I don't know Steve Ballmer. I've only met him once. (I've met with Bill Gates more often than that.) But let's face it, he had tremendous impact as a leader. And it's now a good time for him to step aside.

When Steve took over from Bill as CEO of Microsoft in 2000, the company's revenues were $21B and the business was led by desktop software. Under Steve's guidance, Microsoft made massive inroads into enterprise server software and tools while investing but not really winning in consumer services and certainly not in mobile devices. And in recent years, Steve listened to lieutenants like Ray Ozzie and Bob Muglia to turn the Redmond juggernaut towards cloud computing, mobile devices, and software+services.

At the same time, the world has moved faster than Microsoft's licensed software business model could respond. Apple, Google, and Amazon have become enterprise suppliers. Salesforce.com and Amazon are accelerating the shift to cloud computing. Dropbox has grown from zero to 175 million users in five years. So even as Microsoft's revenue more than tripled to $73B in 2012, things didn't feel good.

I think it's a good decision for Steve to step down and pass control to someone else, probably an outsider. Microsoft will then face its IBM or GE moment: Keep the company together or break it apart? Lou Gerstner kept IBM together and that decision had paid off handsomely. Then again, IBM relentlessly focused on a single enterprise market, shedding its PC and other low-margin businesses.

So what's next for Microsoft? I see three forces colliding to drive that decision:

  1. Technology is increasingly universal, not divided into personal and business. Dropbox for business and Apple iPhone are just two examples of this happening. It is Microsoft's natural prerogative as the owner of Windows and Office to keep its businesses together with coalescence as the primary goal, to merge work and home.
  2. Software is disappearing from view, replaced by services. This is true at home and at work. Why install something only to have to keep it running when I can just use something and know it's current and safe. Smartphones and the Web have trained us that this can work well. That would push Microsoft to flatten its business model and drive a massive shift to subscription pricing regardless of the deployment model. This force will push Microsoft to consider separating its businesses into something like business, consumer, and entertainment.
  3. The mobile mind shift is well under way, and people expect the same service ("application" if you prefer) on every device. This is the biggest force in our personal and work lives. We increasingly don't care whether we are using a smartphone, a tablet, or a computer to get something done. This force is Microsoft's biggest challenge as it doesn't own all the devices. Windows has lost its dominant position as the platform most people touch most often most days. Instead, it has to share that role with Apple iOS and Google Android. This force will push Microsoft faster towards services and also drive the consumer business away from the enterprise business. Why shouldn't Office run on all devices? Why shouldn't Azure host applications for all devices? Why shouldn't Skype run great everywhere? Why shouldn't Windows licenses fade as a revenue model?

Tough decisions for Steve's successor.