Microsoft under pressure to speed transition to a cloud business

Speaking to Bloomberg, Microsoft board Chairman John Thompson is pushing for a more aggressive shift into newer cloud-based products before its traditional software business evaporates.

Microsoft CEO Satya Nadella has said the company is on track to make its forecast for $20 billion in annualized sales from commercial cloud products in fiscal 2018. Thompson however said the cloud business could be even further along, and the software maker should have started its push much earlier. Currently the total commercial cloud business contributed just $5.8 billion of Microsoft’s $93.6 billion in sales in the latest fiscal year, with Amazon hitting closer to $10 billion over the same period.

Thompson said he and the board are pleased with a push by Chief Executive Officer Satya Nadella to make more money from software and services delivered over the internet, but want it to move much faster. They’re considering ideas like increasing spending, overhauling the sales force and managing partnerships differently to step up the pace.

“(Microsoft is) … nowhere near at the same level of sophistication (as Amazon), and the Microsoft partners are mostly new to the Azure ecosystem, so they don’t know it as well,” said Lydia Leong, an analyst at Gartner Inc. “If you’re a customer and you want to migrate to AWS, you have this massive army that can help you.”

She encouraged Microsoft to develop a deeper bench of partners making software for Azure and consultants to install and manage those services for customers who need the help.

Thompson declined to be specific about what the company might change in sales and partnerships, but he said the company may need to “re-imagine” those organizations. “The question is, should it be more?” he said. “If you believe we need to run harder, run faster, be less risk-averse as a mantra, the question is how much more do you do.”

He however felt with Microsoft’s traditional income streams under pressure the company was ready to make the necessary changes.

“You can re-imagine things when you’re stressed. It’s a lot easier to do it when you’re stressed because you feel compelled to do something,” Thompson said. “I see a lot of stress at Microsoft.”