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Microsoft chief reveals Azure upsell strategy

Azure competes with AWS on price as an IaaS, but Satya Nadella sees this as a way to get CIOs to buy higher-level services

Azure is positioned as Microsoft’s strategic platform to upsell high-level services, according to company CEO Satya Nadella.

In its latest fiscal results, Microsoft reported commercial cloud revenue of $15.2bn for the third quarter 2017, up 52%.

Overall, Microsoft reported third-quarter revenue of $21.1bn, up 6%, while net income was $4.8bn.

Productivity and Business Processes reported revenue of $7.96bn (up 22%), Intelligent Cloud grew by almost 11% to $6.76bn, but its Personal Computing division’s revenue fell by 7.4% to $8.84bn.

Microsoft said Office 365 now had more than 100 million monthly subscribers, and commercial deployments of the Office suite had grown by 35%.

In response to questions from Morgan Stanley, posted as part of the Q3 earnings call transcript posted on the Seeking Alpha financial blogging site, Nadella said transport and logistics company Maersk had started out using commodity Azure services and Office 365.

But, over time, such companies begin using more advanced services such as Microsoft Dynamics or HoloLens augmented reality, he said. “So to me, that’s why Azure is pretty strategic for us, not just for the attachment of high-level services in what is defined as Azure, but the all-up digital transformation opportunity.”

Nadella said Microsoft was also developing new business processes by integrating with its LinkedIn acquisition. For example, he said the Dynamics 365 talent applications combined HR business processes with LinkedIn Recruiter to help companies manage the employee lifecycle from recruitment to retention.

LinkedIn marked an important milestone this week, exceeding 500 million members, and our jobs platform hit new record levels with more than 10 million jobs posted,” he said. “This strong momentum with jobs and engagement is continuing to fuel the growth across talent, marketing, sales and learning solutions.”

When asked about overall growth of workloads on Azure, Nadella said the Azure Stack and SQL Server were helping to define the edge computing paradigm. “Azure Stack will enable customers to extend Azure capability to their private datacentre in a truly consistent hybrid computing environment,” he said.

“SQL Server is no longer just about a database that is on-premise. It is a database that is on-premise that can be tiered with the cloud. A single table can be extended to the cloud. The queries will work across both the tierings.

“And so, to me, the innovative work we are doing is what I would characterise as the future of true distributed computing, which is that it will remain distributed. And that’s what we are building towards. We will talk a lot more and build on that about that architecture and what we’re seeing with customers.”

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