The move to enterprise cloud computing
Satya Nadella took over as CEO in early 2014. While he gets a lot of credit for Microsoft’s turnaround, the foundations were in fact laid earlier. This happened when Microsoft embraced enterprise and cloud computing.
Azure is Microsoft’s cloud computing platform. It allows clients to build and deploy cloud-based applications that are run on servers in Microsoft’s data centres. The platform makes Microsoft a SaaS (software as a service), PaaS (platform as a service) and IaaS (infrastructure as a service) player.
Cloud computing platforms give companies more flexibility as their computing power is no longer limited by their own hardware. Capacity can simply be added or reduced as and when needed. Microsoft has used its corporate reach to grow Azure into the second-largest cloud provider in the world, behind Amazon’s AWS. Azure is now the company’s primary growth driver growing revenue at 60% a year.
Other areas of the business have also improved over the last 5 to 7 years. The office was switched to a subscription model with Office 365. This has expanded the market to include people previously reluctant to buy software that will need to be replaced after a few years. Rather than trying to force customers to use Windows devices to access Office apps, Microsoft took the apps to Apple and Android users. This again expanded the market for Office365.
In 2018, Microsoft also bought GitHub, the leading repository for code. Developers use GitHub to store, share and collaborate on code. The purchase will give Microsoft better access to the world’s development community and improve its image amongst developers. This marks a big change for a company that previously kept everything in the house and closely protected.
The hardware division is also gaining more momentum, though growth and margins trail the rest of the business. However, a new innovation in this segment can be used to showcase Microsoft’s capabilities.
The next frontier for the company is healthcare. Microsoft hopes to use its expertise and resources along with artificial intelligence to transform the industry on several fronts.
When Nadella took over in early 2014 the stock was trading around $37. Five and half years later it is above $140, a gain of nearly 400%.
Revenue growth has accelerated from around 5% to 15% and profits are now growing at over 20% a year.
Perhaps more importantly, Microsoft’s culture has changed. It is embracing open source development and collaboration with other companies. In the process, the company has regained the respect of the development and investor communities.
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