No doubt Microsoft will cling to on-premises until the bitter end, but it’s become a very successful cloud provider.
Conventional wisdom says that a revolutionary company in one segment usually can’t make the leap to the next, especially if the next revolution comes at the expense of the technology built by that initial company. Ergo, companies built on selling on-premises software should be abject failures at moving to the cloud, right?
Well, Microsoft isn’t failing at the cloud. It’s getting it better than anyone could possibly have expected, and while everyone beats up Windows 8 and defines the company by that hairball, what’s going on in other parts of the company are nothing short of remarkable.
First, there’s Azure. A whole lot of commotion was made over Microsoft’s claim that it had reached $1 billion in revenue from Azure because it happened so quickly in comparison to others. It’s still running a distant second to Amazon Web Services and there’s a hot competitor not many are watching called Softlayer, but to be sure, Azure is doing great business for Microsoft. It has 20% market share and could reach 35% by next year, according to Forester Research.
Then there’s Skype. A whole lot of people scoffed at the crazy sum Microsoft paid in 2011 – $8.5 billion. But it’s starting to pay off in market share. A third of the world’s voice calls are done through Skype, according to telecom market analysis firm TeleGeography.
Microsoft has integrated Skype with the new Outlook.com platform, along with Google Chat and Facebook chat, and Microsoft is claiming 400 million users of that platform. It’s even running TV ads touting the service. In February, Microsoft announced Skype and Lync sales had reached $2 billion in annual revenue and continues to grow.
Then there’s Office 365, which has already passed the $1 billion annual revenue mark just months after its launch. A rather burdensome end-user license agreement for Office 2013 probably helped, but you can’t deny the service has racked up good reviews.
These growing businesses join the Dynamics ERP & CRM systems and Sharepoint product line to reflect a company that really does seem to get the cloud and is doing a really good job of integrating its many assets and providing a one-stop shop for productivity applications on-demand.
All of these groups in total account for about $7 to $8 billion in revenues for Microsoft, about 10 percent of total sales. That’s going to continue to tilt as more people go on-demand and fewer go on-premises. It won’t be without challenges, especially in the IaaS market for Azure. Google is just now wading into the pool with its Compute Engine offering. And if Dynamics wants a piece of the ERP and CRM business, it will have to rumble with Salesforce, and we all know how much Marc Benioff loves a good fight.
Still, with double-digit growth projections for these markets, Microsoft can ride them to considerable revenue and market share and be the cloud success story no one thought it would be, and without Ray Ozzie, either.
Maybe the Azure team should run Windows.
Best Microsoft MCTS Certification, Microsoft MCITP Training at certkingdom.com