Microsoft: 'If we don't cannibalize our existing business, others will'

Microsoft: 'If we don't cannibalize our existing business, others will'

Summary: "If we don't cannibalize our existing business, others will." That's from a slide deck from a one of many Microsoft presentations this week at the company's Worldwide Partner Conference, where company officials are working to get the 14,000 attendees onboard with Microsoft's move to the cloud

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"If we don't cannibalize our existing business, others will."

That's from a slide deck from a one of many Microsoft presentations this week at the company's Worldwide Partner Conference. (Specifically, It's from a presentation by Tony Safoian, CEO of Microsoft partner SADA Systems,that was part of a Microsoft talk entitled "The Evolution of Microsoft Online Services," that was part of from the conference, where Microsoft officials are working to get the 14,000 attendees onboard with Microsoft's move to the cloud.)

Safoian's slide offers a pretty realistic take on why Microsoft and its partners need to move, full steam ahead, to slowly but surely lessen their dependence on on-premises software sales.

Outside of individual sessions, however, Microsoft's messaging from execs like Chief Operating Officer Kevin Turner, has been primarily high-level and inspirational.

"We are the undisputed leader in commercial cloud services," Turner claimed during his July 14 morning keynote. "We are rebooting, re-pivoting, and re-transitioning the whole company to bet on cloud services."

Turner told partners Microsoft's revamped charter is to provide "a continuous cloud service for every person and every business." He described that as a 20-year journey, and said it will be one where partners will be able to find new revenue opportunities.

While the cloud has been the far and away primary focus of this year's partner show -- with Turner and others telling partners they should be "leading with the cloud," the reality is Microsoft isn't yet giving up on its software cash cows.

Partners need to focus on selling "the triple play," as Turner called it, of Windows 7, Office 2010 and Internet Explorer 8 and 9. He noted that 85 percent of Microsoft's installed base is running XP or Vista. Fifty-two percent is running an old version of Internet Explorer, and 63 percent an older version of Office. Upgrade opportunities abound, he said.

Turner listed as Microsoft's primary competitors Google, Apple, VMware, Linux and Oracle, and took his customary pot shots at all of them, as he typically does at every partner conference.

"It looks like iPhone 4 might be their Vista and I'm OK with that," Turner quipped when dissing Apple.

He told the crowd that Microsoft is working with its partners to create an answer to the iPad, something Ballmer said earlier this week. Ballmer said there would be new Windows 7 slates coming later this year, and  noted that Microsoft is working with tens of PC partners to create new form factors running Windows. Turner said the focus is on something between a slate and a tablet that would be able to do both content consumption and creation.

On the partner front, Microsoft announced a number of new cloud-focused sales tools and promotions designed to get its partners to adopt inside their own shops Microsoft cloud services like the Business Productivity Online Suite (BPOS) and Dynamics CRM Online.

Turner told keynote attendees today that there "is an opportunity for every single partner in the cloud." Partners can "build, tell, sell and support" the company's cloud services offerings. He suggested that partners be the ones who advise customers on how to budget for the cloud;  which apps can and should move to cloud and which don't; how and when to rewrite legacy apps, and more.

Topics: Linux, Browser, Collaboration, Microsoft, Open Source, Operating Systems, Software, Windows

About

Mary Jo has covered the tech industry for 30 years for a variety of publications and Web sites, and is a frequent guest on radio, TV and podcasts, speaking about all things Microsoft-related. She is the author of Microsoft 2.0: How Microsoft plans to stay relevant in the post-Gates era (John Wiley & Sons, 2008).

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39 comments
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  • ?We are the undisputed leader in commercial cloud services"

    That's a quote from Chief Operating Officer Kevin Turner. And he bases that on? Amazon is approaching $300 million per year (if not surpassed) with its cloud computing products. MS is making how much?

    Talk is cheap...

    -M
    betelgeuse68
    • I was curious how much MS is making...

      @betelgeuse68
      on their cloud services. The most relevant data I could find seems to be from their 2010 Q3 earnings report released in April. "Microsoft is now claiming it has 40 million paid seats of its commercial online services, which include its Business Productivity Online Suite (BPOS), Exchange Online, SharePoint Online, Communications Online, Live Meeting, partner-hosted online services, and other paid cloud services"

      What that translates to in greenbacks, I can't say-- but I wouldn't speculate that it surpasses $300M.
      ericesque
      • I take that back...

        @ericesque
        At $10 per seat, Microsoft has Amazon beat. I'd venture to guess each seat is well over $10.
        ericesque
      • RE: Microsoft: 'If we don't cannibalize our existing business, others will'

        @ericesque

        That is $10 per MONTH per user - so at 40M users, that would be about 4.8 Billion.
        ababiec@...
      • RE: Microsoft: 'If we don't cannibalize our existing business, others will'

        @ericesque & ababiec: $10 per head is for full BPOS. There are a lot of customers who just sign-up for LiveMeeting or Exchange, but not the rest of the BPOS suite.

        So the average $ per head is probably closer to $6-7 per head per month. Let's call that $75 per head per year. Multiplied by 40M heads, that's still $3Bn.

        Now add all the Azure hours sold. Probably at least another $500M there too.

        All in all, I think this is just the tip of the iceberg - there's a LOT more revenue to be had here as more and more customers see the wisdom of outsourcing core infrastructure like Email and file storage.
        bitcrazed
      • RE: Microsoft: 'If we don't cannibalize our existing business, others will'

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        timaeus
      • RE: Microsoft: 'If we don't cannibalize our existing business, others will'

        @ericesque

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        exibir
    • RE: Microsoft: 'If we don't cannibalize our existing business, others will'

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  • iPhone 4

    Is iPhone 4 really a "Vista"? I've seen a lot of negative press about the reception and the Consumer Reports thing. Anecdotally I know two people who stood in line to get it on the first day, and have no complaints.
    HollywoodDog
    • RE: Microsoft: 'If we don't cannibalize our existing business, others will'

      @HollywoodDog - Vista had people that had no problems from day 1 as well. However, I would not say that the IPhone is a "Vista" just yet. It has its flaws, so did Vista.
      reclaim25
  • The most sensible thing I have heard from MS in a LONG time

    The problem is twofold however:

    1. Standards will matter more and more. Lock in will become more and more difficult, and especially if you put your stuff in the cloud. Do you want to put your data in the cloud in a format that only MS SW can read?

    2. Given 1., excessive "rents" will be much harder to extract. The low cost provider may win if he can provide security as well as reliability. Can MS compete given its history and cost structure?

    I am not at all convinced that MS can pull this off long term.
    Economister
    • Every platform is a lockin regardless how oepn they claim

      @Economister Customers will have to get used to it.
      LBiege
      • RE: Microsoft: 'If we don't cannibalize our existing business, others will'

        @LBiege - "have to get used to it". There's the fascist spirit.

        I wish I was being sarcastic...
        HypnoToad72
    • RE: Microsoft: 'If we don't cannibalize our existing business, others will'

      @Economister Check this out: http://bit.ly/b47iWi

      Its about the infrastructure that powers a lot of the data that will be on the phone and its wholly based on open standards.

      I quote:
      "We believe that you should be able to choose to take your Windows Live data with you when you travel the web. "
      http://bit.ly/b3WBWm
      jamiet
    • RE: Microsoft: 'If we don't cannibalize our existing business, others will'

      @Economister "Standards" is a hackneyed term. Its a popular discussion point when talking about lock in. But the reason "standards" proliferate is when the lack of the network affects (inter-operation) is more costly than controlling everything yourself. We could be talking about inter-operation with respect to programming languages... or the electrical wiring to your house. Just read about AC (Alternating Current) vs. DC (Direct Current), a war being waged at the end of the 19th century:

      http://en.wikipedia.org/wiki/Validus_DC_Systems#AC_vs._DC_power

      To think that use of cloud provider breaks down to inter-operation (one protocol vs. another one) is foolish. The various providers are approaching the problem in completely different ways and it's up to you to make the right call. It's so early in the game that "standards" at this point are as usual being evoked by those not in the leading position, e.g., MS.

      Besides, if you architect your solution right and don't buy into writing code that assumes you're running on a cloud platform (Azure comes to mind), you can easily move your systems elsewhere. Once you start writing code that assumes you're living in a particular cloud environment, you're very much locked in and you've started on the long trail to "legacy system" and lots of inflexibility. The key to avoiding lock in is asking yourself the question, "If push comes to shove can my code live anywhere else?"

      -M
      betelgeuse68
    • RE: Microsoft: 'If we don't cannibalize our existing business, others will'

      @Economister,
      So you think if you develop custom applications on Google or Amazon they'll be easy to migrate?
      bmonsterman
    • RE: Microsoft: 'If we don't cannibalize our existing business, others will'

      @Economister - if you store your data in SQL Azure, you can choose to expose it via OData if you wish so that it can be consumed and contributed by anything that can talk XML.

      If you choose to store your docs in Sharepoint online, you can access those files via anything that can talk HTML/XML.

      How is this "locking" you into MS' technologies?

      Don't like to use Microsoft's technologies, then go find a competitor. Google perhaps. Because we all know how safe your data and privacy is to Google, right? Right.
      bitcrazed
  • Same old Microsoft, still the dinosaur of yesteryear

    Microsoft hasn't changed.

    It's "triple play" strategy, of Windows, Office and Internet Explorer, makes you wonder why on earth IE is in that strategy.

    This strategy harks from the Netscape years, where IE's purpose was to "tweak" web standards to work on IE and not work on other browsers. Microsoft seems to still want to obstruct web standards, so that its "cloud" services work better on Windows and not so well on other platforms. Microsoft is still attempting vendor lock-in.

    However, Google Docs is far more advanced than Microsoft Office Live, and Google has outsmarted Microsoft in the cloud.
    Vbitrate
    • HAH!

      @Market Analyst
      The only version you've seen of Microsoft's Office Web Apps is the free version. The format compatibility alone is reason enough for most people to pick Microsoft's free offering over Google's. The interface also provides familiarity-- which has proven itself key to consumer choice.

      What's more, fully featured versions of Office Web Apps are on their way, for a price-- and if we've proven anything over the last few decades, it's that people are willing to pay for Microsoft Office.

      Google has outsmarted Microsoft in the cloud? Give me one example.
      ericesque
      • RE: Microsoft: 'If we don't cannibalize our existing business, others will'

        @ericesque
        Plus, all the preaching here is about not costing money to train personnel. I don't know what that is about either, but that's the mantra. Also we hear about familiarity.
        eargasm