Paul Wallbank – Brilliant Communications

Tag: microsoft

  • A dog fight in the clouds

    A dog fight in the clouds

    “Productivity is our life blood,” says John Case, Microsoft’s Corporate VP for the company’s Office product line. “It’s part of the company that we say is our mission.”

    Case was speaking at a media briefing ahead of Microsoft’s launch of their Australian Cloud Solution Provider program for resellers with the company making the case for integrators and IT support businesses to sell the Microsoft Cloud Services.

    For Microsoft this is part of the evolution from the 1990s “PC on every desk” strategy to a mobile and cloud first service.

    This shift doesn’t come without pain for Microsoft and it’s resellers, the cloud is a fiendishly competitive space with Amazon regularly dropping prices and Google steadily eating into the productivity suite market.

    Making matters worse for Microsoft are that Google are moving into their hosted server space with the announcement that Google’s Cloud Platform now supports Microsoft Server.

    Case though is sanguine though about the threats from Google, particularly the increased commissions being paid to resellers which will only put more pressure on Microsoft as resellers consider the options.

    Probably the toughest part of the shift for Microsoft are the reduced margins – although for resellers the change is far more wrenching as the profits from cloud services are far lower than installing servers.

    For Microsoft the key to success in the cloud depends upon the confidence of customers; security and trust are going to make and break all cloud services, something that Case acknowledges.

    Ultimately though Case sees Microsoft’s network of resellers and partners as being the company’s best defense against Google and the shift to the cloud. Whether that network is strong enough to overcome a structural shift in the market place remains to be seen.

    Productivity may be the lifeblood of Microsoft’s business but as margins erode, it may be that that market is not longer lucrative enough to sustain a $400 billion dollar business. Microsoft’s fight for survival is on in the cloud.

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  • The mobile payments industry has a USB moment

    The mobile payments industry has a USB moment

    Has Apple Pay legitimised mobile payments? It appears so, reports the New York Times. Since the launch of Apple’s payments service, Google and other mobile payment providers are claiming usage has doubled with customers exploring the systems.

    If this is true, it’s similar to how Apple legitimised the USB port in 1998 with the release of the iMac.

    Prior to the iMac the USB port was a bit of an oddity, on most PCs the sockets sat unused and the few devices available on Windows computers worked reliably, as Bill Gates himself found out during a live demonstration at the 1998 Comdex show.

    Unlike Apple Pay, the move to USB on Macs wasn’t welcome and it was a high stakes decision by Steve Jobs given that Apple’s existence was still precarious and its user base was still made up of largely of true believers who had been through years in the wilderness with the company.

    Those users also had many thousands of dollars invested in Apple Device Bus (ADB) devices, all of which became redundant with the move to USB. Many customers at the time swore this was the last straw and they would move to Windows PCs.

    Apple’s users didn’t carry out their threats and stayed with the company whose move to USB turned out to be a winner for the entire computer industry.

    For Apple USB’s success meant their customers were no longer locked into a proprietary technology, for manufacturers they were able to start moving off archaic serial and parallel ports while for Microsoft the shift meant a better range of more reliable devices — although their operating systems struggled with USB until the release of the far more stable Windows XP.

    It appears in this respect Apple Pay is repeating history in giving a boost to a technology that has been struggling to find traction in the market place.

    The difference this time is that the payments industry is a far bigger market with far more implications for the broader economy than the computer peripherals segment.

    If Apple raise the boat on payment systems, there are some incumbent businesses who are going to find themselves in a very different marketplace in five years time.

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  • Microsoft’s search for a strategy

    Microsoft’s search for a strategy

    The decision of Microsoft to offer its Office tablet apps for free last week has had the desired effect with them rocketing to the top of the charts as people enthusiastically grab them.

    Microsoft’s decision pretty well locks its resellers into the loss leading strategy the company flagged last week in China, with the tablet apps available for free its hard for retailers and integrators to be charging for the desktop version.

    That loss leader strategy has been further laid out by CEO Satya Nadella at a function in London yesterday where he described their cloud and mobile first strategy, something he also discussed at a briefing to ‘a small gathering of journalists’ last week.

    Nadella’s vision isn’t really anything new; it differs from Ballmer’s ‘devices and services’ strategy but the thrust of the business was always going to be on cloud services and the company’s Azure services regardless of any conceits around tablets or professional offerings.

    Of the three key areas Nadella identifies — Windows, Office 365, and Azure — two of them are problematic; the Office 365 for reasons already mentioned and the Windows product line.

    The ‘Windows everywhere’ strategy, which also happens one of Ballmer’s earlier initiatives, is doomed as the operating system is not suitable for smartphones or lightweight internet of things devices.

    Even if Windows was successful on smartphones or could be successfully ported to low powered smart devices, the margins are tiny compared to the traditional desktop market that was so profitable for Microsoft in the past.

    All of which brings Microsoft back to Azure; it’s clear the cloud service is the future of the company but the margins are dire except for some relatively niche areas like collaboration software.

    Mantras about ‘productivity’ count for nothing as every software and cloud computing company cater for the B2B market is delivering a service that claims to improve customers’ productivity. That Office is declining as a profit centre only makes things harder for the company.

    If anything, Nadella’s discussions illustrate the company is still casting around for the next big profit centre. As the Windows and Office franchises decline, time may start to run out for the current management just as it eventually did for Ballmer.

    Giving away Office apps may lock some users into the 365 service and could prove moderately profitable, but last week’s moves indicates a much smaller future For Microsoft.

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  • Microsoft and the transition effect

    Microsoft and the transition effect

    So it turns out Microsoft’s river of gold with productivity software was a transition effect with the company now offering the product essentially free on iOS and Android devices.

    While the profits in that product line were nice while they lasted we may start seeing Microsoft’s revenues, which have stood up pretty well in a changing marketplace, start to decline rapidly.

     

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  • When margins collapse

    When margins collapse

    Two of the key indicators that your business model, and industry, is being threatened is declining sales and margins.

    A good example of this is the story Microsoft are urging their Chinese resellers to use Office 365 as a loss leader to get their foot in the door with customers.

    Not so long ago Microsoft Office was a huge cash generator for the business; now it’s a loss leader.

    If anything this shows how the margins in the software business are being eroded by cloud computing. Businesses like Microsoft and its resellers that have grown fat on big margins now have to evolve to a very different marketplace.

    This means a very different way of doing business, a different way of delivering products and much more streamlined operation that doesn’t need battalions of highly paid salespeople and managers. In fact those managers and salespeople become a very expensive legacy item in a cloud computing world.

    Microsoft are by no means the only company to find themselves giving away once profitable products in order to maintain their market position but when that starts happening it’s clear the time has arrived to find a new line of business.

    In Microsoft’s case that’s been a pivot to the cloud, however the company will never find things as lucrative as the good old days when software was sold in boxes or licensed out with impossible to read agreements.

    Funnily, the same thing is happening in the telcommunications world. It’s an interesting time to be in business.

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