Microsoft’s profit and revenue plummet in 2015, cloud computing grows

That’s because the numbers for its second fiscal quarter ended December 31, 2015, are in and they’re cause for celebration. On the negative side, Microsoft is suffering due to floundering personal computer business, which is hurting profits from longtime Microsoft software businesses, especially Windows, while on the positive side, the flourishing cloud business gives hopes to the investors that the company will retain its relevance at least for some years to come.

Cloud services are going so well for Microsoft that Business Insider suggests it is growing faster than Amazon’s reported 127% in revenue gain. Office 365 now has 20.6 million subscribers, which was a major contributor to the success of the sales of Productivity and Business Processes (PBP), which rose to $6.7 billion in value, from $6.3 billion in the last quarter.

Free cash flow for the quarter rose 25% to $3.6bn and the annualised run rate of commercial cloud revenues rose 70% year on year to $9.4bn.

More Personal Computing, which includes Windows, Devices, Search and Gaming, made $12.7 billion, up from $9.4 billion in the previous quarter.

Microsoft was particularly pleased with its cloud performance, noting a 10 percent rise in revenue related to server products and cloud services, and a big 140 percent jump in Azure revenue.

Over one third of the Fortune 500 companies have chosen our Enterprise Mobility solutions, up almost three times from the same quarter a year ago, the statement said, adding that the newly-launched Windows 10 is active on over 200 million devices.

During the quarter, Microsoft returned $6.5 billion to shareholders in the form of share repurchases and dividends.

“Businesses everywhere are using the Microsoft Cloud as their digital platform to drive their ambitious transformation agendas”, said Satya Nadella, chief executive officer at Microsoft. Even with the recent issues in the stock market, Microsoft’s shares are up more than 28 percent compared to the last season, while shares in rivals like Apple, Oracle and IBM have declined by double digits.

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Oracle Cloud SVP Shawn Price says “suites win” in cloud computing war with AWS and Microsoft Azure


Senior Vice President of cloud at Oracle Shawn Price thinks that competing cloud computing vendors are too fragmented for businesses and that “suites win” when it comes to Oracle’s strategy.

Shawn Price told Computerworld UK at the Oracle Digital Transformation Summit in London this week: “What does AWS do? Developer productivity but not [private] cloud. Are they a viable, great competitor? Sure. Azure? Very similar. But what about the point applications, where are they. Our strategy is to make sure that we hit the demand curve for the constituents exactly where they want and exactly how they want to consume. Suites win. Consuming the way you want. Remove the friction.”

Price used the example of the fast-growing mobile and online payments startup Stripe opting for Oracle cloud services. “What they needed was one platform to scale, and they were anticipating great complexity. They’re going to go into 200 markets across 16 currencies and they wanted to go live quickly and it’s showing in their results. They’ve gone from a $25 million valued company in 2009 to raising $250m capital at a $5 billion market valuation. These are the catalysts that are driving adoption.”

Reimagining the cloud?

Oracle is working hard to prove that it is a big player in the cloud computing market. A raft of disparaging comments about cloud computing from Oracle founder Larry Ellison opened the vendor up to accusations of being behind the curve when it comes to cloud.

Price, for one, is tired of that view: “People said you were late to the cloud. If you defined us in an old world, version one, one application best of breed then yeah, I could argue that maybe we were, but we’ve written seventy million lines of code, we started ERP seven years ago. We’re not late, we’ve completely reimagined what the cloud means, particularly around mission critical. This is a business at scale. Mark [Hurd, Oracle CEO] said it’s not inconceivable that in a very near quarter we will book over $1 billion in one quarter.”

Price sees Oracle’s suite of products as its competitive advantage. He explains: “If you look at it as data as a service, six hundred SaaS apps, forty plus platform offerings, all clustered around infrastructure, with portability between on-premise and the world, and an openness, I think you’ve got a completely different palette than any other company.”

Platform as a service

Oracle announced that it was extending its UK data centre capability in Slough to include platform as a service (PaaS) alongside software as a service (SaaS) and infrastructure as a service (IaaS).


This matches up with Price’s comments around a linked up cloud strategy: “What [our customers] told us economically was that we have to take the cost out of our physical infrastructure of how we run our applications, and we committed to move 95 percent of those applications to the cloud. So we moved almost forty services: database, middleware, security, big data, analytics all to the cloud as a service.”

“What’s beautiful about this is that the same skill sets that you are confident with behind the firewall transfer seamlessly to the cloud. Multiple programming environments, all apps and support for heterogeneous workloads. This platform as a service, today, powers the 19 largest SaaS companies in the world. SAP uses it, Salesforce uses it.”

Catalysts for change

Price laid out a set of catalysts driving companies to the cloud through the eyes of a CEO, CIO and CFO.

“If we look at the CEO, what’s really forcing them to modernise?” asks Price, “the first is a vast change in consumer expectations. The applications that you use to run your businesses weren’t contemplated with personalisation, or content that is searchable, or mobile and social.”

Then there is Oracle’s traditional lifeblood, the CIO: “They tell me they’ve bought ERP from me, or some German company [Price was fired by SAP in 2014]. They say: It cost us millions of pounds, it took us two years to implement, we customised it beyond recognition, and we pounded on your door saying ‘please innovate’ because we’re stuck. This is no longer acceptable because of the agility required.”

Then there are CFOs: “By far the single largest [catalyst] is around operating efficiency and upgrade avoidance. They don’t want to upgrade that ERP on premises. They want to rationalise, they say: I want a shared service that I can distribute across various entities.”

Read next: 5 Oracle licensing pitfalls customers should watch out for: How to avoid unexpected Oracle licence costs

Moving customers to the cloud allows Oracle to implement a more agile upgrade cycle, with the company producing around 500 upgrades every 90 days instead of having to wait months or even years.

Customer engagement

Price believes that cloud has hit an inflection point and that the old model of Oracle turning up “in suits and skirts” in order to pitch companies on the benefits of cloud are done. “I don’t want to try and convince companies to move to the cloud, I’m only looking for those natural catalysts and that’s what’s propelling and fuelling the growth,” says Price.

He proposes a new engagement model for customers where: “We come to see you at 9am tomorrow morning and we present to you what we think is state of the art across eighty percent of the use cases looks like. We share with you what we think are best practices with adoption, we can price you on what it takes to go live in 90 days, potentially on a fixed price, fixed bit. We can build a vision that shows you what you are going to add next, we can give you pricing and we can connect you with companies that have done it at a greater scale and complexity.”

In a marketplace that is growing as quickly as cloud computing, vendors are having to adapt quickly, and Oracle will hope that its bundled strategy will win customers over. As Price put it: “I think there’s a very different thing between buying a commoditised storage array and running your business, and we run businesses.”

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