Why Microsoft is betting big on consumer cloud services (Hint: It's about the enterprise)

Why Microsoft is betting big on consumer cloud services (Hint: It's about the enterprise)

Summary: Microsoft officials are counting on consumer services around OneDrive, OneNote and Skype to translate into demand for the enterprise complements of those services.


Microsoft officials are big believers in the bring-your-own-device (BYOD) trend.


It turns out they're also betting big on the potential impact of bring your own services (BYOS) or bring your own cloud (BYOC) -- whichever acronym you prefer.

Microsoft management increasingly gets the question: How are you going to make money if you're giving away software and services for free? Free OneDrive storage. free OneNote apps for Microsoft and non-Microsoft platforms. Free Skype apps and services. Nice for consumers, but how will the company monetize these things beyond the possibility of ads?

After reading through a transcript from last month's JP Morgan Technology, Media & Telecom Conference appearance by Judson Althoff, President of Microsoft North America, I think I have a better understanding of what the Softies are thinking on this front.

(Althoff's appearance coincided with Microsoft's Surface Pro 3 launch in New York, so I didn't get to watch the Webcast live. If you want to read the transcript, be forewarned: I couldn't get it to load in Chrome, beyond page 1. It does load fine in Internet Explorer.)

Althoff told JP Morgan attendees that Microsoft's goal is to create consumer-centric "virally consumable cloud services that transcend into monetizable value in the enterprise." In short, the goal is to try to get consumers hooked on a handful of key sticky services in the hopes that they'll want to continue to use them at work and not just at home.

"What we're trying to do is create services that are sticky, that start from the consumer level, that are largely freemium at that consumer level," Althoff said. he mentioned OneNote, OneDrive and Skype, specifically, calling them out as "snackable applications."

"If folks grow up understanding and using the power of our stylus and inking through OneNote; and connectivity and synching through OneDrive in the cloud; all tied together with the conferencing system and Skype that allows instantaneous meetings and discussions, that's an experience that they grow up with in the education environments and the consumer environments that they come to expect in the enterprise," Althoff explained.

Microsoft's recent reorganization resulting in the creation of four new Applications and Services Group investment areas -- Exchange and Outlook/Outlook.com; Skype/Lync; OneNote Online and OneDrive; and OneNote -- now makes even more sense. Microsoft has grouped together the teams where it's hoping to trade in synergies across consumer and enterprise lines.

Topics: Cloud, IT Priorities, Microsoft, Storage, IT Policies


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).

Kick off your day with ZDNet's daily email newsletter. It's the freshest tech news and opinion, served hot. Get it.


Log in or register to join the discussion
  • Makes sense.

    And funny, it is almost history reversed. Why did Windows get SOOOO big - it started at work. When IBM got into the PC business and machines started appearing at work soon people wanted to use "what they used at work". Think of this: Apple was already going into homes because that was "what the kids used at school". Then here comes IBM and along with them Microsoft, but this time, it was what was at work. If IBM had kept tighter reins on its child, this may have been different. But when they let the hardware be cloned, and then lost control of the software with the OS2 spat, Microsoft had its opening.

    Now it is reversed. People are wanting to use their iPhones and Androids at work. Unlike IBM though, Microsoft sees it coming. So they are coming up with services people use at home and will want to use at work (like Skype), services for work people want at home (Office, Outlook), and shared items like OneDrive. And they are also smart enough to see that iOS and Android are the way in.

    Now will that eventually lead to "but the best versions are the Windows versions"? Who knows. But it's going to be fun (and messy) to find out.
    • Interesting observations ...

      IBM got out of the PC business because, by 1987, personal computers were beginning to become commodities at commodity price-points. Apple chose to give up the mass market in exchange for profitability by selling to consumers in low volume at premium prices.

      IBM chose to return to their roots (premium services at premium prices). Like Apple, IBM cannot be profitable at commodity price-points.

      IBM didn't have a choice regarding the "clone" market. Unlike most companies who partner with IBM, Bill Gates did not give up Microsoft's rights to market DOS (or its derivatives) outside of the agreement it had with IBM.

      Because Microsoft had the foresight to foster the "clone" market, they could be profitable by selling large numbers of licenses to OEMs. If one OEM goes under, there is always another OEM "wannabe" who is willing to partner with Microsoft for a piece of the action.

      It all went to hell when Microsoft was developing OS/2 for IBM and decided to Market Windows NT as a competitor to OS/2. The original plan was to have a common kernel with either an OS/2 or Windows NT front-end.

      Microsoft's "take a loss and make it up in volume" approach has paid off but, in doing so it has distanced Microsoft from the consumer marketplace.

      The hardware revolution - ARM versus the x86/x64 architecture - has given consumers with limited computing needs greater choice. Add to that the trend toward BYOD and Microsoft runs the risk of becoming irrelevant among consumers. (For instance, I no longer need to use an enterprise-owned computer to do my job. I can go out and buy myself a modest Windows notebook computer for under $400 and, from my living room, I can access each of the tools and applications my enterprise employer makes available to me to perform my tasks.

      In fact, I could - at least in theory - perform all of my work-related tasks from a ChromeBook, or an iPad, or most any tablet.

      Microsoft is doing exactly what it needs to do to remain relevant to consumers.

      The cloud itself keeps Microsoft relevant to the enterprise since, in the end, those machine-cycles which were once consumed on the desktop/notebook are now being consumed in the cloud and delivered to the desktop.
      M Wagner
  • BYOS?

    The problem is cloud services do not depend on the client OS per se. Cloud service providers can and sometimes do provide client side daemons for more than one or two OSes.
    • The OS doesn't matter for MS

      Otherwise they wouldn't have released Office for iOS and soon for Android, both of which are/will become so popular that enterprises just have to use and pay for them
      • If you are right, this is a fundamental shift

        in Microsoft's philosophy. Which, prior to this has been Windows everywhere and on everything, with all other MS products designed to lock people into Windows.
      • Divisional Diversity and Disparity

        MS has always been fractured. Before MS Office each product barely talked to any other product. The look and feel between products was atrocious (still is actually).

        The corporate climate at MS must be all about the fight and right to sell your product. I guess it makes for a good bit of drama (if you live for that), but as an end user it's super annoying.

        I hope (and pray) that Nadella can break some of these bad habits at MS. Time is here when MS is not the 900 pound gorilla any more and must start playing well with others (starting internally first and working outwards).

        When I see IE released from its bondange to Windows I will know that MS is serious about the new world of computing. Set Inori Aizawa free I say!
        • IE released from its bondange

          I would rather they spend their time supporting web standard rather that port IE over to other platforms. I can only see this being useful in enterprise but chances are your using a windows box anyway. Support standards not browsers and proprietary technology
    • And BYOS

      is potentially illegal in many industries and countries. It will get the company in hot water and probably at least cost the employee their job.

      Data security and data protection go out of the window if people start storing data on non-approved and non-company controlled services (possibly not even known to the company that the services are being used). The first the company knows about it is when a sueball flies across the table at them or the police turn up on the doorstep and start confiscating files and equipment and arresting employees for a data breach.
      • ... or the employee is downsized ..

        and locks their data access before they go. Most countries have laws about how far managers can control employee's property, so, outside the States, Microsoft might be helping to build a bunch of time bombs.
      • That is what company-owned clouds are for.

        There are many ways for the enterprise to restrict where sensitive data is stored and how it is accessed - and by whom. With a well-funded enterprise IT department, security is not a problem. Only the U.S. Government carries around sensitive data on notebook computers - private industry learned that lesson long ago.
        M Wagner
    • Not a reliable service

      If you depend on Microsoft for reliability, you are in for a rude awakening. My "OneDrive" suddenly lost its entire contents one morning, and that was while I was checking email - not using the OneDrive itself. I checked and it was on ALL my devices that it disappeared.
      And you STILL get to reboot your computer once a month for updates !
      Please do yourself a favor and use a different cloud drive provider, such as Google or Amazon. They, at least, don't suddenly erase all your data.
      While you're at it, switch to Linux and stop worrying about viruses and monthly update reboots.
      • Surely you realize . . .

        . . . there is only one way this behavior is possible using a cloud service. If you create a local OneDrive account and set it to mirror to the cloud. You add a file in this folder in local storage and it is mirrored to the cloud; you delete a file, or folder, and the delete action is mirrored to the cloud; you delete everything inside the folder and everything you stored in the cloud is gone. If you setup ShadowCopy then use it to restore that folder. My daughter did that to me with our family music folder accidentally.
        The Heretic
        • This is right, and it could affect all services...

          Care must be taken when moving folders and deleting files. When my PC at work was replaced with a Win7 PC while I was away from the office (a perfect time), I watched in horror as my Dropbox folder on my main home PC emptied before my eyes. The solution was simple, as the folder had simply been moved to a new location on the work PC, but my heart did stop for a moment.

          It is important to understand with OneDrive what is being made available offline, only online, and if you are as I am, using multiple devices, that might well be very different.

          This is going to become even more critical as cloud storage results in leaner, less storage laden machines because we will rely more on the external storage. For example, when I replace my laptop in the coming months, it will likely be with a Surface Pro 3, i7 with 256GB. I will need to make a lot of decisions on what I will do with the 750GB (not all used, but obviously a huge amount of local data), vs. how I use my network 2 TB Live drive, and how I use my current 165GB of OneDrive Space. I will be closing my Dropbox account soon, as that has already been passed to my OneDrive.
          Mark Richey
      • Never had a problem

        I have never had a problem with losing data in the cloud(box, OneDrive, drop box), might been a problem specific to you. "switch to Linux and stop worrying about viruses and monthly update reboots." windows virus haven't been a huge problem like they were in the past. Most problems these days related users behavior.
  • How about paying customers? Do we get any of the new toys?

    Our executives are beating us about the head to get our users onto Onedrive Pro. Problem is, customers who have already paid MS for Office365 subscriptions can't login to the Onedrive app on Android with their corporate accounts. That's difficult to explain to the Execs who have already invested tens of thousands of dollars after being promised MS would support mobile apps. Who would have guessed they meant Apple.

    I'm beginning to think we should start distributing Ipads and Iphones to our employees, so we can be compatible with Microsoft.
    • Also no choice...

      One of the biggest problems I hear at the moment is Mac users who have finally received OneNote, but it is severly crippled, compared to Windows.

      On the forums the MS support reps always say "this functionality is not available in the free Mac version." Fine, so WHERE do I find the charged for version that does have the functionality the users expect to see?

      And don't get me started on Outlook for Mac!

      User, "but I've been doing 'X' for years in Outlook."
      Me, "yeah, not on a Mac you ain't!"
      • The initial OneNote for Mac sucked

        it isn't too bad now though. Still nowhere near as full featured as Windows, which is like a clipping version of SQL Server.
    • This is what happens when IT shops are saddled with executives who ...

      ... know NOTHING about IT. One either needs to understand the basics of IT, or they must TRUST the advice of their IT staff. Nothing you describe is insurmountable when competent IT staff have the leeway to identify the tools they need to accomplish the task at hand.
      M Wagner
  • The cloud

    We are being forced into the cloud and we do not want it at all it puts us in danger from lost data and info lost to hackers and we know you can not keep us safe it is safe to back our data to a ext. hard drive and put it up for safe keeping so that is what I think and know
  • To Microsoft

    Take the cloud out of windows and the store and you will a very good windows again if not good by you will need shut down and go out of service for good if you don't good windows for good
    We will not buy it at all or use it because it sucks