Microsoft Q1 FY 2014 Sales of Enterprise Software for On Premises Data Centers Are Surprisingly Robust

Per Microsoft’s Q1 FY 2014 earnings report, sales of enterprise software for on-premises data centers were surprisingly robust. Server product sales grew by 12% over the same quarter, FY 2013. This performance should provide market analysts with reliable indication of the true pace at which enterprise business is moving office computing over to multi-tenant public cloud alternatives.

The actual pace of enterprise adoption of public cloud, multi-tenant subscription offers appears to be significantly slower than public perception. The reasons for the slower pace, in my estimation, include:

  1. A widening gap between enterprise security standards and “the” cloud “norm”
  2. New features only available via traditional client server, on premises server systems; for example, databases (Microsoft SQL Server) and business intelligence applications (SQL Server Reporting Services, Power View and Power Pivot for Excel 2013)
  3. Renewed consumer interest in an expanded on-premises data center. Today, in 2013, the typical enterprise data center is much more efficient as the result of 6+ years of ongoing optimization since the start of the great recession in the United States in 2007
  4. A growing appetite for data gathering and business intelligence computing solutions, particularly for publicly traded enterprises. These applications have delivered substantial returns to consumers, meaning better data, which they have used to formulate more effective strategies to increase operating profits in often challenging sales environments

The importance of the first of these reasons, the security issue, cannot be overstated. Few enterprises will risk entrusting proprietary data, and the computing procedures required to produce it, to today’s cloud systems. They certainly will consider using cloud systems for redundancy, and will sanction staff use of them as BYOD continues to grow in popularity. But the corporate “crown jewels” aren’t going to leave the on-premises data center anytime soon.

Industry analysts may want to reconsider mature ISVs, meaning Microsoft, Oracle, EMC, SAP, IBM, etc. These businesses look to produce more profits over then next few quarters than estimated.

Ira Michael Blonder

© IMB Enterprises, Inc. & Ira Michael Blonder, 2013 All Rights Reserved

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