Microsoft is holding a press conference Monday in San Francisco to discuss its cloud computing business. But Microsoft CEO Satya Nadella couldn’t wait to give an update.
To give you some perspective, pure cloud company Salesforce.com hit just over $US4 billion in revenues in its last fiscal year and expects to hit $US5.3 billion at the end of its current fiscal year. Amazon doesn’t release its cloud revenues, but Synergy Research Group believes Amazon Web Services is generating more than $US1 billion a quarter/over $US4 billion a year now, too.
In Microsoft’s case, much of that income is being plowed back into the cloud business to grow it as fast as possible.
“I think that if you’re not already spending a lot of capital in the order of four or five billion dollars each year to just grow your cloud, probably it’s a little too late to enter the market,” he told CNBC’s Jon Fortt.
Microsoft has Azure, a cloud that competes with Amazon, Google, IBM, and others to host software. It also offers several software-as-a-service options, which are Microsoft products available as a subscription delivered over the internet.
These include Office 365 and Microsoft Dynamics CRM (which competes with Salesforce.com). Microsoft has also formed new cloud partnerships with companies that are its historic, bitter rivals, like Salesforce.com and Oracle.
Nadella admits that this $US4.5 billion is nothing compared to Microsoft’s $US70 billion business, which still mostly comes from selling software the old-fashioned way, as a licensed product.
But he’s convinced that as cloud computing grows, so will Microsoft’s share of it.
Market research firms are predicting explosive growth for the cloud market, 30% a year. By 2017, Bain predicts cloud will be 10% of all the money spent on IT, $US150 billion. And it could be a $US270 billion market by 2020, predicts Market Research Media.
Unlike Mobile, Nadella says that no one will accuse Microsoft of “missing cloud computing.” This is what he told CNBC’s Jon Fortt.
In the cloud I would say we absolutely caught the trend. See, it’s no longer about, hey is Microsoft in the cloud business. We have a $US4.5 billion business that’s growing well and it’s fantastic to see. It’s just that in relation to our success of $US70 billion it’s a small business.
But the overall magnitude of our cloud business today shows that we’ve caught the trend at the right time, jumped on it with a unique value proposition and we’re now further accelerating. So it’s no longer for debate, whether we get the cloud.