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

Sorry, comments are closed for this post.

Are You SURE You Are Ready For The Cloud? Cloud Readiness

Are You SURE You Are Ready For The Cloud? Cloud Readiness

Cloud Readiness Over the last three months, we have discussed the reasons why you may have wanted to move to the cloud.  Maybe the decision wasn’t yours to be made in the first place?  Either way, you are now getting ready to start down that road of cloud enlightenment! (Image source: Shutterstock) The question is,…

Are You Sure You Are Ready For The Cloud?: Cloud as a Datacenter

Are You Sure You Are Ready For The Cloud?: Cloud as a Datacenter

Cloud as a Datacenter Through my job as a Cloud Architect during the day, I run into a lot of scenarios that I think would be important to write about. Not that they are of major importance to others, but a way for people to learn from real world experience. This month, it had to…

Basic Cloud Risk Assessment Tips

Basic Cloud Risk Assessment Tips

Basic Cloud Risk Assessment You should worry about the risks of cloud computing. But don’t get too scared. With a few simple steps you can easily get a basic understanding of your risks in the cloud and even have a good start in managing these risks. If you are a large corporation in a regulated…

5 Companies That Took On The Small Business Cloud – And Won

5 Companies That Took On The Small Business Cloud – And Won

The Small Business Cloud We take a look at 5 world-leading tech companies that have brought ground-breaking new cloud services to SMEs  Plenty of organisations have broken into new markets with innovative cloud-based products. Discover which companies have successfully taken on the small business Cloud. Cloud based computer systems are ideally suited to support the…

Cyber Physical Systems (CPS) And BYOD Security

Cyber Physical Systems (CPS) And BYOD Security

Cyber Physical Systems (CPS)  Technology has changed the world radically. But, to date, the world hasn’t changed as fast as technology to. There are a couple of concepts that are concerning as we head into the reality of CPS-deployed systems. The first is that standards don’t exist. Many companies are considering the Bring Your Own…

New Smartphones From Apple, Samsung and HTC Promise To Light Up 2016

New Smartphones From Apple, Samsung and HTC Promise To Light Up 2016

New Smartphones from Apple, Samsung and HTC (Sponsored post courtesy of Verizon Wireless) The launch of the Galaxy S7 Edge at the Mobile World Congress in Barcelona during February was the first shot in a vintage year for mobile phones. The S7 is an incredible piece of hardware, but launches from HTC and Apple later in the…

Featured Sponsored Articles
How Successful Businesses Ensure Quality Team Communication

How Successful Businesses Ensure Quality Team Communication

Quality Team Communication  (Sponsored post courtesy of Hubgets) Successful team communication and collaboration are as vital to project and overall business success as the quality of products and services an organization develops. We rely on a host of business tools to ensure appropriate customer interactions, sound product manufacturing, and smooth back-end operations. However, the interpersonal relationships…

Featured Sponsored Articles
How To Develop A Business Continuity Plan Using Internet Performance Management

How To Develop A Business Continuity Plan Using Internet Performance Management

Internet Performance Management Planning CDN Performance Series Provided By Dyn In our previous post, we laid out the problems of business continuity and Internet Performance Management in today’s online environment.  In this article, we will take a look at some of the ways you can use traffic steering capabilities to execute business continuity planning and…

Featured Sponsored Articles

CloudTweaks is recognized as one of the leading influencers in cloud computing, infosec, big data and the 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.

Sponsor