Every Cloud Has a Tin Lining
June 9, 2009
I found the article “Microsoft Exec Sees Lower Margins from “Cloud” suggestive. You can read the article here (I hope), because this is the type of document that can come back and nibble at one’s ankles. The idea is that selling cloud services yields less revenue than selling shrink wrapped software. The article reported:
Microsoft Corp’s chief software architect said on Thursday the profit margins on providing online services — broadly known as cloud computing — would likely yield a lower profit margin than the company’s existing software business. “The margins on services are not like the margins on software, so it (cloud computing) will increase our profit and it will increase our revenue, but you won’t have that margin,” said Ray Ozzie on Thursday at a Silicon Valley technology event.
Several observations:
- If Microsoft deploys a cloud based enterprise search solution, the payback on the $1.2 billion purchase price, the engineering rework, and the marketing of the Fast ESP system may take a longer time to get into the black
- Stakeholders looking for a jet boost to the MSFT share price gets their feet placed in a bucket of ice water
- If the MSFT assertion is accurate, cost control becomes a much more significant for MSFT going forward in a lousy economy.
Stephen Arnold, June 8, 2009
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