Microsoft Strengths, Domain Expertise, and Key Differentiators
By wresting control of the all-important Cloud applications market from Salesforce, Microsoft shows no signs of slowing down in 2019. In October 2018, Microsoft’s LinkedIn acquired Glint for employee engagement applications. The deal, which reportedly was worth more than $400 million, underscores Microsoft’s desire to further grow its presence in the HCM applications market. That was followed by its $7.5 billion purchase of Github, another major source of strength for Microsoft to cement ties with Cloud applications developers. Github, an online coding, learning and collaboration community with 28 million developers, is now part of Microsoft Cloud + AI operations.
The increased momentum is a vindication for Satya Nadella, who headed Microsoft’s Cloud and Enterprise group before becoming its chief executive officer in 2014. Since then, Nadella has successfully steered its transformation from one steeped in the Windows environment to everything revolving around the Cloud. Shortly after Nadella was named to be the third CEO in Microsoft’s history, he rallied the troops by committing to invest more than $10 billion in Azure data centers. The Azure Cloud infrastructure now spans 60 regions and 140 countries, or 72% of the countries recognized by the United Nations. In October 2019, Microsoft won the US Defense Department to become its Cloud infrastructure provider in a deal worth as much as $10 billion over the next 10 years. One significant aspect to the contract is that when different US military branches are migrating their legacy office applications to the Cloud, Microsoft stands to reap tremendous benefit.
Microsoft Recent Developments
After more than a decade of relentless development efforts and heavy investments including a blockbuster acquisition, Microsoft has surpassed Salesforce for the first time as the No. 1 Cloud applications vendor, a momentous turnaround that underscores its tenacity as much as the power of its platform. Microsoft Cloud applications including Office 365, Dynamics 365 and LinkedIn’s commercial products for sales automation and talent acquisition generated a total of $13 billion in Cloud subscription revenues, positioning it as the No. 1 vendor above more than 1,500 Cloud applications providers in our latest annual survey.
Microsoft Mergers and acquisitions (M&A) Activities
In 2020, Microsoft signed a definitive agreement to acquire Metaswitch Networks, a provider of virtualized network software and voice, data and communications solutions for operators. The convergence of cloud and communication networks presents a unique opportunity for Microsoft to serve operators globally via continued investment in Azure, adding additional depth to its hyperscale cloud infrastructure with the specialized software required to run virtualized communication functions, applications and networks. This announcement builds on Microsoft's recent acquisition of Affirmed Networks, which closed on April 2020.
Microsoft Customers in ARTW Customer Database
Leveraging a rigorous data-centric research methodology, APPS RUN THE WORLD asks the simple question: Who’s buying Microsoft applications and why? And we provide the answers – supported by decades of research – to our clients around the world. Our Customer database has over 100 data fields that detail company usage of Microsoft and other enterprise apps by function, customer size, industry, location, implementation status, partner involvement, Line of Business Key Stakeholders and IT decision makers contact details. List of Verified Microsoft Dynamics 365, Microsoft Dynamics AX, Microsoft Dynamics CRM Online, Microsoft Dynamics NAV, Microsoft Dynamics SL, Office 365, Linkedin customers.
Ownership: - NasdaqGS : MSFT
Number of Employees: 166175
Key Verticals: Aerospace and Defense, Automotive, Banking and Financial Services, Communication, Construction, Real Estate, Consumer Packaged Goods, Distribution, K12, Higher Education, Federal Government, State and Local Government, Public Safety, Healthcare, Life Insurance, P&C Insurance, Specialty Insurance, Leisure and Recreation, Hospitality, Life Sciences, Manufacturing, Media, Faith Based Nonprofit, Youth and Elderly Care Nonprofit, Special Cause Nonprofit, Oil and Gas, Professional Services, Retail, Transportation, Utilities,
Microsoft Key Cloud and HCM Applications
Microsoft Dynamics 365, Microsoft Dynamics AX, Microsoft Dynamics CRM Online, Microsoft Dynamics NAV, Microsoft Dynamics SL, Office 365, Linkedin
Microsoft HCM and Cloud HCM Applications Revenues, $M:
|Type/Year||2018||2019||YoY Growth, %|
|Total Revenues, $M||Subscribe||Subscribe||Subscribe|
|HCM Applications Revenues, $M||Subscribe||Subscribe||Subscribe|
|Cloud HCM Applications Revenues, $M||Subscribe||Subscribe||Subscribe|
* HCM Applications Revenues = License + Support & Maintenance + SaaS ( Hardware and Prof. Services are Excluded )
** All revenue figures are estimates based on public records, Cloud and Non-Cloud business models in Apps Run The World's vendor database, and annual survey results including vendor feedback.
Microsoft Revenue Breakdown by Type:
|Type||License||Services||Hardware||Support & Maintenance||SaaS|
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Microsoft HCM Applications Revenues By Sub-Functional Markets, $M:
Split by Sub-Functional Markets
2019 HCM Revenues, By Sub-Functional Markets, $M
Microsoft HCM Applications Revenues By Verticals, $M:
Microsoft Total and HCM Applications Revenues by Region:
|Region||% of Total Revenues||2019 Total Revenues, $M||2019 HCM Applications Revenues, $M|
Microsoft Direct vs Indirect sales
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Microsoft Customers - Breakdown by Geo, Size, Vertical and Product
No. of Microsoft Customers: 250000
No. of Microsoft HCM Applications Customers: 20000
No. of Microsoft Cloud HCM Customers: 100000
No. of Microsoft Cloud HCM Subscribers: 120 million
Microsoft Dynamics 365 Finance, Supply Chain Management and Commerce has 4500 customers, while Microsoft Dynamics AX - 24000 customers, Microsoft Dynamics NAV - 124000 customers, Microsoft Dynamics SL - 13000 customers, Microsoft Dynamics GP has 51000 customers.
Office 365 Commercial revenues continued to post high double-digit growth, with Office 365 consumer subscribers increasing to 34.8 million, up from 31.4 million a year ago. In addition, more than 90 million monthly actively devices are running Office, suggesting that the productivity suite is making significant inroads into the mobile world.
A growing number of large organizations such as City of Chicago, San Diego County Regional Airport Authority and Toyota have adopted Office 365. Microsoft also said more than one million workers were running Office 365 in federal, state and local government agencies. Microsoft Teams service has more than 13 million daily active users, and 19 million active users on weekly basis.
Microsoft Market Opportunities, M&A and Geo Expansions
Microsoft has managed to drive more Cloud applications revenues by successfully converting many of its on-premise customers to its Cloud releases of Office 365, and Dynamics 365. That was further compounded by the continuous growth of LinkedIn, which led a number of HCM market segments including Sourcing, Recruiting, Candidate Relationship Management, as well as the overall Talent Acquisition category. With the $26-billion purchase of LinkedIn, its largest in its history, Microsoft now owns more than a quarter of the talent acquisition market, which topped nearly $7 billion in 2018.
Microsoft’s outlook looks favorable. If one simply compares the fiscal year revenues of Microsoft and Salesforce, the delta between the two widens, resulting in a 23% advantage for the former. That does not even take into account the Cloud Applications revenues from its Office 365 Consumer product, which derives revenues from small businesses as well as individuals. In October 2019, Microsoft announced that Office 365 Commercial now has more than 200 million monthly active users and Office 365 Consumer has 36 million, compared with 155 million and 33 million a year ago, respectively. In 2016, Microsoft had 85 million subscribers for Office 365 Commercial and 24 million subscribers for Office 365 Consumer.
In 2020, Microsoft released Dynamics 365 Commerce—built on the proven Dynamics 365 Retail capabilities—delivers a comprehensive omnichannel solution that unifies back-office, in-store, call center, and e-commerce experiences to provide a delightful shopping journey for consumers across the different touchpoints. Dynamics 365 Commerce enables you to deliver better business outcomes.
Microsoft Risks and Challenges
The future of Microsoft’s Cloud applications strategy will be linked to LinkedIn, which remains popular among professionals, and Dynamics 365, which still trails behind many ERP and CRM vendors in different markets.
The conundrum for Microsoft is not to treat its Cloud applications business distinct and separate from its Azure infrastructure, which requires support from other parts of Microsoft as much as it gets from third-party vendors like Salesforce and Oracle. For Microsoft, growing its Cloud applications business and Azure in tandem will inevitably bruise some egos along the way.
The rivalry between Microsoft and Salesforce in the Cloud applications market will intensify given their trajectory with both wanting to make people more productive, whether they are knowledge workers or customers. The remaining question is whether Microsoft needs Salesforce more or the other way around as the former aims to loosen the stranglehold of Amazon and Google in Cloud infrastructure and search, respectively.
Microsoft Ecosystem, Partners, Resellers and SI
Microsoft primarily works with its ecosystem of 640,000 Microsoft Partner Network partners including many involved in its Office apps and business tools like SQL Server. Microsoft Dynamics software offerings are licensed to enterprises through a global network of resellers, managed service providers and ISV partners that develop and market vertical solutions and specialized services.
Few years ago, Microsoft announced it is doubling its investment in free software, cloud services, and platforms for partners over the next year, giving partners the tools needed to build innovative solutions on top of Microsoft technologies. The number of Microsoft partners has remained fairly static given the sluggish sales of Windows through the OEM channel, while the Nokia purchase and its eventual spinoff yielded little benefits for its ecosystem or its partners.
Currently there are 10,000 Microsoft Dynamics partners including 2000 CRM VARs (value added resellers), 100 ISV (independent software vendor) partners and hundreds of hosting partners in 85 countries. Microsoft Dynamics 365 is supported in Southeast Asia by a network of global consultants and system integrators including Avanade, HP Enterprise Services, Hitachi, Logica, Ciber, Infosys and HCL.
Microsoft Cloud Platform (PaaS) and Infrastructure (IaaS) Details
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Data used in research reports are derived from publicly available documents, continuous surveys of applications vendors, customers, resellers, Independent Software Vendors, systems integrators and other verifiable sources.
Vendor shares and market forecast results are based on a combination of existing databases as well as demand side and supply side research conducted throughout the year with validation from vendors, customers, channel partners and documentations such as earnings releases and 10Q and 10K filings, vertical industry studies, regional and country-level statistics from public and private institutions(i.e. colleges, universities, government agencies and trade associations).
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