The Lighter Side Of The Cloud – The 80s
The Lighter Side Of The Cloud – Cloudier
The Lighter Side Of The Cloud – The Cloud Lecture
The Lighter Side Of The Cloud – Brain Cramp

Can Cloud Computing Be Bad For Microsoft?

Can Cloud Computing Be Bad

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. “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”.

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/

One Response 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

FREE! POPULAR RESEARCH TOOLS

Popular Archives

Cloud Infographic – Guide To Small Business Cloud Computing

Cloud Infographic – Guide To Small Business Cloud Computing

Small Business Cloud Computing Trepidation is inherently attached to anything that involves change and especially if it involves new technologies. SMBs are incredibly vulnerable to this fear and rightfully so. The wrong security breach can incapacitate a small startup for good whereas larger enterprises can reboot their operations due to the financial stability of shareholders. Gordon Tan contributed an…

Cloud Computing Services Perfect For Your Startup

Cloud Computing Services Perfect For Your Startup

Cloud Computing Services Chances are if you’re working for a startup or smaller company, you don’t have a robust IT department. You’d be lucky to even have a couple IT specialists. It’s not that smaller companies are ignoring the value and importance of IT, but with limited resources, they can’t afford to focus on anything…

Recent

Cloud Infographic – Top Vulnerable Applications

Cloud Infographic – Top Vulnerable Applications

Top Vulnerable Applications  As you use the Internet on a daily basis, you probably come across cyber security topics, but rarely glance at them twice. After all, cyber security threats don’t concern you, right? Well, that’s not exactly true. Cyber attacks are more widespread than you can imagine and they may be targeting your devices as…

The Lighter Side Of The Cloud – Whatever Happened To Alone Time?

The Lighter Side Of The Cloud – Whatever Happened To Alone Time?

By David Fletcher Are you looking to supercharge your Newsletter, Powerpoint presentation, Social media campaign or Website? Our universally recognized tech related comics can help you. Contact us for information on our commercial licensing rates.  About Latest Posts souryaSourya Biswas is a former risk analyst who has worked with several financial organizations of international repute,…

MOST RECENT - Posted by
New Trends In Cloud Based Education

New Trends In Cloud Based Education

Cloud Based Education With technological progress accelerating and users’ computer experience becoming richer and increasingly complex, the future developments in education technology is very exciting. Students are now able to attend demonstration sessions on how to handle technology through remote laboratories using advanced applications in a truly interactive environment. One of these exciting areas is in telemedicine.…

The Many Hats Of Today’s IT Managers

The Many Hats Of Today’s IT Managers

The Many Hats of IT Managers In years past, the IT department of most large organizations was much like a version of Middle Earth: a mysterious nether world where people who seemed infinitely smarter than the rest of us bustled around, speaking and typing languages that appeared indecipherable, yet, which made our world work. They…

Selling Your Business To Your Employees

Selling Your Business To Your Employees

Mobility For Your Employees It may seem a radical notion, the idea of selling your business to the people who work for you, but this is the era in which we now work. Employees of all levels are all incredibly aware of their options when it comes to mobility and employability. This doesn’t mean that…

Technology Sponsors

hp Logo CityCloud-PoweredByOpenstack-Bluesquare_logo_100x100-01
cisco_logo_100x100 vmware citrix100
Site 24x7 200px-KPMG
Advertising ROI Plans

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.

CloudTweaks Comic Library

Advertising