Some costs cut down on other costs, as any businessperson knows.
Microsoft’s focus on cloud computing — after its recent failed purchase of Finish multinational communications and information technology company Nokia — is showing proof of smart business, according to analysts who point to findings that chief information officers are already using or are planning to use Microsoft’s cloud.
Not only are business people going to invest in Microsoft’s cloud, they are going to do it despite thinking that they will end up spending more with Microsoft over time. Fifty-seven percent of CIOs who were using or planned to use services like Azure and Office 365 said they thought they would spend MORE with Microsoft in a recent poll. Only 16 percent thought they’d end up paying less to Microsoft.
Using cloud services is widely considered to be a way for businesses to cut down on other costs — for example, hardware and IT staff — although results are far from uniform.
Microsoft thinks that it will make almost double its returns by providing cloud services to customers compared with what the company would make selling software as it did in years past.
This is in part due to the ongoing nature of cloud service provision– the lifetime customer value in a budding industry projected to be worth $150 billion when it ripens. According to Morgan Stanley’s Keith Weiss, current evidence supports Microsoft’s calculations of a 1.2-1.8X increase in customer value — a future that sounds more sunny than cloudy.
By Andy Stern