Business Growth Strategy: Microsoft

Business Growth Strategy: Microsoft

Introduction

Microsoft stands out as one of the most respected and largest technology companies globally. Founded by Bill Gates in 1975, the company has managed to remain relevant, experiencing stellar growth over the years owing to the tech industry’s growth, which has increased demand for the company’s offerings – particularly its Windows operating system (Eitzman, 2019). The stiff competition within the tech industry has meant that Microsoft constantly has to compete against an ever-growing number of rivals, whereby the most prominent ones are Amazon and Google (Bort, 2009). To retain its relevance in the 21st century, Microsoft has invested extensively in new technology offerings, especially cloud computing using Microsoft Azure. Such a move is critical since, despite holding a commanding market position within the personal computer segment, specifically through its Windows products, the company’s focus for the future needs to align with the market needs, which are increasingly in cloud computing (Eitzman, 2019). To that effect, the current study aims to highlight the key strategic issues that Microsoft faces, with a view to devise a suitable approach to ensure the company remains one of the top technology brands globally.

Strategic Challenges Faced By Microsoft

Cloud Wars

As the world advances towards fully embracing the fourth industrial revolution (Industry 4.0), the relevance of cloud computing to the transition has become more prominent. That is the case since the main principle of Industry 4.0 is based on more connectivity of systems through tools such as Artificial Intelligence (AI) and the Internet of Things (IoT). Cloud computing offers businesses in all industries an avenue for quickly adapting to the rapidly changing technology through the integration of AI, and automation, without losing valuable data (Edgy Labs, 2021). It is thus not a wonder that the largest technology companies have decided to invest in cloud solutions. At present, the key cloud service providers include Amazon Web Services (AWS), Microsoft Azure, Google Cloud, and Oracle, among others. Therein lies Microsoft’s first strategic challenge: the extensive cloud wars that are playing out currently and are expected to intensify as demand rises and the number of providers increases. Microsoft has grown its cloud services businesses to its level currently, where it holds the second-place position in the market, behind a formidable opponent in Amazon, through its AWS.

According to Synergy Research Group, Amazon currently commands about 40 per cent of the market for public cloud services. The industry is growing significantly whereby, for instance, from the reports on enterprise spending on cloud infrastructure services in 2020, the fourth-quarter spending was a little over $37 billion. That represented a $4 billion increase from the third quarter, and a 35 per cent year-on-year (YOY) increase, from 2019, which was the second successive year that such significant growth had been experienced (Synergy Research Group, 2021). Amid the growth, Microsoft’s share of the ‘pie’ was just short of 20 per cent, and there is growing optimism among the company’s investors on the growth of Azure, considering that it managed to beat AWS to a large contract for the Pentagon (Gaus, 2021). That said, Azure registered slower growth in 2020, compared to 2019, i.e., 59 per cent, compared to 76 per cent. As such, there is cautious optimism among Microsoft executives regarding the future success of Azure, with an acknowledgement that Microsoft has plenty to prove before it can topple AWS from its dominance in the cloud services industry.

Developing a Culture Fit for Future Dominance

The previous CEO of Microsoft – Steve Ballmer, championed market dominance by improving its existing businesses and keeping them alive. As a result, Windows remained the company’s mantra for years, and any invention that the company made, was geared towards enhancing that specific business (Guppta, 2015). To that effect, despite extensive investments in its research and development (R&D) arm, which have yielded certain successes such as Xbox, and some collaboration services like SharePoint, none have achieved the success of Windows. The vision projected by the current CEO when she was assuming the role was to have windows as just one of the many components within Microsoft’s experience (Guppta, 2015). One of the main challenges that the company will face is in altering the winner-takes-all mentality, which has hampered its effective collaboration with other players in the industry in developing great technologies. An illustration of the mentality at work is how Microsoft opted to develop its hypervisor, as opposed to purchasing VMware, when it was just a star