Since the early 1980s, Microsoft’s success has been predicated on a tripartite strategy:
- Sell software, in volume, at about 20% of the incumbents’ prices.
- Engage third-party developers.
- Use industry-standard hardware.
These have clearly been the three keys to success for Microsoft — although we can argue the details of how revisionist this description of Bill Gates’ strategy is.
It’s also clear that Microsoft sees SaaS — if you insist, cloud computing — as an important part of its future business. For example:
- Exchange/SharePoint Online (Business Productivity Online Suite or BPOS)
- Exchange Hosted Services — including the Forefront Online Security for Exchange offering
- The Azure Services Platform
So this poses a problem for Microsoft. On the one hand, it’s important for it to sell its products for far less than its incumbent competition. On the other hand, the SaaS/cloud incumbents such as Google, Amazon, and Symantec use platforms that are less expensive to run at scale than Windows.
There’s no way that Microsoft can compete on price in these markets. Don’t expect Microsoft to repeat its previous successes by undercutting its rivals.
… Richi Jennings, with thanks to Microsoft’s Bob Muglia for the succinct description of Microsoft’s strategy