Here are seven reasons why:
- As we discussed Saturday on an emergency Gillmor Gang, this cloud wars business is largely about audience size, reach, and details on consumer needs/preferences. This audience intelligence value can be sold to advertisers, but also to enterprises, retailers and marketers as they seek to deliver their brands, goods and services more efficiently to users/buyers everywhere, every digital way. The cloud compute-based, automated, bid-auction-driven, buyer-seller matchmaker powerhouses will be necessary partners for most enterprises. In other words, you will be doing business with the top one or two cloud leaders.
- Nearly all enterprises and SMBs will continue to have large Microsoft product footprints in their organizations for at least several years. You want such a critical supplier to remain focused and fiscally healthy and to invest in current and future products -- or you have a Microsoft extraction problem. If Microsoft goes tits-up online, it will be a weaker company and therefore a weaker supplier. If Microsoft needs to spend lavishly on labor, acquisitions, technology and marketing to get to number one or number two online, it will be distracted from its business-focused businesses. In other words, enterprises spending on Microsoft now subsidize Microsoft's future needs to go cloud-strong, and perhaps enterprise software soft. You'll need to pay Microsoft on premises now so that you can pay Microsoft online later.
- As a hedge on the future, Microsoft is creating online strategy sets that can satisfy consumer online markets while also bringing purely online and "software plus services" hybrid services to SMBs and enterprises. How well these services compete with other offerings from other cloud-based services providers will determine how well these services perform for you as a company. In other words, your future in leveraging Microsoft's path from on-premises software provider to services provider hinges on how well Microsoft does online, which depends on audience and advertising/services (see no. 1). It will at some point behoove Microsoft to push you to its online business services, probably by making on-premises stuff expensive. But you will have more choice over your online suppliers than your did on your PC and department server supplier.
- An emboldened and stronger Google, resulting from a hobbled Yahoo and a runner-up Microsoft, means that more partners and applications will emerge around the Google ecology. We'll see more deals with Google from Salesforce.com, IBM, Apple, mobile handset providers, mobile Internet device makers, and probably the major media companies (lacking a choice). This just makes Google stronger, more diversified, able to spend $1 billion per quarter on capital investments, able to woo the best engineers, and a darling of online start-ups and entrepreneurial developers and content creators. This means Google is not only a channel for enterprises to reach consumers, it increasingly becomes the provider or channel for more and more business services to more types of businesses in more global locations.
- Microsoft is becoming more open. In order to catch up to Google and other ad-driven cloud compute-based providers, probably without Yahoo's audience clout, Microsoft will need to become even more open on standards. That's good news for enterprises. Microsoft is loosening up its strangle-hold on enterprises through its self-imposed standards. More importantly, Microsoft is giving its developers more choice. This is a slippery slope, because at some point Microsoft gets so open that the stickiness and lock-ins lessen so that the Windows runtime (and associated license sales) can be swapped out for open source or virtualized runtimes. Developers can pick and choose what Microsoft stuff they want to use, and then seek cheaper alternatives. To seduce developers and start-ups from Google, Microsoft must continue to get open in more ways, aiding the open source evolution and maturity, and giving enterprise more choices and lower total IT costs.
- Requirements on the PC change and shift. As Google and Yahoo drag Microsoft into a more pure-Web-play, and seek to offer attractive online alternatives to "software plus services," enterprises can re-evaluate their hardware spend and requirements on the desktop. Apple will also offer compelling alternatives for the full Windows PC experience. So enterprises, already resisting the hardware upgrade costs and help desk hit from moving to Vista, may benefit from Microsoft's need to "go Webby" because their hardware requirements will amount to supporting a browser mostly, at least for some users like call centers. This also opens up the market for use of more thin clients, as well as more use of desktop-as-a-service and virtualized app delivery services. Dumb terminals are not dumb if you need to pay for them and support them. By backing off of client-server, Microsoft will cut your PC device total costs. And no more audit threats!
- Microsoft's stock performance in the cloud era will depend less on its business revenues and more on how well it competes against Google, Yahoo et al. In the post Yahoo acquisition saga (volume 1), Microsoft may well see its value as a corporation decrease, even as recessionary pressures build against growth rates for its consumer and business product lines. Microsoft could have fewer resources to devote to its enterprise businesses (see above). At the same time, IBM, Oracle, Red Hat, and HP are firing well on their enterprise business cylinders, and they may see Microsoft blood in the enterprise sales waters. As an enterprise buyer, ask now and for the foreseeable for discounts and better terms from those enterprise vendors that compete directly with Microsoft. Microsoft's sales reps may not be able to respond like they used to. Microsoft's enterprise competitors will seek to take some oxygen from the field in the next several quarters. This is good news for enterprises, and SMBs.