Microsoft has clearly been trying to lessen its reliance on traditional software and switching focus to cloud-based products in recent years; for Microsoft’s Board of Directors however, the transition’s not nearly fast enough, reports Bloomberg, who caught up with Microsoft Chairman John Thompson to ask about Microsoft’s directions in the future.
The talk occurs amid slumping PC sales and growing concerns that Microsoft’s traditional software business – selling “on-premise” software that installs and operates fully in a client computer or network – is soon going the way of the dodo. AT&T’s wireline business suffered a similar fate in only three years, something Chuck Noski, another director, has had personal experience with.
Satya Nadella’s rise to power has been the clearest indication of where Microsoft sees its money coming from in the future, and sure enough, the current CEO and former cloud chief has been making a strong push towards cloud-based offerings, garnering approval from the company’s director board. But it needs to be faster.
“What’s the likelihood that could happen with on-prem versus cloud? That in three years, we look up and it’s gone?” – John Thompson, Chairman of the Board, Microsoft.
Specifically, Thompson and the board wants Microsoft to invest more in its cloud business, not just in pure technology, but also in sales and partnership strategies. The reasoning is clear: cloud business like Azure and Office 365 currently account for less than 10 percent of the company’s total revenue. Microsoft Azure is lagging far behind its biggest competitor, Amazon Web Services in the partnership department, both of which suffer from the transitional effect to a new business model. Microsoft’s slump in the last quarter certainly didn’t help: the blame was put on the lagging transactional business and lower gross margins of cloud products.
“That’s a very different model for Microsoft and one our investors are going to have to suck it up and embrace, because the alternative is don’t embrace the cloud and you wake up one day and you look just like — guess who?” – John Thompson, Chairman of the Board, Microsoft.
Microsoft is in a hard time, as competition is fiercer than ever and the company continues its transitioning to a cloud-based provider. It will take time, during which investors may be jaded; nevertheless, as Thompson said, pressure means change, and we look forward to how the company will transform itself in the years to come.Further reading: Azure, Cloud, Microsoft, Office 365