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Idle to Action: Why Microsoft's Change of Heart is a Turning Point for Cloud Adoption

David Politis

September 2, 2015

5 minute read

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Ten years ago, the cloud wasn’t a tech term. It just wasn’t. Today, it’s hard to have a conversation about the future of technology and not mention it.

When Marc Benioff founded Salesforce in 1999, the average laptop weighed seven pounds and Google was just a year old. A 1999 Wall Street Journal article highlighting Salesforce and the “Latest Software Revolution” lacked a single mention of the cloud.

Just 16 years later, cloud adoption is nearing a tipping point. And for that we owe a lot to Salesforce–along with a long list of other cloud innovators (Google and Amazon in particular). Without these companies, cloud services that you use every day like Netflix, Dropbox, and Spotify might not exist.

Salesforce, Google, and Amazon have helped pave the way for the next generation of technology giants. These companies built billion dollar businesses around the cloud, put their top talent on cloud technology development, educated people on the benefits of the cloud, defined new markets, and provided the viability of cloud technology. Credit should be given where credit is due.  

The Enterprise Elephant in the Room

In the mid-to-late 2000s, the tech world began its shift towards the cloud, yet one tech giant stood surprisingly idle: Microsoft.

For more than 20 years, Microsoft has dominated the enterprise–that much is unquestionable. One in seven people on the planet use Office and 1.5 billion people use Windows every day. The impact its products and services have on the working world is unmatched.

Yet Steve Ballmer and Co. were slow to embrace the cloud. Moving to the cloud would have required Microsoft to cannibalize its traditional software business, sacrificing significant immediate revenue for an uncertain but potentially more stable future. The results would have been short-term losses and unhappy investors.

Why would one of the most powerful and profitable companies in the world disrupt themselves, especially when the business model they were running was a proven cash cow? In order to move its customer base to the cloud, Microsoft needed to admit that its approach–the one that made them a leader in the enterprise–wasn’t going to be the right approach in the future.

For a company the size of Microsoft, a change in vision isn’t easy. It impacts far more than itself–entire industries, in fact. More than an estimated 600,000 partners bet their livelihoods on the success of Microsoft. If each one of Microsoft’s partners has an average of just 10 employees, that’s six million people who are going to be affected by the shift to the cloud. And we’re beginning to see the effects of that now.

For a long time, Microsoft told its partners to invest in on-premises infrastructure, and that’s exactly what they did. Yet Microsoft is suddenly singing a completely different tune, urging its partners to sell the company’s cloud services. But the cloud-based revenue model is a complete divergence from the buy-to-own model that Microsoft used to carve its way into nearly every desktop and server room in the world.

Businesses that have thrived as members of the Microsoft partner ecosystem for the last 25 years are being told to overhaul their entire business models. That’s a tough pill to swallow. It’s up to Microsoft to help ease their concerns, and it’s going to take a lot of trust to shift their mindsets.

Up until recently, it’s been simple for the Microsoft ecosystem to cast aside the notion of the cloud. If Microsoft didn’t see a reason to change, why should they? Microsoft has been right for so long, how could they be wrong this time?

Microsoft is now combatting this line of thinking through initiatives like the Cloud Solution Provider program (CSP) and by making the cloud a primary focus at events like its Worldwide Partner Conference (WPC). Significant investments have been made in developing innovative technology, from Azure to the HoloLens, and as a result, Microsoft is helping to aggressively push technology forward.

A Changing of the Guard

When Microsoft named former executive VP of Microsoft’s Cloud and Enterprise group Satya Nadella as CEO, one thing was made abundantly clear: change was coming.

Nadella said it best in his first email as CEO, “Many companies aspire to change the world. But very few have all the elements required: talent, resources, and perseverance. Microsoft has proven that it has all three in abundance.”

He’s right. Few companies actually have the influence to create change at a global scale. Microsoft is one of them. But they needed to be pushed in the right direction–and for that, Microsoft can thank its competitors.

In a recently released email to the company, Nadella lays out the company’s mission and strategy. He lists three of what he calls “interconnected and bold ambitions.”

  1. Reinvent productivity and business processes
  2. Build the intelligent cloud platform
  3. Create more personal computing

Nadella writes, “all these experiences will be powered by our cloud platform.”

Imagine if this email were written five years ago.

The Next Generation of Enterprise Technology

It hasn’t been easy for the companies that led the shift toward the cloud. They had to take the risks, they were the ones getting dirty, making mistakes, and ultimately blazing a trail that others would have a much easier time following.

Google and Amazon have had several years to win the early adopters, but many large enterprises have waited to adopt the cloud, leaving Microsoft incredibly well positioned to leverage its existing customer base.

But Microsoft’s cloud entrance shouldn’t be viewed as a cause for concern for competitors. It will actually be good for business. When people look up Microsoft Azure, they’ll have to consider Amazon Web Services (AWS). When they look up Office 365, they’ll need to do their due diligence on Google Apps for Work. Microsoft customers that are only now looking to move to the cloud will discover a whole new world of cloud applications.

The Challenge Ahead

While the strides Microsoft has made to date are significant, a huge challenge still lies ahead. Microsoft’s executive team and employees must believe that this monumental shift in strategy is the right decision.

We fundamentally believe that we need a culture founded in a growth mindset. It starts with a belief that everyone can grow and develop; that potential is nurtured, not predetermined; and that anyone can change their mindset.” — Satya Nadella, Microsoft CEO in a recent email to employees

Microsoft also needs to educate its customers on the cloud–like Salesforce, Amazon and Google have been doing since the cloud began taking shape. And on top of that, Microsoft needs its partners to accept its new cloud-first mentality because they are the ones on the front lines. They are the ones interacting face-to-face with customers and without partner support, Microsoft’s cloud push will stall.

All of this will take years to accomplish. But if Microsoft is successful, the impact will be beneficial for everyone: its partners, its customers, and other cloud-based companies. Companies like Salesforce, Amazon and Google. Companies like Dropbox and Box. The ones that pushed Microsoft towards the change that was so desperately needed.

Microsoft’s influence in the enterprise is helping to break open the floodgates of cloud adoption. Regardless of organization size, cloud adoption will drastically increase from here on out–and Microsoft will serve as one of its primary catalysts.

It’s time to embrace the cloud, and finally, Microsoft is telling us that it’s okay.

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