Why Microsoft Has The Largest Commercial Cloud Business, Surpassing $38 Billion In Revenue Per Year
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It’s hard to believe that Microsoft—which used to be an also-ran company in cloud computing until just a few years ago—has today the largest commercial cloud business in the world, surpassing $38 billion in revenue for its last fiscal year (2019) that ended June 30.
To put this in perspective, that’s about 4 times the size of Google Cloud which has an annual run rate of $8 billion, or nearly 3 times the size of Salesforce.com which generated $13.3 billion in revenue in its last fiscal year, and still tops Amazon Web Services which brought in $25.7 billion for its 2018 fiscal year that ended last December.
Microsoft’s commercial cloud business spans from cloud infrastructure to applications
“We are building Azure as the world’s computer addressing customers’ real-world operational sovereignty and regulatory needs,” said Microsoft CEO Satya Nadella in a call with financial analysts last month. “We have 54 data center regions, more than any other cloud provider, and we were the first in the Middle East and in Africa.”
To clarify, Microsoft is including in its commercial cloud business revenues from its Azure public-cloud computing service—consisting of servers, storage, databases, networking, and software (SQL Server, Windows Server, Visual Studio, System Center, GitHub…)—also referred to as the Intelligent Cloud segment, Office 365 (Office, Exchange, SharePoint, Skype for Business, and Microsoft Teams), LinkedIn, and Dynamics 365 (cloud CRM and ERP).
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When Nadella took the helm of Microsoft, a little more than five years ago, in February 2014, the first major thing he did was to pivot the company’s strategy from the then-current “devices and services” vision laid out by its predecessor, Steve Ballmer, to a mobile-first, cloud-first approach which helped transformed the client-server company into a cloud leader—it also helped that Nadella was the head of Microsoft’s cloud business when he took on the CEO job.
“Microsoft has always been about bringing those three constituents [end users, developers, and IT professionals] together with platforms and applications, and we now do that in a mobile-first, cloud-first world, and that’s our pursuit, that’s our innovation agenda, and that’s what you’ll hear us talk a lot about,” said Nadella during his first media briefing, just five weeks after being announced as the new CEO of Microsoft.
A rich breadth of cloud services
Amongst the 5 top commercial cloud providers—Amazon, Microsoft, Alibaba, Google, and IBM—Microsoft along with Google are the only ones with a cloud offering that spans from cloud infrastructure services (IaaS) all the way to applications or software-as-a-service (SaaS).
Today, cloud computing is clearly the foundation of Microsoft’s growth strategy—as of this writing, the software giant is the most valuable company on earth surpassing $1 trillion in market capitalization—betting on the development and acquisition of open source and cloud-based technologies including Linux, Cloudyn, Cycle Computing, Bonsai, GitHub, BlueTalon, and PromoteIQ while de-emphasizing Windows’ dominance inside the technology giant headquartered in Redmond, Washington.
In conclusion, Microsoft’s turnaround under Nadella is one of the most successful enterprise digital transformations we’ve seen so far.