By Leslie D'Monte, The Mint
Investors and analysts are clearly on cloud nine with the sharp growth in Microsoft Corp.’s commercial cloud computing business, which also helped the company up its overall quarterly revenue to delight Wall Street.
The results indicate that Satya Nadella, chief executive officer of Microsoft, is on the right track while phasing out some of the legacy decisions he inherited from former chief executive officer Steve Ballmer. The moves include getting rid of Nokia’s phone business, which was hardly surprising, given that the global market share of Windows smartphones fell below 1% in the first quarter of 2016, according to research firm Gartner Inc.
Other important steps that Nadella has taken include warming up to Linux and everything that is open source; joining hands with the world’s largest open Internet of Things (IoT) standard group with other founding members including Cisco Systems Inc,, General Electric Co., Intel Corp., and Samsung Electronics Co. Ltd—a move expected to help the world’s largest software maker to position Windows 10 as an OS platform for IoT and the Azure IoT platform to be its cloud companion; and agreeing to buy LinkedIn Corp. for $26.2 billion.
The LinkedIn buy will help Microsoft strengthen its real-time cloud-based unified communications (UC) suite for enterprises even though its earlier acquisitions of similar companies like Lync, Yammer and Skype indicate that integration with the professional networking site will hold key to a successful outcome.
Microsoft, meanwhile, is simultaneously scaling up partnerships with former rivals like International Business Machines Corp. (IBM) and Salesforce.com Inc.
The Redmond-based software leader, which kicked off its annual Worldwide Partner Conference in Toronto this week, has already announced a new collaboration with General Electric (GE) focused on the industrial cloud. The plan is to make GE’s Predix platform available on Microsoft Azure. The goal of this project is to help customers collect data from industrial assets and use Microsoft’s enterprise cloud apps. It also signifies a major step forward for companies as they navigate the rapid growth of IoT.
Microsoft has also teamed up with IBM and Booz Allen Hamilton as part of an extension on its Surface Enterprise Initiative, wherein both organizations plan to create industry-specific solutions for Windows 10 on Surface.
IBM will leverage its expertise in analytics and enterprise apps to create software for businesses in the financial services and consumer packaged goods (CPG) industries. Booz Allen Hamilton will build secure solutions for businesses in government, the public sector, and the healthcare industry. It aims to address these organizations’ specific needs related to app security and compatibility.
Nadella, who took charge of Microsoft as its chief executive officer on 4 February 2014, made an important shift when the world’s biggest software company introduced its new OS, Windows 10, on the cloud last July. Labelled “Windows as a service”, the company now provides free upgrades. Microsoft has also assured users that it will keep the new OS updated for the supported lifetime of a device for free.
It was Microsoft’s bid to retain its edge, and stay relevant in a world where consumers are increasingly doing more personal and official work on mobile devices, such as smartphones, tablets and phablets, which run on Google Inc.’s Android, a free operating system, and Apple Inc.’s iOS, rather than on desktops and laptops, most of which run on Microsoft’s Windows OS. Today, Microsoft’s office suite already runs on rival Apple’s iOS and Google’s Android OS devices.
Similarly, when Nadella was down in India in November 2015, he indicated that he wants Microsoft to help companies reinvent their productivity and business processes with the help of tools like OneNote, Windows 10 and Office 365; build an intelligent cloud with the help of Azure; and introduce new types of computers such as the Surface Pro tablet, wearables such as Microsoft Band and mixed reality gadgets such as HoloLens.
He also pointed out, then, that Microsoft was already using Windows 10, and Cortana (Microsoft’s digital assistant that uses Machine Learning and competes with Apple Inc.’s Siri and Google’s Now) and Skype are really integrating e-commerce capabilities of companies like Snapdeal and Paytm in the country.
Microsoft believes that with these changes, it is ushering in an “era of personal computing” but the moves were clearly prompted by intense competition from technology firms like Apple Inc., Google Inc., Hewlett-Packard Corp. and IBM, both in the consumer and business segments.
The setting up of data centres in India makes it evident that the Indian market is vital to Microsoft’s success, especially given that the company completed 25 years in the country last year. According to a 10 May report on the public cloud market by research firm Forrester, there are six leading services providers, with Amazon Web Services (AWS), Google Inc, IBM, Microsoft, and Salesforce.com capturing most of the revenue.
Cloud computing, or the ability to deliver services over a network like the Internet, has traditionally been perceived as a technology solution to save costs on storage and speed up delivery of services. Everything from spreadsheets to enterprise resource planning, customer relationship management (CRM) and payroll software, is now available in the cloud on a subscription (Software-as-a-service, or SaaS) basis. This is prompting companies to buy services rather than install their own servers, leading to a growth in infrastructure-as-a-service (IaaS) and platform-as-a-service (PaaS) to build apps on this leased infrastructure.
In today’s digital world, cloud is also an important enabler for developing Internet of Things (IoT) services, increasing the use of mobility or even creating new customer experiences.
It’s not surprising, then, that technology companies now want users to see the cloud as intelligent or smart, and one that can power advanced services like machine learning, or using statistical models to analyse data, and IoT. By 2018, half of all consumers will interact with services based on cognitive computing on a regular basis, according to research firm International Data Corp.
However, Microsoft faces stiff competition. Amazon.com Inc. pioneered the concept of the cloud about a decade ago with AWS. Its cloud business, which counts Netflix among its biggest customers, continues to do well, and is expected to garner $10 billion in revenue this year. AWS counts about 75,000 Indian start-ups and enterprises among its customers.
To allow these firms to run their technology applications from the AWS cloud infrastructure in India, and provide even lower latency to India-based end-users while retaining data sovereignty, the company announced a cloud hub in Mumbai on 29 July, its sixth in the Asia-Pacific region.
Microsoft, though, was the first public cloud provider to offer services from data centres in India. The company announced the availability of its three data centres located in Mumbai, Pune and Chennai in September 2015. The company has a complete portfolio of cloud services—Microsoft Azure, Office 365 and Dynamics CRM Online.
Microsoft and its partners use tools such as Azure Machine Learning, Azure Analytics, Power BI (business intelligence) among others, to develop solutions that have been deployed across verticals like retail, e-commerce and banking. In the first six months of launching cloud services through local data centres, Microsoft says it has seen 50 of the top 100 firms listed on BSE adopt its cloud to drive digital transformation of their businesses.
Microsoft on Wednesday said it hopes to see its cloud business grow in the coming year. Analysts, investors and competitors will be watching closely.
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©2016 the Mint (New Delhi). Distributed by Tribune Content Agency, LLC.
