Following several consecutive quarters of losing market share to faster-growing cloud rivals, Microsoft CEO Satya Nadella and CFO Amy Hood this week vowed repeatedly to snatch cloud market share from AWS, Google Cloud, and all other cloud competitors.
This is the first time that I can recall where Microsoft — which, by the way, just reported $25 billion in quarterly cloud revenue — openly stated such ambitious intentions. Of course, you don’t generate $25 billion in quarterly cloud revenue — or about $2 billion per week — by being all lovey-dovey and passive about grabbing the lion’s share of the loot.
So, I’m not saying that Microsoft has suddenly flipped the “Be Aggressive!” switch. But for the very thoughtful Nadella to be so unmistakably blunt in saying very publicly that Microsoft’s ready to do whatever’s needed to boost its market share is a sure sign that we are entering a buyer’s market.
For business customers, this is fantastic news because, as I’ve said before about the dynamics in the Cloud Wars, where Microsoft goes, others tend to follow. If Microsoft is going to take whatever appropriate steps it needs to take to ensure its market share goes up rather than down or sideways as it has over the past year, then surely customers are going to be treated to some very attractive deals.
I think we can assume that Nadella’s plans for boosting market share will not include anything like, “Dear Customer: This inflation thing has been kicking our ass pretty hard, and while it might be doing the same to you, that’s not our problem — so, effective today, we’re raising prices by 10% across the board.”
No, I suspect Nadella and the team will take the opposite tack and become more aggressive on pricing and related terms. In fact, in two separate instances on the earnings call, Nadella made that point in a very big way.
First, at the very top of his opening remarks, Nadella said Microsoft is rigorously focused on three things. Of those, the first is helping customers do more with less, and the third is cranking up the heat internally on operational excellence.
But check out Microsoft focal point #2 in Nadella’s own words: “Second, we will invest to take share and build new businesses and categories where we have long-term structural advantage.”
They’re not simply planning to add a few training modules on “Boosting Market Share” for the sales org — no, as Nadella flat-out says, “We will invest to take share”.
In light of that, the other cloud vendors would be stark raving mad unless they take steps to counter the new and increasingly aggressive posture from Microsoft — ergo, the heavenly prospect for customers of a buyers’ market. Boy oh boyzee, talk about generating more with less!
Now was this “share” thing from Nadella just a one-and-done? Am I making too big a deal out of his out-of-the-gate remark about investing to take share — and by that, I sure don’t mean “share and share alike”?
Well, here are a few excerpts from the earnings call, and tell me if you notice a common theme:
- “We will invest to take share and build new businesses and categories where we have long-term structural advantage.”
- “Teams is taking share across every category from collaboration to chat to meetings to calling and seeing higher usage intensity….”
- “Despite a changing market for PCs during the quarter, we continue to see more PCs shipped than pre-pandemic and are taking share.”
- In cybersecurity, “We’re taking share across all major categories we serve.”
- “We are focused on increasing our share and engagement across Edge, Bing, and our personalized content feed, Microsoft Start.”
- “And Edge continues to gain share as consumers use it to save money with our built-in coupon and price comparison features.”
- “In our consumer business, despite those macro challenges, we drove another quarter of share gains for Windows in the PC market and for Edge in browsers.”
- “And as you heard from Satya, we saw share gains in areas such as data and AI, Dynamics, Teams, and security.”
- “We continue to expect double-digit revenue and operating income growth in both constant currency and U.S. dollars. Revenue growth will be driven by continued momentum in our commercial business and a focus on share gains across our portfolio.”
- “Our differentiated market position, customer demand across our solution portfolio, and consistent execution across the Microsoft Cloud should drive another strong quarter of revenue and share growth, although we expect to continue to see growth moderation in our small- and medium-sized business segment.”
- “And in Dynamics, we expect revenue growth in the mid-to-high teens, driven by share growth in Dynamics 365.”
- “In closing, we continue to see strong demand for our products and services and increased commitment to our platform as we remain focused on delivering compelling customer value in this dynamic environment, resulting in continued share gains.”
- Responding to a question about Azure growth: “I feel good about the workloads that Satya mentioned and where we feel like we can take some share.”
So, in the face of this totally unsubtle blitz from Microsoft, if I’m one of the other Cloud Wars Top 10 players, I’m going to rapidly launch some share-snatching plans of my own while also going on offense to retain the customers I’ve already worked so hard to gain.
However that highest-stakes competition works out among the cloud providers, the ultimate winners will be the customers.
Buckle up tight, folks!
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