News

Microsoft's Business Strategy Depends on Hooking Consumers to the Cloud

• By Kurt Mackie
• 05/21/2014

Microsoft's current marketing strategy is to drive its enterprise businesses by creating cloud-based solutions that will stick with consumers.

At least that was the view expressed by Judson Althoff, president of Microsoft North America. He spoke to financial analysts and investors at the JPMorgan Technology, Media and Telecom Conference on Tuesday in Boston. A recording is available here.

Althoff, citing early comments by Microsoft's new CEO Satya Nadella, said that Microsoft is creating "virally consumable cloud services" for consumers that will be recognized as having value for business customers.

"So you will see us continue to invest in the consumer side of our business but with much more focus on consumption-oriented cloud services that accrue towards commercial value in the enterprise and that sort of kind of create that brand loyalty and customer loyalty and stickiness of the services long run, with a focus again on growing our commercial businesses," Althoff said, according to a transcript by Seekingalpha.com.

Those consumer efforts are leveraging the "freemium" marketing model. Examples include Microsoft's OneNote application, OneDrive cloud storage solution and Skype videoconferencing service, according to Althoff. Consumers or college students get the experience of using those free applications and then expect to see the same capabilities in a business environment, he explained.

Althoff noted that Microsoft's release of Office for iPad has helped "to drive consumption of Office 365 for our enterprise customers" because the licensing lets individuals run the software on "a tablet form factor and a PC laptop form factor."

As for Microsoft's devices and platform strategy, Microsoft intends to put more of its cloud services efforts toward supporting the devices that have the greatest share of eyeballs. Althoff didn't use the word, "Android," in that explanation, but that Google-fostered operating system currently holds the greatest OS market share, followed by Apple's iOS.

Microsoft sees IT growth happening in three areas: multiple devices and form factors, cloud services and the explosion of data. The cloud is viewed as being long-term bet for Microsoft. Althoff said that "Office 365 is now at $2.5 billion run rate" and that 50 percent of Microsoft's enterprise customers had moved to Office 365. He added that Microsoft had doubled its Azure and CRM businesses.

In the database market, Microsoft has seen 15 percent growth, year over year. SQL Server 2014 has the ability to run enterprise workloads that previously just could be run using Oracle or IBM products or Unix systems, Althoff contended. Microsoft is planning to ramp up the data side of its business during its next fiscal year, which starts in July. Those efforts will center on SQL Server 2014's in-memory capabilities and Hadoop "big data" support via Windows Azure HDInsight.

Microsoft also plans to expand on Microsoft Azure support for enterprise applications. Althoff pointed to the company's recently announced support for SAP applications, as well as support for Oracle's solutions, as examples.

The "One Microsoft" reorganization announced last year has already changed the company, according to Althoff. Microsoft now focuses its marketing message on delivering value to organizations, instead of selling product silos. The example Althoff provided was offering a social networking solution that works across a CRM system to provide "tangible business value."