Microsoft starts addressing IT investment needs of enterprises

Microsoft CEO Satya Nadella
Kelsey Mason, analyst at TBR, says Microsoft addresses the IT and strategic realities of enterprises.

Microsoft has evolved into a company that is able to speak to enterprises’ realities. Portfolio investments, partnerships and go-to-market strategies increasingly center on enablement of hybrid IT, which will be the end state for many enterprises’ IT environments. In addition, Microsoft has aligned its business apps to enterprise use cases, with the promise of role-based Dynamics 365 applications combined with professional data from the pending LinkedIn acquisition.

Microsoft revenue fell 7 percent to $20.61 billion with a profit of $3.12 billion in Q4 ended June 30, 2016.

Satya Nadella, chief executive officer at Microsoft, said: “Microsoft Cloud is seeing significant customer momentum and we’re well positioned to reach new opportunities in the year ahead.”

With commercial cloud revenue reaching approximately 15 percent of corporate revenue in CY2Q16, Microsoft has proven its ability to successfully migrate customers to cloud. On-premises software growth and margins suffer as a result, but a growing cloud base creates a myriad of opportunities to increase share of wallet.

Microsoft acquires LinkedIn to fill Dynamics’ functionality gaps

Microsoft is far behind its competitors in ERP and CRM in terms of functionality; however the announced LinkedIn acquisition provides a unique set of data that can serve as a differentiator for these suites. Microsoft can use the data volunteered by members and captured by LinkedIn to add value across its productivity, search, advertising and business applications portfolios; however the company will need to build out the complementary HCM and analytics technology to monetize its new data sources and IP most effectively.

LinkedIn’s acquisition of in April 2015 will add in-house learning management functionality to Dynamics. Though learning management is only a sliver of the HR market, it is an area in which companies are increasingly investing as employees’ expectations of training shifts from in-person to online. LinkedIn also provides Microsoft the data and IP needed to catch up to Salesforce in the CRM market. LinkedIn has natural implications around lead generation and target marketing, as the data generated by LinkedIn can help sales teams create a more personal and comprehensive view of their customers.

Dynamics 365 aligns business applications with customer use cases

Microsoft continually evolves its portfolio to address customers’ specific needs and use cases. The launch of Dynamics 365 in July, which brings together CRM, ERP and productivity under a common data model in the public cloud, allows customers to purchase products based on their unique roles. Closer ties, both functionality- and pricing-wise, to Office 365 will drive adoption of Microsoft’s business applications.

Microsoft increases addressable market of OMS as demand for hybrid management mounts Hybrid IT will be the end-state for many enterprises’ IT environments and thus, integration across deployment models and vendors is necessary. In light of this inevitability, Microsoft increasingly supports other vendors’ offerings both in terms of interoperability and management as IT environments become more complex. Microsoft’s Operations Management Suite (OMS) addresses the management pain points associated with hybrid IT.

Microsoft is evolving the go-to-market strategy of OMS to expand the solution’s addressable market. As of July 1, OMS can be purchased as a subscription in addition to being an add-on for Microsoft System Center. Selling OMS as a stand-alone expands the solution’s market outside of existing System Center users and eases the purchasing for new customers. The new purchasing model enables customers to manage their applications on Windows Server or Linux, and across clouds including Amazon Web Services.

Kelsey Mason, analyst at TBR