Cloud services are becoming an increasingly important -- and fast-growing -- source of revenue for Microsoft, according to the company's latest financial figures. The company's earnings report for the third quarter of its fiscal year shows that its commercial cloud business, which saw a 106 percent growth year-over-year, is currently on track to reach $6.3 billion in annual revenue.
Microsoft's cloud business includes its Office 365 software suite, as well as Dynamics CRM and Azure, its PaaS (platform-as-a-service) and IaaS (infrastructure-as-a-service) solutions. All these services increasingly lie at the heart of Microsoft's mobile-first, cloud-first strategy.
Office 365 currently has nearly 50 million monthly active users among its business subscribers, while Azure has been adopted by more than 5 million business users and is being used to host nearly a half-million Web sites, according to CEO Satya Nadella. An estimated 40,000 companies with 4.4 million users use Microsoft Dynamics CRM.
Cloud: No Longer 'If' But 'How'
"Cloud is becoming an increasingly important part of the overall IT industry," Rick Villars of the analyst firm IDC told us. "It's no longer a question of 'if' cloud but 'how' cloud."
Villars, who is Vice President of IDC's Datacenter & Cloud practice, told us Microsoft's cloud offerings are starting to show some positive traction. While the company's cloud services base is smaller than that served by Amazon Web Services, whose early entry into the market helped build its lead, it is also more diverse than Amazon's, Villars said.
Microsoft's strength has been in helping later-adopting companies make the transition to cloud-based services, he added. "They're coming from different starting points," he said.
Target: A Billion-Plus Office Users
While summarizing Microsoft's growth in cloud over the past quarter, Nadella said the company plans to reveal even more about its ambitions for Office 365 during next week's Build conference for developers. One goal is to help developers "connect into the Office framework to both harness the rich data and have their own app extensions available to ultimately a billion plus Office users," he said.
Some of Microsoft's most recent additions to its cloud portfolio include the rollout of its Enterprise Mobility Suite to small and medium-size business customers, the introduction of its Azure App Service and compute instances, and the launch of Azure Machine Learning and Azure Stream Analytics, both of which are focused on the Internet of Things.
Another area where Microsoft sees new opportunity is in mobile payments. It has recently teamed up with payment companies like PayPal and MasterCard, and has filed for money transmitter licenses in all 50 U.S. states, the first of which (Idaho) issued a license earlier this month.
Villars said the next challenge for Microsoft and other companies will be to improve their cloud services to make them easier for users to deploy and manage so they can seamlessly integrate with the data and applications they have residing elsewhere. The development of such orchestration services remains in early days, he said.