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Is Microsoft Taking A Risk By Putting All Its Eggs In The Cloud Computing Basket?

Is Microsoft Taking A Risk By Putting All Its Eggs In The Cloud Computing Basket?

“A ship is safe in harbor, but that’s not what ships are for.”
– William Shedd (1820-1894), American Presbyterian Theologian.

Risk-taking is a requirement for business; unless, a business takes risks, it cannot sustain its competitive advantage, and without a competitive advantage, it will soon fall by the wayside. History is witness to several companies that were once stalwarts in their field but are now limping, or have dropped out of the race completely.

Therefore, Microsoft’s decision to invest in cloud computing, in spite of its dominant presence on computers across the world through its Windows operating system and Office suite, didn’t come as a surprise. In time, its Azure platform became one of the best products in the cloud computing space. However, Microsoft’s recent decision has certainly raised eyebrows.

Last week, Microsoft president Jean-Phillipe Courtois announced that the company will be spending 90% of its research budget on improving cloud computing technologies. Since Microsoft’s annual R&D budget this year is $9.6 billion, this investment translates to a massive $8.6 billion.

While this is certainly a shot in the arm for cloud computing as a whole, I believe that Microsoft may be putting all its proverbial eggs in one basket. While I am all for the massive potential of cloud computing, as my numerous supportive articles will attest, I have always presented a cautionary stance, as with my observations on IBM’s optimistic projections (See: IBM expects to generate $7 billion in cloud computing revenues by 2015: CEO ).

Make no mistake; I believe that cloud computing is the technology of and for the future. But allocating 90% of the research budget on an emerging technology without paying adequate attention to established products in which it has dominance is too big a risk in my book. Especially since that dominance is under threat, with the rise of Firefox and Chrome against the Microsoft Internet Explorer, and the growing popularity of Linux versus Microsoft Windows.

I believe there may be a sense of hubris in the way Microsoft is neglecting its established revenue lines. While its Windows still powers more than 80% of the computers in the world, there are several complaints against the operating system. In fact, many would argue that a lot of that $9.6 billion R&D should have been allocated to making the next edition of Windows bug-free, resource-light and malware-resistant.

Now, Microsoft may have its own reasons for this decision. It did commission a survey that showed the overwhelming rise of cloud computing in the next few years (See: Microsoft Study Says 40% of SMBs to Go on Cloud within 3 Years), and HP’s recent entry in the market may also have given it cause (See: HP Declares Ambitious Plans in Cloud Computing Space).

Moreover, as I had pointed out earlier, cloud computing is not the panacea to all IT ills, and hence, not all companies will move to the cloud en masse (See: How to Avoid a Cloud Computing Gold Rush ). Combine this with recent well-publicized failures and data breaches and the problem multiplies (See: What Effect Will the Epsilon Data Theft have on Cloud Computing? and Gmail Outage – Is Cloud Computing To Blame?).

In conclusion, I believe Microsoft is taking on a big risk here; however, big risks sometimes do translate into bigger profits. What’s in store for Microsoft, only time will tell.

By Sourya Biswas


Sourya Biswas is a former risk analyst who has worked with several financial organizations of international repute, besides being a freelance journalist with several articles published online. After 6 years of work, he has decided to pursue further studies at the University of Notre Dame, where he has completed his MBA. He holds a Bachelors in Engineering from the Indian Institute of Information Technology. He is also a member of high-IQ organizations Mensa and Triple Nine Society and has been a prolific writer to CloudTweaks over the years...

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