Microsoft Doubles Down on Industries

In late February, Microsoft CEO Satya Nadella released a 9-minute video talking about 3 new industry clouds and the company’s new embrace of an “industry-first focus.”
 
Two months later, in Microsoft’s April 27 earnings call, Nadella specifically called out, for the very first time, the subject of industry clouds in his opening remarks, and almost half of the subsequent questions from the financial analysts were about Microsoft’s industry-cloud ambitions, vision, and capabilities.

Clearly, Satya Nadella does not take the term “industry-specific focus” lightly.

So while Microsoft’s industry-cloud business here in May 2021 might not rival that of some of the leaders on my Industry Cloud Top 10 list—including #1 Salesforce, #2 Google Cloud, #3 Oracle, and #4 SAP—you can bet that the industry intensity at Nadella’s company is getting cranked up to extreme levels.

And that means a few things for this booming category:

• the competitive energy is going to increase dramatically and rapidly;
• the expectations of customers will jump as the world’s #1 cloud provider pushes the industry-specific agenda aggressively and visibly;
• the hunt for acquisition targets to bolster industry-cloud portfolios will heat up; and
• more cloud CEOs will begin to evangelize the industry-specific capabilities that are accelerating the onset of the global digital economy.

For Microsoft, industry clouds are not being positioned as a boutique product line for a select audience but rather as the inevitable next-gen foundations for how modern digital businesses will operate. That means Nadella will ensure that Microsoft’s industry clouds are virtually fused with everything from Azure to Dynamics 365 to Teams to Microsoft 365 to Hololens and beyond.

And for the whole category, that means that industry clouds are surging out of their previous roles as niche products for particular situations and will become indispensable drivers of the digital economy.

So any company that hopes to compete successfully with Microsoft had better prepared to do the same.

During the April 27 earnings call, Nadella hammered home that overall theme on several occasions that clearly call out Microsoft’s industry-cloud strategy.

Industry Clouds and Dynamics 365. Noting that Dynamics 365 revenue was up 45% (which would put on something close to a $3-billion run rate), Nadella said, “We are seeing increased adoption of Dynamics 365 across every industry from ABN AMRO in financial services to BMW in automotive. More broadly across the Microsoft Cloud, we are leading with industry and cross-industry solutions and expanding our investments to help organizations use our complete tech stack along with industry-specific customizations to improve time to value, increase agility, and lower costs.” 

Industry Clouds, AI, and the $20-billion Nuance acquisition. Asked specifically about the healthcare vertical, Nadella said, “When I look at the industry cloud opportunities, we think of healthcare as a very critical opportunity for us and a huge and expansive addressable market... When I think about the [healthcare] provider market, in particular, digital tech is going to play a huge role for every provider to do the things that they care the most about, which is improve the patient outcomes and reduce cost and reduce the burden on the physicians. So that's where the Nuance acquisition is a great fit for us. We've been partners with them and also enhances our platform approach.

“What we have always done has gone into an industry with a platform and an ecosystem approach. For example, with Nuance, they've done a fantastic job of taking what's perhaps the most defining technology of our times, which is AI, and applying it to healthcare, which is the most important application space. And they've done that by partnering deeply with EMR systems and the rest of the healthcare ecosystem, ultimately to benefit the providers.... This allows us to integrate more deeply with Teams and some of our AI capabilities even more deeply, and we think we can add a significant amount of value, both to our partners in the healthcare ecosystem, as well as, most importantly, to the providers.”

Industry Clouds and Azure. Asked about the “verticalization of Azure,” Nadella said, “We absolutely think that ultimately, customers are looking to increase their time to value, lower cost, and improve agility. So we’re able to help them customize these workflows, and help customers reach that next level of schematization of what is perhaps today not digital inside an industry. And so by stitching together, say, Microsoft 365, Teams, and Power Platform with certain workflows with data inside of Azure, as well as Dynamics, that absolutely improves the ability for any customer in any one of these industries to improve their time to value.”

Industry Clouds and Microsoft’s future. Nadella hinted that the $20-billion Nuance blockbuster will not be the last acquisition as Microsoft aggressively builds out its industry-cloud portfolio and capabilities. “And we'll continue to look. And this is not just one single industry at a time—it’s also the cross-industry workflows. So we absolutely believe that we already talk about not just some individual part of our cloud but rather we talk about only one thing and it's called the Microsoft Cloud. And now we're increasingly talking about Microsoft Cloud by industry and cross-industry.”

Industry Insights.

• Which companies are on the Industry Cloud Top 10 list? And why?
• How has Google Cloud soared to the #2 spot on the Industry Cloud Top 10? I’ll give ya 10 good reasons!
• Oracle has 100,000 industry-cloud customers. How did that happen?
• How did relatively quiet Infor grab the #5 spot on the Industry Cloud Top 10?
• SAP goes all-in on Industry Cloud but also aims even higher: industry networks.
• Salesforce has earned the #1 spot on my Industry Cloud Top 10. Can it hold on?

What's next?

Businesses need lots of help from cloud vendors to master the new skills, insights, processes, and outlooks that the digital economy will require. And those businesses need that help now, not 12 or 18 months from now. Industry clouds appear to have enormous potential for delivering on all of those needs, and Microsoft seems fully committed to ramping up its ability to deliver industry clouds better and faster than anybody in the market. 

As Nadella said on the earnings call, “The other thing we are now seeing is also that industry-level differentiation of the all-up Microsoft cloud. So whether it's in retail, whether it's in healthcare, or in financial services, we feel that we now can bring the power of the entire cloud together in a much more strategic way.”

Folks, the fun is just beginning!

Thanks very much for spending some of your valuable time with Industry Cloud Newsletter, part of the Cloud Wars Media family!  Cheers,
Bob