Microsoft Corporation (NASDAQ:MSFT) sees email as the magical key that will unlock further growth in the enterprise cloud services market. Speaking on the sidelines of a conference to announce the company’s fourth quarter results, CEO Satya Nadella said more companies have signed up for Microsoft Cloud as they seek a competitive edge.
This idea seems plausible as most of the world’s biggest firms rely on Microsoft Exchange Server, which was launched years ago, for their email communications. This is due to the fact that when companies want to move their data to the cloud, the first step involves moving email, usually on its own or along with other office software apps.
Let Microsoft deal with the mess
For companies that want to streamline their technology using cloud, moving email is difficult because, apart from the logistics involved in moving email servers, there is the headache posed by virus scanning and spam. This process of moving data to the cloud easier for a company that depends on Microsoft Outlook and Exchange for email messaging as it seems logical to involve the same company that handles the data in the cloud to do the task.
Microsoft offers its productivity software service through Office 365, which provides seamless transition of data to cloud for companies that already use Outlook or Exchange for sending and receiving email.
“It’s just a really natural thing,” Matt McIllwain, an investor at Madrona Venture Group, commenting on the thinking. “It’s easier and can be more cost effective to run it on the cloud, and let Microsoft worry about your Exchange servers.”
The thinking has helped Microsoft gain ground on market leader Amazon.com, Inc. (NASDAQ:AMZN), which retails as Amazon Web Services, in the public cloud infrastructure market. Microsoft, which has seen revenues in its once-dominant PC business dwindle, reported Thursday that its Azure brand of public cloud, saw revenues grow 140 percent year-on-year, making it the fastest growing major cloud provider.
In contrast, Amazon’s AWS reported a revenue growth of 65 percent, which is nearly half that of Microsoft’s Azure product line.
“The enterprise cloud opportunity is massive, larger than any market we have ever participated in,” added Nadella.
Microsoft also announced that it is set to post $9.4 billion in annual revenues from public cloud services, up from $5.5 billion in 2015.
Need for Caution
Nonetheless, analysts urge for caution, stating that not all companies using Microsoft’s email services are likely to opt for its cloud offerings. For example, Clif Bar, a snack provider based in Oakland, California, transferred all its Outlook email and other software tools such as document workflow to Azure. However, it opted to move its enterprise resource management software to Oracle cloud.
Going forward, Microsoft should expect more clients- -especially those relying on its email services- – to sign up for its cloud services. However, it should also strive to demonstrate that its cloud offerings are at least equal or better than those of its rivals both in price and quality.