The Doyle Report: Q2 Results Underscore How Cloud Sales are Propelling Microsoft

The Doyle Report: Q2 Results Underscore How Cloud Sales are Propelling Microsoft

By all accounts, Microsoft’s cloud sales are propelling the company forward. 

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Microsoft (MSFT) posted better than expected financial results on Jan. 26, another proof point that the company is rolling with positive momentum.

For the second fiscal quarter of 2017 ended Dec. 31, 2016, Microsoft earned $5.2 billion on sales of $24 billion. This compares to earnings of $5 billion on sales of $23.8 billion reported last year.

By all accounts, Microsoft’s cloud sales are propelling the company forward. For the quarter, sales from Microsoft’s Intelligent Cloud business segment, which includes Azure, climbed 8 percent to $6.9 billion. Recent growth has helped Microsoft create one of the largest cloud computing franchises in all of technology. In a prepared statement, CEO Satya Nadella said, “Accelerating advancements in AI across our platforms and services will provide further opportunity to drive growth in the Microsoft Cloud.”

This is especially true for partners. This week in San Jose at the 2017 Cloud Channel Conference, I got a chance to hear some insights why. There, Microsoft Director of Strategy for Cloud Larry Persaud delivered a presentation on using cloud technology to drive digital transformation. (If you’re in New York the week of Jan. 31, you can hear him speak at Legalweek: The Experience, where he’ll take part in a panel discussion entitled “Cloud 2025: The Truth About Cloud Technology.”)

In San Jose, Persaud said the heart of the company’s cloud ambitions is data—how it’s used, what it reveals and what new ways it can be leveraged. Armed with these insights, Microsoft is convinced that it can build offerings to transform even more of the world around us. This will be achieved in several ways:

  • Driving application innovation to help reduce deployment times from 12 months to three
  • Analyzing data to improve digital outcomes
  • Increasing the use of open software innovations to operate at a pace and “everlastingness” that traditional software developers cannot match
  • And, building greater trust and security into everything that it does

One of the things Persaud is focused on is helping partners better understand how they can apply these four principles to their customer engagements. This includes helping them create better personal computing experiences (be they PC, mobile, tablet or even VR device-based), reinvent productivity and business processes, and build the intelligent cloud platform.

In addition to sharing Microsoft’s goals, Persaud talked about some trends that are occurring within the Microsoft ecosystem. Partners that have leveraged Microsoft’s digital transformation playbooks, for example, have seen a 20-30 percent “lift” in their sales within the last year, Persaud said.

SaaS developers who have joined the AppSource marketplace launched last year, meanwhile, have as much as $70 billion in market opportunity between now and 2019, according to the company. This will be created by the millions of line-of-business customers (or “optimized” users, as Microsoft calls them) who procure SaaS capabilities through the cloud for their organizations. Microsoft, Persaud said, wants to better connect these buyers with channel partners to improve their customer experiences where possible.

Persaud wrapped his presentation with some advice on how Microsoft partners can stand out among their peers. His four tips include:

  • Differentiate your capabilities
  • Modernize your marketing and sales
  • Optimize your operations
  • And deliver lifetime value to your customers

In addition to partners, Microsoft’s efforts are resonating of late with investors, who have driven up shares of Microsoft stock nearly two-fold since Nadella took over as CEO in February 2014. At the time, Microsoft shares traded in the mid $30s. Now they trade in the mid $60s, giving the company a market cap of roughly $500 billion. Little surprise that Nadella has become one of the media’s favorite CEOs. In November 2016, Fortune labeled him, “The Man Who Is Transforming Microsoft.”

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