Turner also pointed at another factor I think will be important to Microsoft's continued success in the cloud: Its vast partner ecosystem. Google has no formal partner program, certainly nothing like Microsoft's, and it likely never will.
Microsoft's temporary weakness in the cloud, from what I can tell is price. And I think it's temporary because the obviousness of this issue will cause the company to move aggressively to counter any successes that Google and others like it achieve.
Currently, Google offers its alternative to Microsoft Business Productivity Online Suite (BPOS), Google Apps, for free to individuals and educational institutions. Or you can pay a flat fee of $50 per year (about $4.10 per month) for business use.
Microsoft's BPOS fees are, as always, all over the map, but the most relevant services work out like this: BPOS is $15 per user per month. Separately, you can get Exchange at $10 per user per month, SharePoint for $7.25, Office Communications for $2.50, and Live Meeting for $4.50.
Yes, there's a functional gap between Google Apps and BPOS. But that will close, and as it does, Microsoft will need to lower prices to match Google.
One area in which Microsoft is already moving a lot more aggressively on pricing is Office Web Applications. This incredible online version of Microsoft Word, Excel, PowerPoint, and OneNote will be absolutely free for both consumers and businesses, and enterprises with SA agreements will be able to host it inhouse.
Keeping services like this free or low-cost is key to keeping customers in the Microsoft ecosystem. And as we've discussed in the past, this is, I think, the key to Microsoft's future as well: Lower revenues per customer, but thanks to the scale and ubiquity of cloud computing, a bigger potential pool of customers as well.
Not coincidentally, this is exactly what Microsoft expects to happen as well: When it rolled out BPOS, I was told that the company expects over half of all Exchange licenses to be for hosted versions by 2012. And fully 70 percent of those customers would be new to the platform.
Microsoft president Bob Muglia touched on this at FAM as well, in the context of Windows Server. "If we go out five or ten years and we assume that the cloud becomes a very substantive part of the server and tools business, what you'll still see is higher overall profitability numbers from Microsoft, higher overall revenue, higher overall profitability," he said. "So we'll continue to grow both key aspects of our business ... As the cloud emerges with Windows Azure, SQL Azure, our overall cloud platform, we have an incredible portfolio that enables our customers to take their existing investments forward into the future."
So is Microsoft f*%&ed? Not even close.
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