The company products/services segments and success factors Microsoft is an American multinational technologycompany operating in the computer and software market founded in 1975.
The Companyis headquartered in Redmond Washington with 124,000 employees and a net incomeof $23.09 billion as of 2017 operating in more than 190 countries. Microsoftsuccess is owed to their uniqueness and creativity of their software solutionsstarting with their operating systems like the Microsoft Disk Operating System(MS-DOS) proceeded with the famous Windows 1.0 in 1985 and its continuedevolution in OS.
Technology is a rapidly evolving service and in order forcompanies to survive they need to adapt and evolve their strategies with a longterm planning. According to a BBC article Microsoft’s share value rose to$60.73 in 2016 from a share value of 37$ in February 2014 when Satya Nadellasucceeded the previous CEO Steve Ballmer where the previous highest share valuewas $59.95 in December of 199912Appendix A.Microsoft is an example of anadapting company as in the past 3 years after changing their market strategy theshare price has continued to rise while maintaining its brand name for a widerange of products including software and hardware devices.
Microsoft’s longhistory in technology has given it a strong reputation in the market and todayit is valued to be $143 billion in 2017 the highest it has been in Microsoft’shistory 7.In 2015, Microsoft changed its financialreporting structure in order to emphasize the company’s strategy and ambitionsto “build best-in-class platforms and productivity services for mobile-firstand cloud-first world” 4. The restructuring of the company meant that the mobilephone business will be reduced vastly after seeing that the goodwill paid forthe Nokia Corporation’s Devices and Services (NDS) inferred a carrying valueexceeded the its estimated fair value leading to goodwill impairment charges of$7.5 billion to their phone business and $2.1 billion of restructuring chargesthat included employee severance expenses and the write down of certain assetsconnected to the restructuring activities. In addition to these impairments andrestructuring charges, integration expenses associated with the acquisition ofNDS was $435 million. These expenses meant that the net income of the companywas reduced as opposed to the previous year. In 2016, the impairment chargeswere vastly reduced to $1.
1 billion; in 2017, the company continued to payseverance expenses of $306 million related to sales and marketing restructuringplans. On the other hand, Microsoft’s strategy to focus on cloud computing andserver applications business resulted in a rapid increase of net income from$12.19 billion in 2015 to $16.80 billion in 2016 to $21.
2 billion in 201789 10 Appendix A proving the strength and profitability of the cloud basedand server market. In 2017 a new modified vision was incorporated whichremained focused on cloud computing with an addition of Artificial Intelligencetechnology of “building the best-in-class productivity services for anintelligent cloud and intelligent edge infused with artificial intelligence”.The segments were narrowed from five segments: Windows and WindowsLive, Server and Tools, Online Services, Microsoft Business, and Entertainmentand Devices to three segments: Productivity and Business Processes, IntelligentCloud, and More Personal computing 5 4.
In the Intelligent Cloud Segment of Microsoft, the Server Productsand Cloud Services face competition in two almost different groups where thefocus will be on Microsoft Cloud Services: Azure as it conveys most of therevenue and income for this segment. The competition in the segment of cloudcomputing is diverse as there are many services within the cloud computingsegment. Cloud computing has different architectures such as Infrastructure asa Service(IaaS), Platform as a Service(PaaS), and Software as a Service(SaaS)where IaaS and PaaS has been dominating the market. Along with thesearchitectures, there are deployment models associated with it such as privatecloud, public cloud, hybrid clouds, community clouds, federated clouds,inter-cloud, and multi-cloud 13. Thecompany is now the 2nd leading cloud provider in public IaaS aftermarket leader Amazon Web Services(AWS) and with the fastest growth in theindustry they were also the 2nd leading PaaS provider afters Salesforce.com.Appendix A The company’s Intelligent Cloud segment offers public, private, andhybrid server products and cloud services for businesses. This segmentprimarily comprises Server products and cloud services, including SQL Server,Windows Server, Visual Studio, System Centre, and related Client AccessLicenses(CALs), as well as Azure.
In addition, it provides Enterprise Services,including premier support services and Microsoft consulting services. In thissector they provide solutions for IoT related projects to pursue businessgrowth by enabling connectivity of devices to the internet in multipleindustries such as manufacturing, smart cities, transportation, healthcare andretail 17. In addition, they provide Cortana Intelligence, which transformsdata into intelligent actions through the cloud platform, Azure, suitable forinformation management, big data stores, machine learning and advancedanalytics alone or integrated with dashboards and visualisations to enable datavisualisation 16. Furthermore, Cortana Intelligence is used as the Cortanabot which enables natural human interactions 16. Moreover, Microsoft havebeen expanding their global datacentres that is powering their Cloudinfrastructure and reaching to 42 regions worldwide with more than 100datacentres providing scalable, reliable and energy efficient connectivity totheir platform 18 19. Microsoft provides the solution of OperationsManagement Suite as a collection of management services that were initially designedin the cloud and therefore it is entirely hosted in Azure offering monitoringand log analytics for the availability and performance of physical and virtualresources, automation and control, protection and disaster recovery, andsecurity and compliance to respond to security threats identified and enableprotection 20 21.
Microsoft Azure is not restricted to one sector ofIndustry as shown by Microsoft’s industry solutions providing a wide range ofsectors for different purposes such as banking, insurance, manufacturing,media, the public sector retail and goods, and telecommunications. The adoptioncan be seen in many companies as the use of cloud platforms have now been ondemand and the market share for this sector will continue to grow rapidly asthe technology being adopted requires scalable and reliable resources withMicrosoft leading in the market growth. Appendix A SwotAnalysis: (refer to Appendix B and C for external and internal factors) Strengths · Extending data centres globally with investment of $15 billion in 36 data centre.
· Research and development facilities in U.S, Canada, China, India, Ireland, Israel, United Kingdom. · Microsoft Research organization collaborating with top universities worldwide · Microsoft revenue from Intelligent Cloud increased by 7.
45% in 2017 · 2nd leading public service provider in IaaS sector over a period of · Microsoft’s data centres are powered by renewable energy · Contributors to their platform of more than 9000 people · Cloud requirements in their physical resources are met through various products · Strong growth in the market share of cloud services Weaknesses · Decrease in operating income by 2% due to increase in operating expenses of $973 million in sales and marketing and research and development · Extra cost from directly purchased renewable sources · Azure open source approach lacks the support from Azure professionals · Azure ecosystem is inexperienced for big enterprise solutions · Azure’s client portfolio is smaller compared to AWS · Azure’s quality in professional services is inconsistent Opportunities · Certified by standardization bodies such as the ISO, NIST, CSA for cloud computing requirements · Microsoft commits for the ISO 37001 anti-bribery management · Privacy Shield framework gives Microsoft a trustworthy image for EU customers for data privacy · GDPR will give more data control for customers hence more trust and hence more customers to providers · Microsoft provides globally to all countries with no state sanctions · Microsoft investment in datacentres locations is strategically planned based on countries with high opportunity of cloud services such as Germany and the UK and soon in France · Public cloud adoption is increasing worldwide · Microsoft commits to investment in renewable energy to power datacentres · Microsoft’s Azure is used in data analytics for aircrafts, agronomic research, equipment maintenance, and smart farming · Microsoft extended its partnership with SAP to extend cloud solutions for customers and acquisition of other cloud providers such Cloudyn and Avere Systems for computing usage management and storage such Threats · Microsoft Litigations by the EU and other countries for competition law · Donal Trump’s immigration policies affect Microsoft’s employees · The GDPR act by the EU parliament will ensure security of cloud providers and data breaches will cause a fine to the provider · Microsoft will need to spend resources for compliance to the GDPR act · Microsoft is reviewed for anti-bribery allegations for violating U.S. Foreign Corrupt Practices Act · Cloud providers are subject to cyber-attacks by individual or group hackers backed by state-sponsored organizations · Microsoft was subject to currency exchange loss in 2017 and Azure in United Kingdom is more expensive · Competition in the cloud market from different vendors such as AWS, Google, IBM and others Ansoff’s matrix: (Refer toAppendix D for Further Information) Existing Products & Exiting Products (Market Penetration) · Azure is 2nd leading IaaS public cloud provider and 2nd leading Enterprise Application PaaS provider with a prospective of growing market share · Microsoft is one of the few vendors providing Hybrid cloud services · Azure prices combined with the services provided have led market leader AWS to reduce prices by offering cloud management services for usage like the Enterprise Cost Management · Azure customer’s subscriptions of 120,000 per month New Products& existing Market (Product Development) · Research in innovative sectors such as cognitive APIs, machine learning and blockchain. · Azure offers more than 70 compliance offerings applied to cloud security and privacy requirements. · Offers data migration of database before market leader AWS · Acquisition of Cloudyn, Avere systems to extend research facilities and cloud services Existing Products & New Markets (Market Development) · 6 data centres expansions in South Africa, France, and Australia · Leading to an increase in labour skills and digital literacy · Expanding governmental services to international countries · Expand customers’ portfolio to Europe with extending existing Availability Azure Services to France New Products & New Markets (Diversification) · Research of AI, human computer interaction, and Computer Vision some already in place in the cloud platform · Research on Systems related topics for Data Visualization, Analytics and to further enhance IoT projects with cloud services · Development of HoloLens for better learning capabilities and visualization and integrating it into the cloud platform · Research into the quantum computing to enhance computing power in the future Segmentation,Targeting and positioning;Segmentationand Targeting:Demographic:Globally Microsoft’s customers from Azure’s products extend to a1135 globally excluding the monthly subscriptions to their product. The focuswill be on their customer base in North America. The companies are groupedbased on Industry classification:Azure’s customers extend geographically across 9 different regionswith 380 customers in North America. The industries and regions specified arefurther segmented into small, medium, large and corporate size organizations withsmall being 1-49 employees; medium being 50-999 employees; large being1,000-9,999 employees; and corporate being more than 10,000 employees.
In theUnited States, there are 293 companies are divided into 73 medium sized organizations;105 large organizations; 68 corporate organizations; 42 small organizations; 5companies with undefined size 66. Microsoft segments its customers by sizeEnterprise Partner Group and Small and Medium Solutions and Partners which arethen further segmented by industry with focus on Financial Services, Manufacturing,Retail, Health, and Government which are conventionally segmented similarly inAzure’s platform.Azure Operations:Azure operations include a wide range of technologies extendingfrom compute, networking, storage, web and mobile, containers, databases, dataand analytics, AI and cognitive services, IoT, enterprise integration, securityand identity, developers tools, monitoring and management, and Microsoft Azurestack. The manufacturing industry has an emerging trend to meet challenges inthe Industry 4.0 with the Azure platform the hybrid intelligent edge andintelligent clouds can be connected together with IoT solutions providetogether 72. Similarly, retailers and consumer goods are using MicrosoftAzure with data, AI, and IoT to enhance their businesses 75.
Whereas thehealth industry with the emerging technology trends sees to merge with itHealth 2.0 and hopes to leverage machine vision, video analytics, healthanalytics, population health, patient records, and precision medicine offering73. Similarly, the financial services leverage Microsoft Azure for similarpurposes to transform an intelligent Banking platform 74. The government havealso used Azure platform for various levels civil, governmental, federal levelsto optimize city infrastructure and government databases. Purchasing Situations:Microsoft was able to exploit the customers subscribed to theirproducts such as Microsoft Dynamics 365, office 365, and Skype for business andextend their product portfolio towards Azure. Existing customers using Azurepurchased subscriptions towards their cloud platforms to further enhance theirproductivity 68. Microsoft’s offering for some managing products in its cloudplatform attracted new customers to buy from them such as Quantum technologiesmanufacturer, Itron, and Tyco International, Honeywell, and Centrify 68 6970 71.
The companies saw an opportunity to integrate all work into oneplatform through Azure most evidently through the discrete manufacturing sectoras Microsoft provided specialized applications for these companies 67 and thechance to integrate work into a cloud platform with an extension of industry4.0 technologies for monitoring, predictive maintenance, and asset management.Vendor/Product Attributes:Legacy Supply Chain a logistics company used Azure Logic Apps toadopt customers faster and reduce technology operating costs partneredprofessionally with Azure.
In addition, Adobe a software company partnered withAzure to create for its customers Adobe Creative cloud to integrate dataanalytics with content and campaign management. Another big segment for Azureis the manufacturing industry as with the rise of IoT industry and AI evolutioncompanies are wanting to deliver services with cloud platform due to the easeof use and resource saving. An example of this is Johnson Controls who providetechnology solutions and they wanted to adopt a cloud service for the smartthermostat which was then based on windows 10 IoT operating system predominantlyusing Azure’s IoT suite and Cortana Intelligence.
Other manufacturers withsimilar requirements are Rockwell Automation, Honeywell, Peterson, Adobe, andHP. and providing customers with extra services for their applications such asAzure Location Based Services with continuous development for the IoT segmentand AI. Targeting:Through the marketing mix Microsoft differentiated marketing schemefocuses on an intelligent edge and intelligent cloud products enabled throughcompanies in the manufacturing industry the prospect of interconnected devicesis growing with industry 4.0 providing a cloud platform for data analytics,cognitive services, monitoring, asset management, predictive maintenance andother services can be met with the cloud platform. The retailing and consumergoods industry can also bring Azure a strong market growth with similarrequirements for the development in the segment.
i-Product:Microsoft continuous research on areas such as IoT and AI solutionsand introduction of new products to integrate into their cloud platform such asthe HoloLens it will bring the manufacturing industry towards a more rapidproduction, reliable maintenance, and scalable productivity. Azure developsvarious products as well for the industry sector such as the production ofhybrid cloud solutions and the ability to migrate businesses private cloud ontoAzure public cloud to scale their on-premises infrastructure and deploy dataand applications at least capital expenditure this is shown through their azurestack that allows customers to deploy applications from their private cloud tothe subscribed public cloud. ii-Place:Azure involves 4 vendor types: certified devices vendors, securityauditors, system integrators, and independent software vendors to provide, aswell as available separately on their website to sell IoT solutions to customers.Azure products for hybrid cloud are only accessible through their website as itis one of their competitive advantage against competitors.
iii-Pricing:Azure employs a subscription based billing model for the resourcesused by the business and therefore depending on the technical implementation ofthe enterprise it can employ few subscriptions to numerous subscription 75.The minimum price for the IoT suite would be $260 per month and can extend tomore than $9,000 per month depending on the support plan chosen that isprovided by Microsoft as well as transactions and units used in the IoT suite.80Positioning:Azure has positioned itself as the 2nd leading publicIaaS provider with a competitive edge for providing a true hybrid cloudsolution. The positioning of Azure in the market has driven competitors such asAWS to lower their prices for their customers showing Microsoft strong marketleadership competing with AWS prices. Azure unique showcase towards the hybridcloud makes it desirable for businesses that need hyper scale applications. Thegrowing market desire for Azure could position it as a leader with moreresearch and recruitment of qualified cloud engineers in their cloud platformalong with the extensive global expansion of datacentres.