President John Thompson said he and the board are satisfied with CEO Satya Nadella push to make more money with the software and the services provided on the Internet, but want to move much faster.
Members of the Microsoft board of directors face a growing concern that the traditional enterprise software company, which constitutes the bulk of its sales, could evaporate in a few years – and the president John Thompson is campaigning for a change more aggressive in new products based Cloud-.
Thompson said he and the board are satisfied with a push by CEO Satya Nadella to make more money with the software and the services provided on the internet, but want to move much faster. They are considering ideas that the increase in expenditure, the examination of the sales force and management associations to accelerate the pace different path.
The growth of the cloud is not only nice to have – is essential in the context of lower demand for what is known as on-premise software, the more traditional approach of installing software on computers and the own corporate networks.
It is not known exactly how fast the sale of these legacy deals fall, Thompson said, but it “inevitable that part of our business will be under continuous pressure.”
The concern of the board of directors “born of experience. Thompson tells how his colleague director Chuck Noski, former CFO of AT & T, watched traditional evaporative telecommunications business wireline business in just three years, when the world changed for mobile. Now Noski Thompson and wonder if something similar could happen to Microsoft.
“What is the probability that could happen with the prem-face cloud? That within three years, to watch and he left? ‘” Said Thompson in an interview, snapping his fingers to the point.
Nadella said the company is on track for its projected $ 20 billion in annual sales of commercial cloud products for the year 2018. However, Thompson said business cloud could be even beyond, and manufacturer software should have started its push much earlier.
registered business cloud revenue growth rates – with sales of Azure products increased more than 100 percent from the same quarter – but the total activity accounted for only $ 5.8 million compared to $ 93.6 Microsoft billions in sales last year.
Thompson praised the technology behind the products of small cloud, like business analysis electric BI tools and data visualization and mobile management service company, offering applications and enterprise data to multiple devices.
But this one, for example, provides $ 300 million a year – a small portion of the annual income in general, will soon exceed $ 100 billion, said Thompson.
The board examines whether Microsoft has underinvested in its entire line of clouds, Thompson said. This is not only to develop better technology in the cloud, but a question of how the company sells these products and its strategy to recruit partners to resell Microsoft services and build their own offers on top of them.
Persuade partners to develop compatible applications is a strong point for the market leader Amazon.com said Cloud.
Thompson declined to be specific about what Microsoft might change in sales and associations, but said the company might have to “reinvent” organizations. “The question is I, should I be?” He said. “If you think we have to run, run faster, less risk aversion like a mantra, the question is how much more can be done.”
Analysts say Microsoft should develop a deeper understanding of the partners who make software for Azure and consultants to install and manage these services for customers who need the help bank. Microsoft is working on this, but is behind Amazon Web Services (AWS), said Lydia Leong, an analyst at Gartner.
“They are far away at the same level of sophistication, and Microsoft partners are most of the time for new Azure ecosystem, so they do not know well,” he said. “If you are a customer and you move to AWS, you have this vast army that can help. ”
In the sales force, Microsoft representatives need more experience in offering cloud computing – which are generally more purchases both by subscription – and how they differ from traditional software contracts, said Matt McIlwain, CEO Madrona Venture Partners Seattle. “They have not done enough of a transition to a store based on the cloud,” he said. “It’s still a work in progress.”
Microsoft declined to comment on its cloud strategy or changes in sales and partnerships for this story, and the director Noski could not be reached for comment.
the dependence of the company at the request of traditional software was painfully obvious in its latest quarterly report, when revenues were affected by the weakness of its transactional activity, or purchase software once. CFO Amy Hood said in April that sales were mediocre transaction is expected to continue.
two largest companies are Microsoft cloud Azure Web service, which attracts the leading provider Amazon, but leads Google and IBM, and versions of Office 365 cloud email, collaboration software, text processing and spreadsheets.
The main products include Microsoft SQL Server databases on Windows systems and traditional versions and office.
Depressions that pain last quarter amid new business trips to the cloud, which made changes in your financial information. Offers in the cloud, revenues are recognized over the term of the agreement rather than being considered as an initial boost. Companies are also lower margins squeezed by the cost of building and maintaining data centers to provide services. Gross margin of Microsoft dropped 80 percent in fiscal 2010 to 65 percent in the year ended June 30, 2015.
“This business is growing incredibly well, but the gross margin is significantly lower than that of its main products of old,” said Anurag Rana, Intelligence Analyst at Bloomberg. “How far are you?”
Irritates some investors, but the alternative is worse, Thompson said.
“This is a very different model for Microsoft,” he said, “and our investors will hold and hug, because the alternative is not embracing the cloud and wake up one day and be like – guess who “Thompson did not finish the sentence, but makes clear that it refers to IBM, the company where he spent more than 27 years, he says he is” more is not relevant? “.
IBM declined to comment.
Pressure is good for Microsoft, Thompson said; the pressure tends to cause the change.
“You can re-imagine things when you’re stressed,” Thompson said. “It’s much easier to do when you’re stressed because you feel compelled to do something.
“I see a lot of stress on Microsoft.”