Video: Microsoft fights revenue decline as cloud shift hardens

In an exclusive interview with Computer Weekly, Microsoft Europe chairman Jan Mühlfeit responds to tough questions on:

• Where the cash will come from as the market moves to cloud computing.

• The firm's strategy for operating systems.

• How it is fighting back in mobiles.

• Its approach to huge new vertical markets like health care and energy management.

• The need to be cooler.

Read the full transcript from this video below:  

Video: Microsoft fights revenue decline as cloud shift hardens

Interviewer: This move to Cloud computing is clearly going to change
your business model. What is going to be the revenue model in
the Cloud for Microsoft, and what will this do to your earnings?

Jan Mühlfeit: I will start by saying we are in the software business for
30 years, in the enterprise business, both in the commercial
side and the private sector side for 20 years, and in Cloud
computing, in fact, with Hotmail, Microsoft Messenger, all the
stuff we have for 10 years now. We believe, and I will give you
some IDC numbers, next year the IDC is saying that Cloud
opportunities: $24 billion. According to the Gartner, 25% of the
business applications will be hosted in Cloud. Basically, we are
moving our customers to the Cloud and our partners to the cloud.

Obviously, the thing is you may have less revenue per user, but
there will be absolutely more users. For example, today, already
in an existing portfolio we have Business Productivity Online
Suite, which is an offering for a much broader set of customers,
the opportunity, that is the Microsoft piece. Then, obviously,
our partners, they can build their own application
add-ons on our platform.

Interviewer: Really, what you are talking about is your average per
user is going to go down.

Jan Mühlfeit: Probably, yes, but there will be many more users, that is
one point. The other point is we invested very early in emerging
markets. Today, the biggest internet market is China already. We
really believe that more users and more market is the right

Interviewer: Just talking about China. Google has had its problems with
China, and they have blamed security problems with Windows. They
have just recently been reported that they are going to give up
on Windows. What is your response to that?

Jan Mühlfeit: I will not comment on any rumors. I think Windows, if you
think about it, the numbers and the feedback from the customers
on Windows 7. I am with the company for 17 years. It is the best
ever product. I think it is very secure. Obviously, there is a
new business model in the Cloud, but our belief is that we are
what we call, we are all in, so we are moving very fast to the
Cloud building on existing assets. Today, if you would ask me
how many developers in Microsoft are doing Cloud related
development, it is 80% of our developers.

Interviewer: You have been losing market share in the mobile space.
What are you going to do to counteract that?

Jan Mühlfeit: We are very optimistic about the new
platform we are launching in the autumn, that is number one.
Number two, you should understand we have Xbox on the consumer
side, and we are involved in super computing, so we have some
places where we are number one. We have some places where we are
number two or three, but we will definitely compete. What I am
saying is it is a rather integrated experience we are able to
deliver through the computer, browser, and mobile. Today, yes, you carry always some
mobile device, but I believe, in the near future, you will have
some kind of, and it depends on the phone factor.

Interviewer: Why has Steve Jobs managed to steal all the limelight?

Jan Mühlfeit: Again, you need to look -- you are asking the question, you
need to look at what is the overall market share. They gain a
little bit, but over 90%, it is a different game. There is a lot
of, and again, there is a factor of coolness, and there is a
factor of innovation. I think we need also to be cooler.

Interviewer: One of the areas that Microsoft seems to be, definitely
not say ignoring, but is not doing as well as it might, compared
to or relative to its competition, is vertical markets. I
am thinking particularly of energy and health, where Google in
particular, seems to be making a lot of strides there. What is
your response to that?

Jan Mühlfeit: I would not say that we are ignoring that. We have a very
different model because we a platform company, and we have our
partners. They are integrating our stuff and doing their own
bits and bytes on servicing that. If we make
one euro in Europe, our partners, which we call partner
ecosystem, they are making eight euros, so they are building
their own applications. In fact, you mentioned energy and
environment, we just built, with the European Environmental
Agency and with some partners, The Great Solution, based on Bing
Maps and host it on Azure, which measures the quality of, it is
called the Air Watch, and it is basically measuring the quality
of water in Europe and the quality of air in Europe.

The health care is a very important industry there. We have a
lot of partners, and they are more going to the more vertical. We
have our own vertical experts in organizations working through
those problems. I think it is a very different model, and it is
a win-win model, because even in Europe, we have over 200,000
partners working with us.

Interviewer: OK Mr. Muhlfeit, thank you very much for your time.

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