Microsoft stuff in a public cloud, pretty much.  The next push was to copy AWS by moving more toward IaaS.

You can bet the next moves will be more “fast follower” shifts as well, perhaps watching what AWS does and then attempting to set a path to just catch up.  That’s the strategy of most IaaS providers, by the way, not just Microsoft.

While Microsoft does need innovation and fresh thinking, I’m not sure that’s going to come from Nadella.  He’s been charged with the Microsoft cloud strategy thus far, and the while Microsoft can show growth, it can’t show cloud services that are more compelling than most of its competitors.  Short of that sort of innovation, Microsoft will always be at about the same percentage of growth in the cloud computing market as Google, HP, AWS, IBM, and others.  While most startups would love to have that kind of market penetration, for Microsoft, it’s a slow death.

IBM, HP, and Oracle have the same problems.  The more cloud these companies sell, the less money each will make.  For Microsoft, this is due to the fact that it will have to migrate its customer base from existing and more profitable on-premise Microsoft platforms to Microsoft public cloud services.  This is a change in how the software is sold, which includes a lucrative partner network that Microsoft depends upon.

My advice would be for Nadella, who is an insider, to hire a lot of smart and innovative thinkers for the emerging cloud side of the business.  The idea is to promote a change in culture, and a new way of thinking about emerging technology opportunities.  Experiment a little.  Try new cloud services that others have not figured out yet.  In other words, provide a clear and innovative vision for what Microsoft can become, and begin the march in that direction.

Unfortunately, this is unlikely to happen for a few reasons.  The culture at Microsoft is not the culture of the 1990s.  It’s difficult to get the ship moving in a new direction.  There are heavy political environments, where perhaps the employees are looking out for themselves, and their budgets, more so than the greater good of Microsoft.  These types of cultures are hard, if not impossible, to change in an expeditious way.  I’ve tried this a few times in my career with much smaller companies, and it was possible, but only because of the size of the company.    I can’t imagine attempting to change the culture at a place the size of Microsoft in the time required to better capture the cloud computing market.

The “Microsoft cloud guy” promotion would lead you to believe that Microsoft is more committed to cloud computing than ever.  If recent history is any indication, I’m not sure we’ll see many new things out of Microsoft, other than a race to keep up with the other cloud providers.    Nothing to pull them ahead.

Of course, Nadella could be a mover and shaker that just needed a chance to make a true difference.  While that’s very unlikely, I suspect the Microsoft users, investors, and employees are keeping their fingers crossed.