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

Microsoft officials are counting on consumer services around OneDrive, OneNote and Skype to translate into demand for the enterprise complements of those services.
Written by Mary Jo Foley, Senior Contributing Editor

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.

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