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Topic: Cloud

Windows Azure joins Microsoft's billion-dollar business club

Summary: Microsoft now has seven $1 billion businesses that are part of its Server and Tools unit.

Mary Jo Foley

By for All About Microsoft |

It looks like Microsoft made good on plans to turn Windows Azure into one of its billion-dollar businesses.

azureposter

In March, I noted that Microsoft was cultivating five of its businesses to be among the next to reach a $1 billion annual run rate. In addition to Windows Azure, the others on the short list included Windows Intune, Microsoft's device management/security service; Bing Maps; the StorSimple cloud-storage appliance technology; Perceptive Pixel, which makes large, multitouch displays; and Parallel Data Warehouse, Microsoft's parallel data-warehousing appliance which integrates directly with Hadoop.

On April 29, Microsoftofficials  told the folks at Bloomberg that Azure had crossed the $1 billion threshhold. The Softies also said Azure subscriptions have risen 48 percent in the past six months, Bloomberg reported.

Microsoft officials already said earlier this month that the company has 200,000 Azure customers (though won't say how many of these are paying, non-Microsoft users).

There are already more than a dozen distinct products/services generating more than $1 billion a year in sales at Microsoft. Those include Windows, Office, Xbox, SQL Server; System Center; Unified Communications; SharePoint; Developer Tools; Dynamics (ERP & CRM); and Online display and search advertising. SharePoint actually crossed the $2 billion a year threshold in 2012.

In fact, the Server and Tools Business (STB) at Microsoft is already home to six of those $1 billion businesses. The other six: Windows Server, System Center, SQL Server, Visual Studio, Desktop access business; and enterprise consulting and support.

Microsoft officials said recently that Office 365 also is poised to become one of its $1 billion businesses. I'd expect that to happen in the next few months, as Microsoft completes its current fiscal year and continues to upgrade more customers to the latest version of its Office 365 business and consumer subscription services.

Topics: Cloud, Microsoft, Windows

About

Mary Jo has covered the tech industry for more than 25 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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22 comments
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  • This is well deserved

    Microsoft is doing good with azure platform. I wonder how profitable are this and other cloud services.
    AleMartin
    Reply 3 Votes

  • Lots of cash cows

    I hate when the critics say Microsoft only has two cash cows (Windows and Office). I bet Windows Phone will get there in a couple years.
    adacosta38
    Reply 5 Votes

    • Not without apps

      I bought a Windows 7 Phone the day it came out (HTC HD7), and despite loving the OS, I felt disconnected from the world of productivity and social apps that everyone on Droids and iOS had been using for years. Without apps, the Windows Phone is just a pretender. Maybe that changes with Windows 8, but it's not changing fast enough.
      CharlesDrengberg
      Reply Vote

      • Apps are there

        Much better App situation now in WP8. Tried the switch 2 months ago and the store apps were no issue. However for my useage the Phone and Contacts app are behind the times in functionality. That made me switch back.
        Sacr
        Reply 1 Vote

  • Scotty

    You're doing big things with azure.
    blazing_smiley_face
    Reply 1 Vote

    • Guthrie should be CEO

      Case closed. If he wants the job, it shouldn't even be up for debate.
      jackbond
      Reply 1 Vote

  • Shows that Windows 8 is not all of Microsoft

    Just because Windows 8 isn't doing as well as planned does not mean that Microsoft is a dead company walking. They have so many more divisions in which they provide services to customers. I wouldn't be surprised if Microsoft fights more fronts than any other tech companies today. Btw from what I've heard from Azure customers it's a very good service and it is also open source.
    Jabe124
    Reply 3 Votes

    • Agreed

      Saying that Microsoft is "dead" (or "dying") is just as wrong as saying that Apple is "doomed".
      Smalahove
      Reply Vote

  • But not all $B businesses are created equal

    Windows Server and SQL Server likely account for between 2/3 and 3/4 of STB revenue.
    EXMSDE
    Reply Vote

  • There's another story here though

    While I am definately NOT a MS basher, this success has less to do with the actual platform, and more to do with sales targets. Basically every EA for the last 8 months has had an Azure component put in for free. The sales reps basically tell the customer they will discount product X for $y and put in the same $y of Azure for free. So Magically Azure is a $bill business when in reality it's just MS robbing Peter to pay Paul.
    gr1f
    Reply 2 Votes

  • Clarification

    These 1B dollars include other things- perfect example of double dipping, or here is what El Reg says:
    "El Reg has calls in to Microsoft to try to get clarification on what precisely is in that $1bn number, but Microsoft has not yet responded. It seems likely, however, that the bulk of that revenue figure comes from peddling Windows Server, Systems Center, SQL Server, and any other wares that service providers, telcos, and hosters have bought to build Windows-based clouds."
    Mary Jo, I know you have integrity- care to explore the numbers for us?
    kirovs@...
    Reply Vote

    • @ kirovs

      Last check on Azure revenue shows atleast $250 million per year (Oct 2012). So that should be the minimum revenue with a multiplier of 1.x accounting for WinServer 2012 release.

      For Amazon EC2, selling unused capacity on Amazon data center (IAAS) to smb and now enterprise customers is easier but they do lack some enterprise experience on PAAS though Amazon RDS and SimpleDB are getting there.

      I would think Microsoft has better experience in serving SQLServer instances with WinServer 2xxx series. So that should persuade Microsoft entrenched enterprise customers to move some test loads (non-production) from Amazon EC2 to Microsoft Azure or to move new instances to Microsoft Azure.

      There may be creative accounting involved but which corporation does not do it these days. The main question is if Azure makes a profit. And the answer to that question lies in that Amazon depressed bandwidth and storage and compute rents on Amazon EC2. And so followed Microsoft. So this is a low-margin/margin breakeven market with very low profits. The money will come from add-on services and not from Azure itself. If System Center ties to Azure, then those sales will indeed go under Azure revenue. This may not be the case yet but will happen.

      Bottomline there is increasing adoption of the market leader Amazon EC2 followed Microsoft Azure (436 for ec2 versus 253 for azure searches on dice.com). Google Apps is not a credible competitor. IBM SmartCloud has just started. OpenStack is the next big competitor. If HP/Cisco/DELL/Rackspace can move OpenStack into mainstream, then I expect these companies, especially DELL and HP to win big. Who knows, may be, Cisco will buy Rackspace to compete better against Amazon EC2 and Microsoft Azure.
      calahan
      Reply 2 Votes

      • Reading your post

        There are 2 ideas - low profits, lots of competition.
        AleMartin
        Reply Vote

        • @AleMartin

          Low profit? yes.
          But lots of competition? 6 is not a lot of competition. And OpenStack is a private cloud. You cannot count as offering now. But Dell/HP takes OpenStack then it is a contender.
          spicycheeks
          Reply 1 Vote

      • Nice analysis

        Even though I do not agree with your take on Google. Google's play is different- I think they want Joe sixpack to use their services. And it may happen, who knows?
        kirovs@...
        Reply Vote

    • It's just a different number

      There's a critical flaw in the register article, it doesn't explain what real Azure prices would include and why all of those additional licenses don't count when they are purchased as part of a company getting into Azure. If those are all licenses that the company wouldn't have bought without Azure, then they are certainly money MS has made from Azure.

      But let's assume only stuff in the actual cloud counts. Azure and Amazon both peddle VM instances with software pre-installed, such as Windows and SQL Server. There are also a number of custom VMs in the Azure Store for 3rd party services that bake in some amount for licensing. Does the money Amazon (and I'm sure Azure) pay in Server OS, SQL Server, etc licenses could towards the Azure number or does that need to be deducted before income can be calculated (ie, some form of net income comparison instead of gross)?

      Where does support go? Azure recently started charging for support, which was previously free. This isn't stuff in a cloud, but should it count as Azure dollars?

      What about other Microsoft services that have moved from paying traditional for data centers to paying for Azure space instead, is that money Azure is making?

      I would love to see a breakdown of the numbers too (down to the service level + internal/external would be cool), but it's really up to Microsoft to decide how they want to measure their business goals. Whatever they decided to include or exclude, that's the calculation and target they told the Azure team to hit. If the target was "generate $1 billion", then technically they could have opened the most expensive lemonade stand in the world on Bill's front lawn, sold 1 $1 billion lemonade w/ a promise to return annually for another one, and they wold have made it.
      Tarwn
      Reply Vote

  • Giving Us A Better Idea Of How Windows Sales Are (Not) Doing

    So a billion dollars of Azure sales are worthy of comment, but Windows 8 sales are not?

    That suggests Windows sales have fallen below a billion dollars...
    ldo17
    Reply 1 Vote

  • @ldo17

    What Windows 8 has to do with a Windows Azure article?

    Anyway, How many desktop OS you know of, makes a billion dollar other than Windows?
    spicycheeks
    Reply 1 Vote
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