3 Reasons (Network Effect, Dual User Effect, Cross Platforming) Microsoft might be the biggest gainer in a mobile-first, cloud-first environment!
If you were to bet on one company for being the best in IaaS and PaaS leadership, it ought to be Microsoft. Here's why:
1. Network Effect: There is the evergreen argument that the PC is dying so MSFT may soon see its market share decline but quite contrary would be the direction. It is easier for MSFT to move its solutions to the cloud and become a Platform Services provider for its existing large customer base and retain that base, rather than for a new entrant to come in and develop office solutions afresh on the cloud and acquire new customers. Granted MSFT has lagged a little bit in getting its Azure Cloud Service out but the fact that Azure is being used by half of the fortune 500 companies means the supply chain that supports these large enterprise companies would need to run Azure cloud as well. Competitors such as Google are simply not present in the enterprise segment or others such as Amazon Web Services despite having the leading market share in cloud deployments, simply lack the holistic support services and work group familiarity that enterprises need. There we go, the network effect all over again.
2. Dual User effect: Almost everyone in the world works for some employer or the other. That's how our societies are structured. Besides the creative artistes community, most other businesses use Microsoft devices and Software. When someone in the family works for a company, that entire family tends to go with wireless family plans and devices that are consistent with one another, and is largely used by the breadwinners in the family. Windows phones and Surface tablets, hence become pivotal customer interface points and entry portals into winning platform market share with the non-office customer, the regular joe. If the office manager can be convinced to be on a Windows phone or tablet because that is the ONLY seamless way to be able to connect with Office 365 and Azure tools, then the follow on effect could be simply to gain market share in the consumer market as well owing to the family plan effect. Further, the XBOX franchise can be successfully utilized to promote MSFT first party devices via unique,interactive, industry leading technology native to only Windows ecosystems. As an example, GUIs of various MSFT software can be tweaked to take advantage of XBOX GUIs and other gaming technologies, bringing familiarity across ecosystems.
3. Cross Platforming of MS Office productivity tools: In keeping with the new CEO Satya Nadella's vision, Microsoft has turned into a platform agnostic vendor. This means today MS Office is available on iOS (iPhones and iPad) and Windows and SQL Server Virtual Machines can be run on Amazon Web Services environment. What MSFT needs to do is find ways to differentiate its cloud pricing from AWS' pricing semantics. AWS is frantically finding ways through regularly optimizing infrastructure to shave off whatever dollars it can find. AWS also has introduced on demand and reserved capacity pricing that really bring down the costs but the question to be asked is whether these are Enterprise grade solutions. My prior interaction with AWS sales people and pricing team did not give me the confidence that AWS is geared up for Enterprise/MNCs and Mid-Market companies. Its strategy works great for small businesses and emerging market companies. But this segment does not result in any great profitability. While AWS might bet on the fact that building an SMB ecosystem could percolate to larger profitable customers due to the network effect, I believe the opposite is true - adoption by larger companies might drive adoption by smaller companies. Microsoft, however, must build robust Azure offerings for the small business segment as well and this could be done through leveraging the mobile devices subscriber accounts. Amazon in the meantime has come out with its own first party phone device and has Kindle but I believe these platforms would not fully bring out the power of the cloud like Microsoft's Nokia devices and the Surface tablets do.
A leaner, quicker, energy efficient Microsoft can still do wonders for the global office productivity market and select first party devices markets. Microsoft, I believe, has the largest and most reliable number of customer interface points than Google or AWS, and hence is rightly positioned for revenue share success in the new age.
1. Network Effect: There is the evergreen argument that the PC is dying so MSFT may soon see its market share decline but quite contrary would be the direction. It is easier for MSFT to move its solutions to the cloud and become a Platform Services provider for its existing large customer base and retain that base, rather than for a new entrant to come in and develop office solutions afresh on the cloud and acquire new customers. Granted MSFT has lagged a little bit in getting its Azure Cloud Service out but the fact that Azure is being used by half of the fortune 500 companies means the supply chain that supports these large enterprise companies would need to run Azure cloud as well. Competitors such as Google are simply not present in the enterprise segment or others such as Amazon Web Services despite having the leading market share in cloud deployments, simply lack the holistic support services and work group familiarity that enterprises need. There we go, the network effect all over again.
2. Dual User effect: Almost everyone in the world works for some employer or the other. That's how our societies are structured. Besides the creative artistes community, most other businesses use Microsoft devices and Software. When someone in the family works for a company, that entire family tends to go with wireless family plans and devices that are consistent with one another, and is largely used by the breadwinners in the family. Windows phones and Surface tablets, hence become pivotal customer interface points and entry portals into winning platform market share with the non-office customer, the regular joe. If the office manager can be convinced to be on a Windows phone or tablet because that is the ONLY seamless way to be able to connect with Office 365 and Azure tools, then the follow on effect could be simply to gain market share in the consumer market as well owing to the family plan effect. Further, the XBOX franchise can be successfully utilized to promote MSFT first party devices via unique,interactive, industry leading technology native to only Windows ecosystems. As an example, GUIs of various MSFT software can be tweaked to take advantage of XBOX GUIs and other gaming technologies, bringing familiarity across ecosystems.
3. Cross Platforming of MS Office productivity tools: In keeping with the new CEO Satya Nadella's vision, Microsoft has turned into a platform agnostic vendor. This means today MS Office is available on iOS (iPhones and iPad) and Windows and SQL Server Virtual Machines can be run on Amazon Web Services environment. What MSFT needs to do is find ways to differentiate its cloud pricing from AWS' pricing semantics. AWS is frantically finding ways through regularly optimizing infrastructure to shave off whatever dollars it can find. AWS also has introduced on demand and reserved capacity pricing that really bring down the costs but the question to be asked is whether these are Enterprise grade solutions. My prior interaction with AWS sales people and pricing team did not give me the confidence that AWS is geared up for Enterprise/MNCs and Mid-Market companies. Its strategy works great for small businesses and emerging market companies. But this segment does not result in any great profitability. While AWS might bet on the fact that building an SMB ecosystem could percolate to larger profitable customers due to the network effect, I believe the opposite is true - adoption by larger companies might drive adoption by smaller companies. Microsoft, however, must build robust Azure offerings for the small business segment as well and this could be done through leveraging the mobile devices subscriber accounts. Amazon in the meantime has come out with its own first party phone device and has Kindle but I believe these platforms would not fully bring out the power of the cloud like Microsoft's Nokia devices and the Surface tablets do.
A leaner, quicker, energy efficient Microsoft can still do wonders for the global office productivity market and select first party devices markets. Microsoft, I believe, has the largest and most reliable number of customer interface points than Google or AWS, and hence is rightly positioned for revenue share success in the new age.
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