The company products/services segments and success factors


Microsoft is an American multinational technology
company operating in the computer and software market founded in 1975.The Company
is headquartered in Redmond Washington with 124,000 employees and a net income
of $23.09 billion as of 2017 operating in more than 190 countries. Microsoft
success is owed to their uniqueness and creativity of their software solutions
starting with their operating systems like the Microsoft Disk Operating System
(MS-DOS) proceeded with the famous Windows 1.0 in 1985 and its continued
evolution in OS. Technology is a rapidly evolving service and in order for
companies to survive they need to adapt and evolve their strategies with a long
term 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 Nadella
succeeded the previous CEO Steve Ballmer where the previous highest share value
was $59.95 in December of 199912Appendix A.Microsoft is an example of an
adapting company as in the past 3 years after changing their market strategy the
share price has continued to rise while maintaining its brand name for a wide
range of products including software and hardware devices. Microsoft’s long
history in technology has given it a strong reputation in the market and today
it is valued to be $143 billion in 2017 the highest it has been in Microsoft’s
history 7.

In 2015, Microsoft changed its financial
reporting structure in order to emphasize the company’s strategy and ambitions
to “build best-in-class platforms and productivity services for mobile-first
and cloud-first world” 4. The restructuring of the company meant that the mobile
phone business will be reduced vastly after seeing that the goodwill paid for
the Nokia Corporation’s Devices and Services (NDS) inferred a carrying value
exceeded the its estimated fair value leading to goodwill impairment charges of
$7.5 billion to their phone business and $2.1 billion of restructuring charges
that included employee severance expenses and the write down of certain assets
connected to the restructuring activities. In addition to these impairments and
restructuring charges, integration expenses associated with the acquisition of
NDS was $435 million. These expenses meant that the net income of the company
was reduced as opposed to the previous year. In 2016, the impairment charges
were vastly reduced to $1.1 billion; in 2017, the company continued to pay
severance expenses of $306 million related to sales and marketing restructuring
plans. On the other hand, Microsoft’s strategy to focus on cloud computing and
server 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 20178
9 10 Appendix A proving the strength and profitability of the cloud based
and server market. In 2017 a new modified vision was incorporated which
remained focused on cloud computing with an addition of Artificial Intelligence
technology of “building the best-in-class productivity services for an
intelligent cloud and intelligent edge infused with artificial intelligence”.
The segments were narrowed from five segments: Windows and Windows
Live, Server and Tools, Online Services, Microsoft Business, and Entertainment
and Devices to three segments: Productivity and Business Processes, Intelligent
Cloud, and More Personal computing 5 4. In the Intelligent Cloud Segment of Microsoft, the Server Products
and Cloud Services face competition in two almost different groups where the
focus will be on Microsoft Cloud Services: Azure as it conveys most of the
revenue and income for this segment. The competition in the segment of cloud
computing is diverse as there are many services within the cloud computing
segment. Cloud computing has different architectures such as Infrastructure as
a Service(IaaS), Platform as a Service(PaaS), and Software as a Service(SaaS)
where IaaS and PaaS has been dominating the market. Along with these
architectures, there are deployment models associated with it such as private
cloud, public cloud, hybrid clouds, community clouds, federated clouds,
inter-cloud, and multi-cloud 13. The
company is now the 2nd leading cloud provider in public IaaS after
market leader Amazon Web Services(AWS) and with the fastest growth in the
industry they were also the 2nd leading PaaS provider afters
Appendix A


The company’s Intelligent Cloud segment offers public, private, and
hybrid server products and cloud services for businesses. This segment
primarily comprises Server products and cloud services, including SQL Server,
Windows Server, Visual Studio, System Centre, and related Client Access
Licenses(CALs), as well as Azure. In addition, it provides Enterprise Services,
including premier support services and Microsoft consulting services. In this
sector they provide solutions for IoT related projects to pursue business
growth by enabling connectivity of devices to the internet in multiple
industries such as manufacturing, smart cities, transportation, healthcare and
retail 17. In addition, they provide Cortana Intelligence, which transforms
data into intelligent actions through the cloud platform, Azure, suitable for
information management, big data stores, machine learning and advanced
analytics alone or integrated with dashboards and visualisations to enable data
visualisation 16. Furthermore, Cortana Intelligence is used as the Cortana
bot which enables natural human interactions 16. Moreover, Microsoft have
been expanding their global datacentres that is powering their Cloud
infrastructure and reaching to 42 regions worldwide with more than 100
datacentres providing scalable, reliable and energy efficient connectivity to
their platform 18 19. Microsoft provides the solution of Operations
Management Suite as a collection of management services that were initially designed
in the cloud and therefore it is entirely hosted in Azure offering monitoring
and log analytics for the availability and performance of physical and virtual
resources, automation and control, protection and disaster recovery, and
security and compliance to respond to security threats identified and enable
protection 20 21. Microsoft Azure is not restricted to one sector of
Industry as shown by Microsoft’s industry solutions providing a wide range of
sectors for different purposes such as banking, insurance, manufacturing,
media, the public sector retail and goods, and telecommunications. The adoption
can be seen in many companies as the use of cloud platforms have now been on
demand and the market share for this sector will continue to grow rapidly as
the technology being adopted requires scalable and reliable resources with
Microsoft leading in the market growth. Appendix A

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Analysis: (refer to Appendix B and C for external and internal factors)


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

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

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
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

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
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 to
Appendix 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
Development of HoloLens for better
learning capabilities and visualization and integrating it into the cloud
Research into the quantum computing to
enhance computing power in the future




Targeting and positioning;

and Targeting:


Globally Microsoft’s customers from Azure’s products extend to a
1135 globally excluding the monthly subscriptions to their product. The focus
will be on their customer base in North America. The companies are grouped
based on Industry classification:

Azure’s customers extend geographically across 9 different regions
with 380 customers in North America. The industries and regions specified are
further segmented into small, medium, large and corporate size organizations with
small being 1-49 employees; medium being 50-999 employees; large being
1,000-9,999 employees; and corporate being more than 10,000 employees. In the
United States, there are 293 companies are divided into 73 medium sized organizations;
105 large organizations; 68 corporate organizations; 42 small organizations; 5
companies with undefined size 66. Microsoft segments its customers by size
Enterprise Partner Group and Small and Medium Solutions and Partners which are
then further segmented by industry with focus on Financial Services, Manufacturing,
Retail, Health, and Government which are conventionally segmented similarly in
Azure’s platform.

Azure Operations:

Azure operations include a wide range of technologies extending
from compute, networking, storage, web and mobile, containers, databases, data
and analytics, AI and cognitive services, IoT, enterprise integration, security
and identity, developers tools, monitoring and management, and Microsoft Azure
stack. The manufacturing industry has an emerging trend to meet challenges in
the Industry 4.0 with the Azure platform the hybrid intelligent edge and
intelligent clouds can be connected together with IoT solutions provide
together 72. Similarly, retailers and consumer goods are using Microsoft
Azure with data, AI, and IoT to enhance their businesses 75. Whereas the
health industry with the emerging technology trends sees to merge with it
Health 2.0 and hopes to leverage machine vision, video analytics, health
analytics, population health, patient records, and precision medicine offering
73. Similarly, the financial services leverage Microsoft Azure for similar
purposes to transform an intelligent Banking platform 74. The government have
also used Azure platform for various levels civil, governmental, federal levels
to optimize city infrastructure and government databases.


Purchasing Situations:

Microsoft was able to exploit the customers subscribed to their
products such as Microsoft Dynamics 365, office 365, and Skype for business and
extend their product portfolio towards Azure. Existing customers using Azure
purchased subscriptions towards their cloud platforms to further enhance their
productivity 68. Microsoft’s offering for some managing products in its cloud
platform attracted new customers to buy from them such as Quantum technologies
manufacturer, Itron, and Tyco International, Honeywell, and Centrify 68 69
70 71. The companies saw an opportunity to integrate all work into one
platform through Azure most evidently through the discrete manufacturing sector
as Microsoft provided specialized applications for these companies 67 and the
chance to integrate work into a cloud platform with an extension of industry
4.0 technologies for monitoring, predictive maintenance, and asset management.

Vendor/Product Attributes:

Legacy Supply Chain a logistics company used Azure Logic Apps to
adopt customers faster and reduce technology operating costs partnered
professionally with Azure. In addition, Adobe a software company partnered with
Azure to create for its customers Adobe Creative cloud to integrate data
analytics with content and campaign management. Another big segment for Azure
is the manufacturing industry as with the rise of IoT industry and AI evolution
companies are wanting to deliver services with cloud platform due to the ease
of use and resource saving. An example of this is Johnson Controls who provide
technology solutions and they wanted to adopt a cloud service for the smart
thermostat which was then based on windows 10 IoT operating system predominantly
using Azure’s IoT suite and Cortana Intelligence. Other manufacturers with
similar requirements are Rockwell Automation, Honeywell, Peterson, Adobe, and
HP. and providing customers with extra services for their applications such as
Azure Location Based Services with continuous development for the IoT segment
and AI.











Through the marketing mix Microsoft differentiated marketing scheme
focuses on an intelligent edge and intelligent cloud products enabled through
companies in the manufacturing industry the prospect of interconnected devices
is growing with industry 4.0 providing a cloud platform for data analytics,
cognitive services, monitoring, asset management, predictive maintenance and
other services can be met with the cloud platform. The retailing and consumer
goods industry can also bring Azure a strong market growth with similar
requirements for the development in the segment.


Microsoft continuous research on areas such as IoT and AI solutions
and introduction of new products to integrate into their cloud platform such as
the HoloLens it will bring the manufacturing industry towards a more rapid
production, reliable maintenance, and scalable productivity. Azure develops
various products as well for the industry sector such as the production of
hybrid cloud solutions and the ability to migrate businesses private cloud onto
Azure public cloud to scale their on-premises infrastructure and deploy data
and applications at least capital expenditure this is shown through their azure
stack that allows customers to deploy applications from their private cloud to
the subscribed public cloud.


Azure involves 4 vendor types: certified devices vendors, security
auditors, system integrators, and independent software vendors to provide, as
well as available separately on their website to sell IoT solutions to customers.
Azure products for hybrid cloud are only accessible through their website as it
is one of their competitive advantage against competitors.


Azure employs a subscription based billing model for the resources
used by the business and therefore depending on the technical implementation of
the 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 to
more than $9,000 per month depending on the support plan chosen that is
provided by Microsoft as well as transactions and units used in the IoT suite.


Azure has positioned itself as the 2nd leading public
IaaS provider with a competitive edge for providing a true hybrid cloud
solution. The positioning of Azure in the market has driven competitors such as
AWS to lower their prices for their customers showing Microsoft strong market
leadership competing with AWS prices. Azure unique showcase towards the hybrid
cloud makes it desirable for businesses that need hyper scale applications. The
growing market desire for Azure could position it as a leader with more
research and recruitment of qualified cloud engineers in their cloud platform
along with the extensive global expansion of datacentres.



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