Business Insider wrote a piece about the ‘Dirty Little Secret’ Of Microsoft’s Cloud Business (Read more: http://www.businessinsider.com/microsofts-cloud-business-the-good-the-bad-the-ugly-2014-11#ixzz3J9nr18dq).
In essence the write-up suggests that Microsoft is pushing an inclusion of free-cloud-capacity to its huge on-premises customer base as part of large on-premise enterprise renewals. And that later on as part of Microsoft’s internal revenue allocation the renewals are allocated partly to the cloud services. This can potentially explain Microsoft reported $4-billion-mark in revenue from the cloud services.
I am no expert on revenue reporting but that sounds somewhat “creative” way of looking at the numbers. To add to that, the other critical aspect that is suggested in the article is that a lot of the free-cloud-capacity remains not used, what in the good old days of on-premises software we used to call shelfware.
Here is the little contribution I can bring to the table.
Over the past couple of years (and this started before Microsoft’s new CEO era), i have witness several conversations within IT managers at large North America corporations, where they were debating about what to do with the free-cloud-capacity from Microsoft. Sometimes these discussions became almost comical. Trying to find a good use for the extra capacity without a real business imperative driving it. Driven by IT and not by the Business. And with a label of temporary associated with it as the free-cloud-capacity has expiration date associated with it.
One can wonder if the transition from free-cloud-capacity to a paid-cloud-capacity will be as smooth as Microsoft would want. I suspect that this is going to be a dramatic question for Microsoft’s future success.