During Microsoft’s recent Q1 2015 earning conference call, Brent Thill of UBS asked a question at the start of the analyst Q&A. This question provided Satya Nadella with an opportunity to present something about the importance of hybrid cloud computing to Microsoft’s success for the quarter. When asked what makes Microsoft’s cloud experience different from its peers, Nadella answered:
“As it turns out the technology that we build for our cloud is what we incorporate in our server products, in fact our R&D expense is the same expense. And that’s made our server products very competitive. And so again those our traditional competitors we’re seeing significant share gains across the entire infrastructure line of our server products in particular. And we hope to architected our cloud very differently. We are the only hyper scale cloud provider that also thinks of our server product at the edge of our cloud.” (quoted from a transcript of Microsoft’s Q1 2015 earnings conference call as published on Seeking Alpha)
The reference to “server product at the edge of our cloud” introduces hybrid cloud computing — where on premises and cloud servers are architected into a coordinated, comprehensive computing solution — to this otherwise purely financial discussion of Microsoft’s business performance for the quarter.
Microsoft certainly is uniquely capable of demonstrating the veracity of Nadella’s point, at least with regard to its more obvious cloud competitors — Google and Amazon. Noticeably absent from the comparison was IBM, which, (along with other mature ISVs firmly established in the typical data center for a large enterprise business), is, truly, an example of the only competition Microsoft is likely to face for this application of client server computing. Neither Google, nor Amazon supports an installed base of on premises client server computing for their own IP, so they cannot compete with Microsoft in the hybrid cloud computing space.
Regardless of who else offers solutions capable of satisfying enterprise business consumer appetite for this type of computing method, the appetite is nevertheless real and strong. A lot of research is available on the topic from most of the most popular analysts, but for readers otherwise unfamiliar with market demand for this type of computing platform, take a look at this blog post published yesterday, by Richard Fichera, and Analyst at Forrester®.
In this writer’s opinion a lot of the momentum in Microsoft’s cloud earnings report can, and should, be attributed directly the role played by Microsoft’s installed base of hybrid cloud systems. We have first hand, absolutely current experience with SharePoint and how organizations are implementing Office 365, SharePoint Online, in conjunction with SharePoint on premises. These organizations represent, literally, thousands of users. Therefore, the financial impact of this customer base should not be underestimated.
Ira Michael Blonder
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