The top 5 challenges facing Microsoft CEO Satya Nadella

Now the real work begins.

After emerging as the winner of Microsoft’s CEO sweepstakes, Satya Nadella gets to take on one of the most complex and difficult jobs in the business world — leading Microsoft through a period of massive change and challenges to its traditional businesses, and trying to position the company to identify and capitalize on the next big things in technology, whatever they turn out to be.

Clearly this role is above our pay grade, but we do have our own ideas about the challenges that Nadella will be facing as he settles into the corner office. These are the top 5, as we see them.

Integrating Nokia: Think of this as a giant “welcome to the job” present from outgoing CEO Steve Ballmer. Microsoft’s $7.2 billion acquisition of Nokia’s smartphone business is slated to close this quarter, adding some 30,000 employees and kicking off an entirely new phase in the company’s “devices and services” strategy.

Microsoft has a history of difficult and failed acquisitions, including the $6.3 billion purchase of aQuantive, in which Nadella was deeply involved. No doubt he learned a few lessons from that process. Applying them to successfully integrate Nokia will be one of his first big challenges, but also a great opportunity to make Microsoft more relevant in a key market.

Improving Microsoft’s standing as an innovator: Right or wrong, Microsoft suffers from a reputation as a follower, particularly as Apple and Google have taken the lead in the world of smartphones and tablets. Microsoft’s Xbox business can help with the “cool factor,” but the company overall could use an upgrade in its reputation as a cutting-edge innovator.

One key will be identifying and capitalizing on the next big shifts in devices and services, as cloud-connected technologies become smaller and more deeply integrated into our lives. As former Microsoft CFO John Connors told us, “If you look at the shifts in the device world, the shifts have happened pretty regularly. So they’ve got to emerge as a leader in the next big shift, and that will be his great challenge, but also his great opportunity.”

Defending the enterprise: Microsoft’s sales of software and services to businesses have remained a bright spot for the company, even as sales of Windows PCs to consumers have slumped. But the strides being made by Apple’s iPad among corporate buyers illustrate the potential for consumer trends to chip away at Microsoft’s position over time.

Nadella needs to make sure that Windows — in all its forms, from the cloud to the device — remains (or in some cases becomes) the de facto standard for companies large and small.

Navigating the new internal politics: Microsoft doesn’t just have a new CEO, it has a new board chairman, a new activist investor, an entirely new organizational structure, and a new employee review system to boot. (More presents for Satya from SteveB.) And, oh, by the way, Bill Gates is back in Redmond, roaming the halls as a technology adviser.

Stepping in to run a company the size of Microsoft would be hard enough, as is, but the magnitude of change at Microsoft right now is staggering. If Nadella can manage all of this, inspire the rank-and-file, and keep the company growing, he deserves every cent of that money they’re paying him.

Deciding where to focus: Which leads us to our final point. As viewed from the outside, at least, Microsoft suffers from too much complexity, and can feel at times like it’s trying to do too much. We’re not saying that the company should spin off Bing, or Xbox, but one of the keys to unlocking its potential is to figure out what’s critical, and what can be left behind. And those are the types of decisions that will ultimately shape Nadella’s legacy as Microsoft’s CEO.

GeekWire’s John Cook contributed to this post.