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Windows Azure sales hit $1 billion

– Microsoft’s Windows Azure software and related programs have surpassed $1 billion in annual sales for the first time, a sign of progress in the effort to challenge Amazon.com in cloud computing.

The sales milestone for Azure – which stores business information and programs on remote servers and lets customers access them over the Web – was reached in the past 12 months, said Curt Anderson, finance chief for Microsoft’s server and tools unit.

Microsoft, the largest software maker, is counting on Azure and other Internet-based business programs to bolster growth as a global personal-computer slump erodes demand for Windows software installed on desktop machines.

About 20 percent of companies tapping the cloud use Azure, compared with 71 percent usage for Amazon, according to James Staten, an analyst at Forrester Research Inc. Within a year, Microsoft can command as much as 35 percent, he said.

“I expect them to double annually from here,” Staten said of Microsoft’s Azure revenue.

“Microsoft probably has more net new growth opportunity sitting in front of them than probably anyone in the market.”

Microsoft’s $1 billion sales figure includes Azure, as well as software provided to partners to create related Windows cloud services, Anderson said in an interview.

Azure subscriptions have risen 48 percent in the past six months, said Takeshi Numoto, Microsoft’s vice president for marketing for the server and tools division. That unit, which encompasses Azure, has posted nine straight quarters of sales growth of at least 10 percent, he said. Windows sales were $18.4 billion last year, down 5.7 percent from a peak in 2010.

Gaining ground against Amazon won’t be easy. Microsoft will need to do a better job of convincing existing customers, as well as newer companies seeking to reduce computing costs, why they should opt for Azure, Staten said.

“The majority of people thinking about cloud weren’t thinking of Azure first,” Staten said. “That’s been an uphill climb for them, and even though Microsoft is now matching the prices of Amazon and some of the capabilities, they haven’t really answered the question of ‘Why Azure?’ ”

Startups, which tend to be early adopters of new technology, may be an especially hard sell, he said.

“They haven’t excited the front-line developers – the ones who made Amazon who they are,” he said. “Those will be hard to influence.”

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