How Microsoft plans to court startups

Microsoft CEO Satya Nadella speaks at Fortune Brainstorm Tech in Aspen, Colorado on July 14, 2014.
Microsoft CEO Satya Nadella speaks at Fortune Brainstorm Tech in Aspen, Colorado on July 14, 2014.
Stuart Isett/Fortune Brainstorm TECH

If you ask startup founders and their investors about Microsoft’s software and services, many will say the company simply isn’t relevant to them.

Satya Nadella, the newly installed chief executive of Microsoft (MSFT), will admit as much. Startups prefer to use competing services such as Amazon Web Services for their cloud hosting, servers, and various other IT functions. When a startup decides where to build, Microsoft doesn’t often come into play—problematic when small startups can quickly turn into major clients, after which they are less likely to switch.

At the Fortune Brainstorm Tech conference in Aspen, Colo. this week, Nadella addressed this shortcoming on stage. Microsoft faces two challenges in reaching out to startups, he said: a perception issue and selection bias. The first area of focus? Cloud and enterprise. As AWS has grown to become the default cloud service provider for startups, Microsoft’s competing product, Azure, has grown mostly through enterprise adoption, he said. And that’s a problem.

Any startup, even if they use Amazon Web Services, can also use Azure’s Active Directory, Nadella said. (The service allows an IT professional to manage access to cloud storage.) There’s also single-sign-on—another identity management service—for Microsoft’s Office 365. “So that’s a benefit for any one of your portfolio companies,” he said, appealing to the investors in the audience.

There’s more. Startups can use Microsoft’s cloud-based machine learning services to perform advanced predictive analytics while using another cloud provider, Nadella said.

The hope is that entrepreneurs will start dabbling with various pieces of Microsoft’s offerings, even as they use a competitor’s service. “One of the reasons I want to construct our API’s and services is so that its not an all-or-nothing thing,” Nadella said.

It’s all about enticing developers and battling Microsoft’s existing reputation in that community. There remains a misconception that Microsoft is “only a .NET Windows shop,” Nadella said, referring to the company’s framework that runs on its Windows operating system. It’s not true: Azure supports Linux and “pretty much every platform,” Nadella said, “and that’s something we’ve got to tell more boldly and it’s something that’s top priority for us.”

Watch the entire interview below:

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