Microsoft Server and Tools Market Analysis and Future Outlook Team 2.
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Transcript of Microsoft Server and Tools Market Analysis and Future Outlook Team 2.
Microsoft Server and Tools
Market Analysis and Future Outlook
Team 2
Situational Analysis
Problem Statement Cloud Market RecommendationsStructure
Business ModelIntegration
DiversificationRevenue GeneratorFinancial SolidityNadella’s Leadership
Follower in InnovationOrganizational structureHigh capital requirements for cloud
Integration of Cloud ServicesExisting growth potentialsService provider
Competition with AmazonOther Competition
SWOT
External
Internal
Acquisitions
Situational Analysis
Situational Analysis
Problem Statement Cloud Market RecommendationsStructure
Business ModelIntegration
1. •Cloud Integration
2. •Organizational structure
3. •Cost and Labor
Problem Statement
Situational Analysis
Problem Statement Cloud Market RecommendationsStructure
Business ModelIntegration
• Amazon’s projection of 33% growth to 158,000 servers [3]
Google was the leader in the size of data centers and servers (projected close to 900,000 servers) [2]
The Competitors
[2] Report: Google Uses About 900,000 Servers
Situational Analysis
Problem Statement Cloud Market RecommendationsStructure
Business ModelIntegration
Cloud Market
Gartner 2013 [1] - http://www.gartner.com/newsroom/id/2352816
2010 2011 2012 2013 2014 2015 20160
50
100
150
200
250
77 93 110130
160180
210
Cloud Market Projections
Situational Analysis
Problem Statement Cloud Market RecommendationsStructure
Business ModelIntegration
The Target Market
Microsoft a leader in cloud: IT Pro [4]
Small businesses: The unbundled buyers
Smaller packages at a time, few licenses, more purchases
Support and customization teams required – lifetime value goes upBig one-time investment – loyalty
Pay-as-you-go plans[6]
Fortune 500 companies: [5] These are the big revenue generators
Big packages and software supportLong-term contracts
Discounted added applications on Azure
Need for customization – higher paying client
Annual or monthly plans [6]
[4] Microsoft Case Study: http://advertising.microsoft.com/en-us/cl/651/microsoft-cloud-case-study
Situational Analysis
Problem Statement Cloud Market RecommendationsStructure
Business ModelIntegration
Compatibility
Merging Azure
Cloud Services
Setback faced due to incompatibility of applications with Azure
• Merge Azure into STB• Team collaboration
crucial
Categories: [7]
1) Execution Models2) Data Services3) App Services4) Networking5) Store
One Cloud – The Success Recipe
Universal Compatibility[8]
Application Platform
Data Layer
Modern Data Center
What’s Required?
•Three-year term•Billed Monthly
Contract Terms
•Monthly•Annual
Cloud-based Services
•Pay-as-you-goWindows
Azure Subscriptions
Service License Agreement[9]
Situational Analysis
Problem Statement Cloud Market RecommendationsStructureBusiness
ModelIntegration
Future
Integration of Azure
Pay by Product use
Datacenter Maintenance
Security
Replicate Windows Server 2012
Customers pay only for what they use
99.95% up time
Prevention from threats and attacks
New Model Recommendation
Situational Analysis
Problem Statement Cloud Market RecommendationsStructure
Business ModelIntegration
Making the Model Profitable [10]
• Multi-year volume licensing agreements• Discounts at no additional costs > 50%• Transactional volume licensing programs• Retail packaged products• Licensed software products for Original
Equipment Manufacturers25%
• Enterprise Services20%
Situational Analysis
Problem Statement Cloud Market RecommendationsStructurel
Business ModelIntegration
Cannibalization
Absence of individual licenses
Exchange and SharePoint
Market and sell Azure along with Windows Server 2012
Longer periods of monetization
Effects of Cloud Promotion
Situational Analysis
Problem Statement Cloud Market StructureBusiness
ModelRecommendationsIntegration
Three-year Financial Projections
$19,875M$17,987M$16,352M
Revenues10% e. y
Operating Expenses
$2,894 $2,955 $3,155
$6,756 $8,099 $9,072Operating Income
Yearly Projections (in millions)
2011 [11,12] 2012 2013
Revenues $16,352 $17, 987 $19,875
COGS $280(200K servers @ $70M/50K servers [13])
$350 (250K servers @70M/50K servers)
$700 (500K servers @70M/50K servers)
Gross Profit $16,072 $17,637 $19,175
Sales and Marketing $3,344 (6% increase of Sales in 2010)
$,3,410 $3,648
R&D Exp. $2,400 (approx. expenditure)
$2,470 (4% increase) $2,550
General and Admin Exp.
$678 (8% increase from 2010)
$703 $750
Operating Expenses $2,894 $2,955 $3,155
Operating Income $6,756 $8,099 $9,072
Situational Analysis
Problem Statement Cloud Market StructureBusiness
ModelRecommendationsIntegration
Three-year Financial Projections
Situational Analysis
Problem Statement Cloud Market RecommendationsStructure
Business ModelIntegration
Program Managemen
t
Data and Storage
Development
Testing and Engineering
Srivastava NOT retained
Promote Guthrie
Organizational Structure
[14] Microsoft reorganizes its Server and Tools unit, Zdnet, 2012
Situational Analysis
Problem Statement Cloud Market RecommendationsStructure
Business ModelIntegration
Internal Structure
Retain Anderson
Promote Laing
Promote Zander
Change Kummert’s Title
No Changes to Marketing and Finance
Add a new CVP for Testing and Engineering
Internal Organization [10]
The rest for integrated product development
Testing and quality assurance
• Use about 4,000 employees for Azure
Situational Analysis
Problem Statement Cloud Market RecommendationsStructure
Business ModelIntegration
President STBSatya Nadella
Scott GuthrieCVP Program Management
Brad AndersonCVP Program Management
Jason ZanderCVP Development
Bill LaingCVP Development
Ted KummertCVP Data and Storage
New CVP for Testing and Engineering
The Hierarchy
Situational Analysis
Problem Statement Cloud Market Business
Model Structure RecommendationsIntegration
Recommendations: Integration
Merge Azure in STB to ensure reduction of cannibalization of Windows Server 2012
Allow customization of the platform with other STB products like SQL Servers
Partner Licensing includes monthly, annual and pay-as-you-go subscriptions.
Situational Analysis
Problem Statement Cloud Market Business
Model Structure RecommendationsIntegration
Recommendations: Leadership
Not retain autonomous leaders who might interfere
with integration
Bring in Scott Guthrie, internally promote
and reorganize
Fresh, open minds, new perspectives
4,000 employees on Azure, add 1000+
employees
Situational Analysis
Problem Statement Cloud Market Business
Model Structure RecommendationsIntegration
Recommendations: Business Model
Start with startupsMove on to acquire Fortune 500 clientele
Expand data centers, scale infrastructure1M servers by 2013
Multi-volume licensingEnterprise systems
[1] Gartner February 2013, http://www.gartner.com/newsroom/id/2352816
[2] Report: Google Uses About 900,000 Servers, Rich Miller, Aug. 2011http://www.datacenterknowledge.com/archives/2011/08/01/report-google-uses-about-900000-servers/
[3] Amazon Ramps Server Count 33%, Charles Babcockhttp://www.informationweek.com/cloud/infrastructure-as-a-service/amazon-ramps-server-count-33-/d/d-id/1110660?
[4] Microsoft private cloud case study, http://advertising.microsoft.com/en-us/cl/651/microsoft-cloud-case-study, 2012
[5] Microsoft Customer Case Studies, http://www.microsoft.com/en-us/server-cloud/cloud-os/customer-stories/default.aspx#fbid=hl1V5qhEXEO
[6] Microsoft Corporation 10K, FY12, Microsoft Corporation
[7] Introducing Windows Azure, Microsoft Corporation http://www.windowsazure.com/en-us/documentation/articles/fundamentals-introduction-to-Windows-Azure/
[8] Interview: With $19B in revenue, Microsoft’s S&T’s chief says he’s just getting started http://venturebeat.com/2013/05/20/with-19b-in-revenue-microsofts-server-and-tools-chief-says-hes-just-getting-started-interview/
[9] Microsoft Corporation MSFT 2013 Q4 10-K
[10] Microsoft Annual Report 2012, Microsoft Corporation
[11] Microsoft Annual Report 2010, Microsoft Corporation
[12] Microsoft Corporation 10K, FY10, Microsoft Corporation
[13] The Cost of a Cloud: Research Problems in Data Center Networks, Albert Greenberg, James Hamilton, David A. Maltz, Parveen Patel, Microsoft Research, Redmond, WA, USA, http://research.microsoft.com/en-us/um/people/dmaltz/papers/dc-costs-ccr-editorial.pdf
[14] Microsoft reorganizes its Server and Tools unit, 2012, http://www.zdnet.com/microsoft-reorganizes-its-server-and-tools-unit-7000002814/
References
[15] Gartner: AWS Now Five Times The Size Of Other Cloud Vendors Combined, http://readwrite.com/2013/08/21/gartner-aws-now-5-times-the-size-of-other-cloud-vendors-combined#awesm=~ovMtjfPcmIRWqO
[16] Microsoft now has one million servers – less than Google, but more than Amazon, says Ballmer, July 2013http://www.extremetech.com/extreme/161772-microsoft-now-has-one-million-servers-less-than-google-but-more-than-amazon-says-ballmer
[17] What is Windows Azure? - http://www.windowsazure.com/en-us/overview/what-is-windows-azure/
[18] http://blogs.forrester.com/richard_fichera/12-09-05-microsoft_announces_windows_server_2012
[19] Microsoft moves further into cloud – by Quentin Hardy (New York Times)http://bits.blogs.nytimes.com/2012/09/04/microsoft-moves-farther-into-the-cloud/?_php=true&_type=blogs&_r=0
[20] Microsoft’s cloud vision: The Next Webhttp://thenextweb.com/microsoft/2012/12/13/microsofts-cloud-vision-how-azure-is-the-linchpin-to-the-firms-new-devices-and-services-corporate-strategy/#!vzjuB
[21] How Satya Nadella will transform the company , Feb. 2014http://venturebeat.com/2014/02/04/the-new-microsoft-how-satya-nadella-will-transform-the-company/
[22] Interview with STB CFO Curt Andersonhttp://view.officeapps.live.com/op/view.aspx?src=http://www.microsoft.com/investor/downloads/events/UBSAnderson.docx
[23] Build vs. Buy: Addressing Capital Constraints in the Data Center, CyrusOnehttp://www.ciosummitna.com/media/whitepapers/2013/CyrusOne_BuildvsBuy.pdf
[24] Earnings Release FY13 Q3https://www.microsoft.com/Investor/EarningsAndFinancials/Earnings/SegmentResults/ServerAndTools/FY13/Q3/performance.aspx
[25] Microsoft Moves further into cloud, New York Times, Sept. 2012, http://bits.blogs.nytimes.com/2012/09/04/microsoft-moves-farther-into-the-cloud/?_php=true&_type=blogs&_php=true&_type=blogs&_php=true&_type=blogs&_r=2
[26] Microsoft Data Center Tab tops $15 Billion http://www.wired.com/wiredenterprise/2013/02/microsofts-data-center/
[27] http://www.wired.com/wiredenterprise/2013/02/microsofts-data-center/
[28] http://www.wired.com/wiredenterprise/2013/02/microsofts-data-center/
[29] http://www.bloomberg.com/news/2013-04-29/microsoft-azure-sales-top-1-billion-challenging-amazon.html
[30] http://redmondmag.com/blogs/the-schwartz-report/2013/10/microsoft-shatter-financial.aspx
[31] http://www.zdnet.com/blog/microsoft/microsoft-if-we-dont-cannibalize-our-existing-business-others-will/6841
Additional References
Questions?
Current Cloud Customers [5]
http://www.forbes.com/sites/louiscolumbus/2013/02/19/gartner-predicts-infrastructure-services-will-accelerate-cloud-computing-growth/
IaaS growth of 41.3% by 2016, fastest growing public cloud computing
Competitors Capital Investment
Revenues: Revenues in 2010: $14,866 [6]Calculating a 10% increase in Revenues: $16,352Similarly, using the same percentage increase for subsequent years: Revenues FY11 = $17,987, Revenues for FY12 = $19, 875
Expenses Calculation:
Sales and MarketingTaking approx. 23% of Sales expenses for STB Sales, in 2010 STB Sales = $3,154Extrapolating at a growth rate of 6 – 7% we arrive at the given values
Financial Calculations
General and AdministrativeTaking approx. 17% of G&A expenses for STB G&A, in 2010 STB G&A= $678Extrapolating at a growth rate of 3 – 6% we arrive at the given values
Operating Income = Gross Profit – Expenses
Cost of Goods Sold = Cost of ServersAccording to [13], Cost of 50K Servers = $70 M = $52.5 (for servers) + $18.5 (Infrastructure)For approx. 1M servers, Phased production Year 1: 200K Servers = $280MYear 2: 250K Servers = $350MYear 3: 500 K Servers = $700M
Financial Calculations