Over the last couple of years, there has been a fair bit of commentary on Microsoft’s lack luster performance in the cloud computing space. And generally speaking it’s a fairly accurate assessment at this point in time. Critical in this statement is “point in time”. I believe that MS views the move to cloud computing as a major opportunity. I’ve heard that Ron Markezich, CVP MS online, is telling his troops that they are going to “Creatively Disrupt” themselves. Which is a great internal line, something you would absolutely use when trying to convince your staff that everything they have worked towards is now going to be thrown out the window. We’ve got Ballmer talking about the need for channel partners, which is true…now. Again, if you are MS you have to do this because your old business 100% depends on channel partners and you don’t want to alienate them.
Both great lines, but a bunch of baloney. If you believe this and you are a channel partner or operate in a subsidiary supporting the channel, you are in big trouble. Heads up! In a cloud world, Redmond doesn’t need you… In fact its worse than that, in a cloud world Redmond believes they can make more profit. Forrester agrees with me..
Check out this picture to see how…
On the face of it, this profit increase is derived from cheaper operating model, no channel and no subsidary required. And to some extent it is, but its way more than that. MS is moving into the adjacent market of its very own integrators by absorbing up the complexity it has traditionally created in the on premise world. And if you are MS this is a huge new profit pool, I’ve heard ratio’s of 4-6 : 1 services to license spend are normal. This means that the potential profit pool is something like $200-300bn.
On top of this, I think that MS knows that with its on premise software its now ‘overshot’ to use disruptor language. And in fact, there are large pools of users who are ‘non-customers’. By offering up a simpler package, priced accordingly and that has much more wider appeal, MS can actually grow its market share. Think about it, all over the world, broadband and mobile networks are opening up computing to completely new users. Netbooks, PDA’s and notebooks are becoming increasingly affordable to boot. In affect MS’s addressable market is increasing massively too, but only if it meets this new markets needs. Something that a cloud solution will do nicely…
Make no mistakes, Microsoft dearly wants to be a cloud computing company…..