Microsoft is $1.3 Billion Serious About The Cloud

There has been a lot of analysis of the Microsoft quarterly report from last week that has dissected almost every element of it.  I posted here last week about the reports around Windows Phone unit being sold and how the Surface lineup is impacting the overall consumer PC business.  One element that seems to have been overlooked to a large extent is capital expenditure of $1.3 billion that the company has spent on new and upgrading existing data center infrastructure.  This is, in my opinion, an important statement from the company in their earnings.  It points out, beyond any reasonable doubt, that Microsoft is serious about the Cloud and will continue to make this an emphasis for the company.

Satya Nadella, when he became CEO of Microsoft, made it clear that the strategic direction of Microsoft was to be “Mobile First, Cloud First”.  This is a huge ask for a company that has traditionally sold on a license model that assumes physical equipment on premise.  A lot of people simply chalked this up to Nadella’s background of working in the Microsoft Cloud division and this being his roots in the company.  But the evidence suggests that since he has become CEO, the company is indeed holding true to this new direction.  Windows Phone sales continue to improve but the mobile division continues to add applications on other platforms.  The most notable of these is probably the Office suite of apps for iPad that was released shortly after he became CEO.  But supporting the mobile division and perhaps more of the company than we know is the Cloud division.  It is everywhere in Microsoft and if you use a Windows PC, Windows Phone or Xbox One, you are using these cloud services and probably don’t even know it.

At the core of every Microsoft application and platform is a cloud service.  For consumers, this is mostly seen in Office 365 and OneDrive and it is increasingly irrelevant which platform you chose to consume these services.  Before I moved away from iOS, I used OneDrive on my iPad and my iPhone, used the Office apps on my iPad and accessed my account from my Mac.  Everyone one of these are part of the larger cloud ecosystem that Microsoft has and continues to build.  But what Microsoft has been able to do – the genius of it really – is to make this cloud “layer” disappear.  As a consumer, I don’t have to think about where my files may be stored.  They have done an amazingly good job of simply blending it into the user experience.

Take OneDrive for example.  As a Windows PC user I can have all my files automatically store to OneDrive and not to my local PC.  As a Windows Phone user, every photo I take is automatically uploaded to OneDrive.  As an Office for iPad user, all my files are stored in OneDrive and I can access them from my iPad and can even store a local copy so I can work on it offline.  All of these things happen without me having to really do or think about anything.  The line between “on my PC” and “in the cloud” is quickly and quietly disappearing.

That is exactly what Microsoft wants and what so many are trying to achieve.

For companies of any shape or size, Microsoft offers Azure, their cloud platform.  It can be anything from a web hosting solution to a datacenter for an organization.  The array of services are dizzying (in fact, Microsoft probably needs to calm down on the number of options as it looks overwhelming to someone who isn’t sure what they need) but the idea is simple:  Microsoft can provide you cloud services without you having to think about it.  Those services can be accessed by local PCs, have local redundancy, be accessed by mobile devices, can be SQL databases in the cloud… you get the idea.  If there is a business service your company needs, chances are Microsoft through Azure can offer it.

It is this dual approach of supporting the consumer as well as supporting the enterprise which leads back to the $1.3 Billion investment Microsoft made in their data centers last quarter.  If they indeed are going to offer seamless cloud services to consumers and to businesses, provide virtually any service you need in the cloud and give you that with Five-9s reliability, that costs money.  Microsoft clearly is willing to spend it and ultimately we all win.  Proof point:  Everyone OneDrive user who has Office 365 now has 1TB of storage available to them and non-Office 365 users can buy up to 1TB for only $6.99 per month.  And by-the-way, that 1TB OneDrive gives you access to Office 365 anyway!  Think of it as a freebie.  For businesses OneDrive for Business starts at $5.00 per month per user.  If you are a small business, you don’t even need to go down the Azure path for storage.  OneDrive can do it at a fraction of the cost.

The bottom line for all of us, consumers and businesses, is that Microsoft is serious about Cloud.  Their investments in their infrastructure prove it and we, because of their size and purchasing power, benefit with low cost cloud solutions that are interwoven into our everyday computing and mobile experience.

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