The past 60 days or so have shown a wave of changes at Microsoft. But are they enough to maintain interest by enterprise customers that Microsoft has long since courted…and counted on for the bulk of their revenue?
Revenue Breakdown
About a third of Microsoft’s revenue comes from their Business Division. A quarter comes from their Server and Tools Division and another quarter from their Business Division. The rest of the software giant’s $77.8 billion in revenue comes from Entertainment and Online Services (ie: Bing & MSN). Revenue from Microsoft’s Azure cloud service falls under their Server and Tools Division while their Office 365 cloud service falls under the Business Division category. The question is: Can Microsoft shift gears to replace diminishing traditional software with services such as 365 and Azure. In order to answer that question, Microsoft’s cloud strategy becomes front and center.
New CEO at the Helm
Next year will mark Microsoft’s 40th anniversary since their founding in 1975. Roughly 60 days ago, Microsoft announced a new CEO, Satya Nadella. Nadella is only the third CEO to lead Microsoft during their almost 40-year history. A long time Microsoft employee of over 20 years, Nadella has lead different parts of the organization most recently leading Microsoft’s Cloud and Enterprise Group. It is this last assignment that may be the most critical to his (and Microsoft’s) success moving forward.
Microsoft’s Halo is Strong
No, not that Halo. The halo effect from Microsoft’s existing enterprise business and relationships is strong and not expected to erode any time soon. In order to understand this further, one can look at the percentage of desktop operating system (OS) market share that Microsoft currently commands.
Credit: The Next Web
Beyond desktop operating systems, Microsoft is still the dominant player in the productivity suite…by a long margin.
Credit: Forrester
Desktop OS and Productivity Suite are foundational to any enterprise customer. The relationship Microsoft garners with enterprise customers is strong and wide. And the value of those relationships is a gold mine that any provider today would kill to have. The question really comes back to Microsoft’s ability to convert customers from traditional software users to next generation users of cloud and mobile centric solutions.
The End of the XP Era
Well, not really. Yes, Microsoft ends support tomorrow for XP, but there is still quite a bit of the XP operating system in use between corporate systems and embedded within products. According to many, XP’s percent of desktop market share still hovers near 30%. It will take quite a while (read: years) to completely replace those systems. In the meantime, expect to see an increase in compromises through those unprotected systems.
Turning a Battleship in a Bathtub
Bringing in a new CEO that appreciates both Microsoft’s history and the new cloud centric world was a key move for Microsoft. If there was a time for Microsoft to change, now is that time. At the recent BUILD conference, Microsoft expressed their understanding of the importance from cloud and mobile. With Nadella at the helm charged with a background in cloud, the next few months will be critical to prove his ability to start the transformation of a giant. Customers will want to watch Microsoft’s next moves closely as it should set both the tone and cadence of future moves.