Late last week marked an interesting series of coincidences, at least for me: On Thursday, Microsoft held its annual Financial Analyst Meeting (FAM), an event which sounds irrelevant on the surface but is in fact an excellent guide to the company's various market strategies.
And I finally formalized something that's been kicking around in my head for some time (and been hinted at in various UPDATE commentaries): During a talk in Amsterdam, I wondered aloud whether Microsoft would be subsumed by the growing trend towards cloud computing.
The 2009 FAM marked Microsoft's most stunning and explicit support for cloud computing yet, suggesting that the company is, in fact, much more serious about embracing this future than many realize. In fact, I was among the doubters as recently as a week ago and had titled my presentation, tongue-in-cheek, as "Is Microsoft F*%&ed?" (a title I likely wouldn't have foisted on an American audience).
The answer to this rhetorical question is an emphatic "No." In fact, if you actually look at what Microsoft is doing to embrace the cloud, its strategy is both clear and logical.
But first, a quick bit of perspective: I feel we're in a transition phase, where computer users of all stripes are utilizing a mix of both local- and cloud-based applications and data. As Microsoft CEO Steve Ballmer noted at FAM, "Even as people go to the cloud, you see people writing Windows applications as a front end to a number of these things."
But looking forward, this mix will shift inexorably towards the cloud. Yes, there will always be a need for local storage, especially for regulatory and legal reasons in business, but for all effects and purposes, the future is cloud-based. This isn't a bit of temporary marketing silliness. It's the future.
But don't take my word for it. In his speech at FAM, Ballmer said simply, "We're embracing the cloud. Our cloud story today is actually pretty developed. It's not fully implemented, but it is actually pretty developed, and we've got a lot of hard execution in front of us."
For Ballmer, the big question, of course, is how Microsoft will profit from the cloud. This speaks to the discussions we've had here in Windows IT Pro UPDATE about how Microsoft will need to cope with reduced revenues as its traditional revenue streams from desktop products dry up over time and its server products move from on-premise sales to hosted subscription services. "With the launch of Windows Azure ... We have real reference accounts and some real success now with Exchange Online, SharePoint Online," Ballmer said. "[We announced] our Office Web application companions. I think we've sketched both a business approach and technology approach that lets us benefit from the cloud."
Compared to pure cloud-based companies such as Google, Microsoft has two key advantages. First, it has decades of experience and millions of customers, both of which will help it make the transition to the cloud. (And, in the case of its customers, many will simply follow Microsoft to the cloud.)
Secondly, and perhaps most important, Microsoft offers a hybrid strategy that will prove invaluable to Microsoft's most important customers: The enterprise. Unlike Google, which pretty much offers an all-or-nothing cloud approach, Microsoft sells both on-premise and cloud-based solutions. And they work together, so you can mix and match.
"We offer customers choice," Microsoft COO Kevin Turner said at FAM. "Customers don't want 100 percent of every piece of data for every application managed in the cloud. For some users, for some applications, for some competitive reasons or privacy reasons or security reasons, they want to control that and manage it. The company that offers them the ability to have that choice is Microsoft. That's where we have the integrated story with our Business Productivity Online Suite [BPOS] offerings that we launched this past year. And we are already hosting over one million people on email. And it's just going to continue to grow and continue to grow."