Microsoft: Losing Margins to the Cloud?

A recent SmartMoney article tells us that Ray Ozzie, Microsoft’s chief software architect, is concerned that cloud services could undermine the company’s margins over the long term:

“The margins on (online) services aren’t what the margins on software are… It will increase our profits, it will increase our revenue, but you won’t have the margin.”

According to the article, Ozzie also said that there was probably room only for a few players in the cloud. Because of the need for costly, large scale data centers to process and store computing tasks, very few companies would be able to afford the investment necessary to get economies of scale.

Also, it seems very convenient to assert that their can only be a “few” cloud players who must be “huge” companies. What this means (according to Microsoft) is that it will only be a Microsoft/Google world of “cloud” services. We beg to differ. It is the IT Service Providers who already have the core competencies required to deliver on the promise of cloud computing. And while the profit margins might not be in Microsoft’s software, they are present in cloud storage. In the recent meetings on Cloud Storage at the SNIA Cloud Storage Technical Work Group, one of the specific topics was cloud interoperability, a discussion that assumes multiple clouds by multiple service providers.

Wait, there’s more. A few weeks ago, Ozzie shared a few more thoughts on the cloud. Courtesy of the Seattle Times:

On cloud computing:

“Right now the way I’ve been framing things is in essence we are moving to a world of three screens and a cloud. That’s the most succinct way that I can describe it. For the user experience we will all commonly consume solutions immediate to us, whether it’s in media, entertainment consumer or business, that will be delivered to us in something the size of a phone, something the size of a PC, and something the size of a TV. There will be solutions that weave those things together, brought together by cloud on the backend.”

On how Microsoft Office will change to adapt to cloud computing:

“We have to repivot to think not ‘Is this the specific device?’ but ‘How do you deliver these scenarios across these devices.’ We are rethinking Office. We aren’t conceptualizing Office as a PC product anymore. There are scenarios in the realm of productivity that are very, very appropriate for PC such as viewing a spreadsheet. When you are trying to share something, the Web is a much more appropriate concept in terms of how to share because that’s how people are brought together. They aren’t brought together on the PC; they are brought together on the Web.

“When we’re in meetings like this or when you’re in a conference room, you have your phone with you, you don’t have laptop in front of you, you don’t have a browser in front of you. You might use the camera and take a snapshot, you might activate the headset and record. … Every device will be appliancelike so you’ll go buy it, you’ll log in with cloud-based identity and profile of what belongs on that device comes down to that device.”

Looks like Microsoft is re-evaluating the cloud user experience >>

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