2015 Advertising Opportunities - Find Out More!

Can Cloud Computing Be Bad For Microsoft?

Can Cloud Computing Be Bad For Microsoft?

Microsoft and Cloud Computing share a strange relationship. On one hand, Cloud Computing threatens Microsoft’s dominance in the personal computing space through its Windows OS and Office suite; on the other hand, Microsoft accepts the inevitable progress of Cloud Computing and is investing considerable resources in that space – some may even argue, a bit too much (See: Is Microsoft Taking A Risk By Putting All Its Eggs In The Cloud Computing Basket?). Now, analysts have started asking questions whether cloud computing can be bad for Microsoft’s bottom line.

According to Goldman Sachs analyst Heather Bellini speaking to Bloomberg, lower profit margins in cloud computing will adversely affect the company’s overall bottom line. This view is seconded by Jason Maynard from Wells Fargo Securities who said that Microsoft may not be able to produce outsized margins like before (See: Microsoft Shrinking Margins Loom as Cloud Push Lifts Costs: Tech). “Nothing will ever be as high as the old model,” Maynard said.

Forbes has laid out Microsoft’s problem clearly in its feature titled Cloud Could Rain On Microsoft’s Profit Parade. “Microsoft has traditionally enjoyed very high operating profit margins on its enterprise software products like the Office suite as the incremental costs of producing one more copy of the software are very low. However, hosting software on servers in its data centers and offering it over the cloud is more expensive than simply selling packaged software as it incurs operating cost throughout the usage period,” it says.

Moreover, it’s not only cloud computing that’s hurting Microsoft’s margins. The company’s bestselling X-Box gaming consoles, though bringing in revenue dollars, are considerably more expensive to manufacture than software, thereby affecting profitability. Thus, although top line growth is happening, the bottom line has been taking a beating, and will continue to in the foreseeable future. Only if Microsoft manages to get more customers for its cloud computing offerings can it generate economies of scale to improve margins.

Now, we come back to the question posed in the title of this article: can cloud computing be bad for Microsoft? If we consider that the technology is affecting the company’s stranglehold on enterprise software, then it certainly is. However, that does not mean that Microsoft wash its hands off cloud computing. If it did, it may very well end up as the Kodak of its age. Even with the reduced profit margins, it makes sense to have a prominent presence in cloud computing. After all, a smaller share of a growing pie is better than a larger share of a shrinking one. This has resulted in Microsoft becoming, as I stated in an earlier article, “Cloud Computing’s Unlikeliest Supporter” (See: Cloud Computing’s Unlikeliest Supporter).

By Sourya Biswas

sourya

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... http://www.cloudtweaks.com/author/sourya/

2 Responses to Can Cloud Computing Be Bad For Microsoft?

  1. I guess we can all see that the cloud is here, and here to stay. Microsoft need to make sure they adapt and go with the times. We live in a very different computing world than we had 15 years ago. Microsoft do not want pull off a ‘Kodak’. I’m sure they want let that happen….. http://ow.ly/8wwcl

Comics

At CloudTweaks, we're plugged into the cloud, the internet of things and all that the web has to offer. From wearable technology, to mobile computing, cloud computing and big data, CloudTweaks is your source for updates and news on the most innovative technology.

Popular

Top Viral Impact

The Future Of Work: What Cloud Technology Has Allowed Us To Do Better

The Future Of Work: What Cloud Technology Has Allowed Us To Do Better

The Future of Work: What Cloud Technology Has Allowed Us to Do Better The cloud has made our working lives easier, with everything from virtually unlimited email storage to access-from-anywhere enterprise resource planning (ERP) systems. It’s no wonder the 2013 cloud computing research IDG survey revealed at least 84 percent of the companies surveyed run at…

Using Big Data To Make Cities Smarter

Using Big Data To Make Cities Smarter

Using Big Data To Make Cities Smarter The city of the future is impeccably documented. Sensors are used to measure air quality, traffic patterns, and crowd movement. Emerging neighborhoods are quickly recognized, public safety threats are found via social networks, and emergencies are dealt with quicklier. Crowdsourcing reduces commuting times, provides people with better transportation…

5 Considerations You Need To Review Before Investing In Data Analytics

5 Considerations You Need To Review Before Investing In Data Analytics

Review Before Investing In Data Analytics Big data, when handled properly, can lead to big change. Companies in a wide variety of industries are partnering with data analytics companies to increase operational efficiency and make evidence-based business decisions. From Kraft Foods using business intelligence (BI) to cut customer satisfaction analysis time in half, to a…

BYOD Will Continue To Define Workplaces In 2014

BYOD Will Continue To Define Workplaces In 2014

BYOD Will Continue To Define Workplaces In 2014 The bring-your-own-device trend has been the subject of scrutiny ever since its initial formation. Given how quickly personal smartphones and tablets became a fixture in everyday life, it makes perfect sense that these mobile machines would slip into workplaces. While BYOD has caused headaches for many businesses,…

Cloud Infographic – The Power Of Cloud Disaster Recovery

Cloud Infographic – The Power Of Cloud Disaster Recovery

Cloud Infographic – The Power Of Cloud Disaster Recovery Preventing a Cloud Disaster is one thing. Recovering from a disaster is a whole other area of concern. Today’s infographic provided by CloudVelox outlines some best practices and safeguards in order to help your business make more informed decisions. About Latest Posts souryaSourya Biswas is a…

Featured Sponsors

Watching You Shop: Stores And Mannequins “Read” Their Customers And Respond

Watching You Shop: Stores And Mannequins “Read” Their Customers And Respond

Watching You Shop The mannequin in the store window stares blankly ahead as shoppers look at the clothes it is dressed in and contemplate a purchase. One shopper makes some comments. “It’s nice. I wonder if they have my size.” Another takes a few steps inside the store to see where these particular clothes might…

Cloud Logo Sponsors

hp Logo CityCloud-PoweredByOpenstack-Blue square_logo_100x100-01
cisco_logo_100x100 vmware citrix100

2015 Advertising Opportunities - Find Out More!

Established in 2009, CloudTweaks is recognized as one of the leading influencers in cloud computing, big data and internet of things (IoT) information. Our goal is to continue to build our growing information portal, by providing the best in-depth articles, interviews, event listings, whitepapers, infographics and much more.

Contact

CloudTweaks Media
Phone: 1 (212) 763-0021

Join Our Newsletter