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Microsoft’s “all in” cloud strategy will translate into higher traditional software sales, Chief Operating Officer Kevin Turner said during a speech at Microsoft’s annual Financial Analyst Meeting July 29.
Microsoft opened its daylong event with a brief run-through of its new and upcoming products, including Windows Phone 7, Xbox Kinect and Office 2010. As soon as Turner took the stage, however, focus immediately shifted to the cloud and its effect on Microsoft’s business customers.
“Our enterprise business is about 35.8 percent of the company. Our small and medium-sized business is about 20 [percent] as you look at it,” Turner told the assembled analysts, according to a transcript published on the Microsoft Investor Relations Website. “The two pieces of that pie are the two that I’m going to talk about today.”
Part of Microsoft’s broader strategy to appeal to businesses, he said, revolves “around rebooting, retransitioning, replatforming ourselves, if you will, around leading with the cloud with our customers.”
Moreover, he insisted Microsoft’s cloud initiatives will boost its traditional software sales.
“We are going to lead with the cloud,” Turner said. “Leading with the cloud actually helps better position Microsoft to sell more on-premises products than we ever have before … very strategically it signals a very clear commitment to our customers and to our partners.”
Turner also suggested that the company’s cloud strategy is already gaining traction.
“One of the most exciting things about our cloud strategy is that 70 percent of the wins in the cloud that we had in [the fourth quarter], ladies and gentlemen, were new Microsoft customers,” he said. “They were IBM Lotus Notes customers, they were Novell e-mail customers, they were all this other stuff, in addition to the Microsoft customers, [and because of] that we’re actually able to grow our portion of the pie this next year in a very dramatic way, because we can explode worker productivity.”
Microsoft has been aggressively pushing the cloud, most recently at July’s Worldwide Partner Conference, in Washington.
“We’ve been shouting about ‘O Cloud’ at the WPC now for about four years,” Microsoft CEO Steve Ballmer told the audience during his July 12 keynote. “There’s no question that Microsoft has chosen to embrace that path together with all of you, and there’s no question that there’s more to do.”
At the time, Ballmer said Azure, Microsoft’s cloud-development platform, had around 10,000 users, and the company controlled 20 percent of the virtualization market. While positioning the cloud as something ultimately beneficial for IT departments-mostly as something that could remove much of the cost and complexity associated with administration-he suggested that Microsoft’s cloud services came with its own particular brand of internal challenge.
“When customers put their data in our system,” Ballmer said, “when they entrust more and more of their data and operations to us, there’s the need to do a better job on reliability, security, privacy.”
Ballmer is also due to speak at the Financial Analyst Meeting, where he will reportedly describe Microsoft’s more consumer-oriented strategy.
Despite Microsoft’s touting of the cloud, the company still depends on its traditional products to supply the lion’s share of its revenue. During its July 22 earnings call, Microsoft reported quarterly revenues of $16.04 billion, thanks in large part to software such as Windows 7 and Office. However, Azure did not contribute significantly to that bottom line, and it will likely be some time before Microsoft sees substantial revenue from its business-centric cloud initiatives.
“On the Azure side, it’s early,” Microsoft Chief Financial Officer Peter Klein told analysts and media during the earnings call. “It’s not material to the financials this year.”