Microsoft’s Biggest Client, or Just a PR Stunt? – Part I
On April 13, Reuters ran a news item where “Microsoft announced its biggest-ever customer for cloud computing – software that it hosts on behalf of clients and delivers over the Internet – after winning a contract to provide free services to the All India Council for Technical Education (AICTE)” (). Now, the first thing that struck me was the word “free” and left me thinking, “Does this truly make the AICTE Microsoft’s biggest client, or is this just a PR stunt full of fluff with no solidity?”
I looked up the definition of the word “customer” on dictionary.com. Out of the many alternate definitions available, including the expected one of “a person who purchases goods or services from another,” I found the word “patron,” which in turn was defined as “a person whose support or protection is solicited.” In other words, perhaps a transaction where no money is changed hands can also have a customer if the latter’s support is desired. That set me thinking that Microsoft can actually benefit considerably from this deal.
First, a little background information on the news item in question. The AICTE, a part of India’s Ministry of Human Resource Development, is the umbrella body that supervises the operations of engineering institutions throughout the country. Under the terms of the deal, Microsoft would provide its cloud-based Live@edu communication and collaboration software to more than 7 million students and half a million teachers in engineering colleges across India. The software suite includes email, Microsoft Office Web Apps, instant messaging and storage. Students will get 10GB of storage space and email IDs customized to the institutions at which they study, according to Microsoft.
Now, here’s the interesting part. Live@edu, as per its website, is “transitioning into Office 365 for Education.” As the news goes, AICTE also plans to deploy this new suite “when it becomes available later this year, providing access to email, shared calendars, instant messaging, video conferencing and document collaboration through applications such as the Exchange Online email and calendar, SharePoint Online, Lync Online and Office Professional”. And most conveniently, as a Microsoft spokesperson said, “some of the higher-level, newer services on Office 365 for education may come with a price.”
This brought to my mind the Gillette Razorblade Model where the razor is sold at cost or even a loss, with sales on high-margin blades bringing in the cash. Building on this idea, basic software may be provided for free to attract users, and then money earned through incremental sales of advanced applications. This is definitely a possibility here. While the current software suite, with basic functionality, is offered for free, AICTE or even individual colleges may be charged for advanced functionality. Moreover, if they feel that they are getting value out of Microsoft cloud services, they will be more amenable to paying for something more.
For some other possibilities, read the concluding part Microsoft’s Biggest Client, or Just a PR Stunt? – Part II.
By Sourya Biswas
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