Microsoft's little secret: A large number of cloud users are only registered not to use

Several people familiar with Business insider said a frightening new word was circulating between Microsoft sales managers in recent days: consumption.   "Consumption", also known as "use", refers to the cloud computing resources that a customer actually consumes.   The number of customers who sign up for Microsoft Cloud computing services because of a wide range of co-operative agreements is a disconnect from the number of customers actually using those services. The disconnect has caused a variety of problems within Microsoft, such as  --to compete with Amazon Web Services (AWS), and Microsoft has been trying to attract companies to sign up for Azure, people familiar with the   said. Although there is very little extra charge, even a penny, many of these customers do not intend to use the service at all. Microsoft has been counting some of the revenue from such deals as cloud computing revenue, but if these customers don't really use Microsoft's cloud computing business, these revenues will not last. The same is true for Office365, a cloud-based e-mail and productivity suite (although we've heard that Office 365 is stepping into the fast lane).  --Microsoft is putting pressure on the sales team to turn these "unregistered only" customers into real "users". Microsoft has adjusted the pay plans of many sales teams, setting a "spending" target for them.  --We've heard that some salespeople will leave their jobs, or they won't get a bonus because the actual usage data is substandard. Not getting bonuses is a deadly blow to salespeople, who have to rely on bonuses to develop their careers.  --Sales Department is holding a variety of meetings to develop plans to improve sales targets.   After we asked Microsoft about it, the company replied that its use of cloud computing was "strong": "We found that companies of all sizes are using Microsoft's cloud computing services to a strong level." More than 60% of all Azure customers use at least one value-added service, such as streaming video. More than 80% of Office365 enterprise customers use two or two workloads. "  into the cloud to understand why salespeople have a headache with these new consumer metrics, it's best to get some background information:  in the cloud computing industry, companies only need to pay for the resources they actually use, such as computing time, storage space, and usage of value-added applications and services.   This model is very popular with customers, so they have to abandon the traditional software and computer usage patterns, through the cloud to obtain computing resources.   As a result, all large technology companies are scrambling to provide cloud computing services lest their rivals get ahead. They all spared no effort to seize the share in this huge market. According to IDC, the US market research firm, the cloud computing market will grow from $56.6 billion in 2014 to 12 in 2018.7 billion dollars.   As noted in previous reports, Microsoft has struggled over the past few years to attract a large number of corporate customers to try the company's cloud computing products through the so-called "try and Reuse" model. The so-called "try again" refers to the provision of cloud computing benefits to businesses, hoping that they will continue to pay for the use of Microsoft's cloud computing services after using the discount.   But in fact, Microsoft does not directly provide users with free vouchers. A person familiar with the situation said: "Customers must pay for all services in the ' Enterprise Agreement ' (EA). There is no free product at all. "Microsoft's large enterprise customers will almost always sign such an EA agreement.   Just as part of this agreement, Microsoft will offer a high discount on the software portion of the agreement-for example, Windows licensing fees or SQL Server database licensing fees-and then apply those discounts to the cloud services covered in the agreement.   In fact, there is little change in the total cost of the agreement compared to the non-incidental cloud service.   But that means Microsoft can include some of the revenue from this agreement in cloud revenue. We have already done the relevant report on this point.   It's a smart "try and buy first" strategy that can help Microsoft bring money into the cloud business. But the business is also risky, and if corporate customers do not continue to use Microsoft's cloud computing business, but stop using it after the coupon has been exhausted, Microsoft cannot count it as a true cloud customer-although it does seem to do so from the financial statements.   This is actually the true portrayal of some cases.   "Microsoft's very small secret is that there are really few customers who actually use Azure. "People familiar with the situation told us last November.   Another person familiar with the situation recently told us: "Microsoft got the money, but the customer didn't use the cloud service." "Microsoft will be binding $ tens of thousands of in cloud computing benefits when negotiating a $ millions of deal, but in reality, the enterprise customer is not ready to use Azure (and not even certify the security of the service)," said   people familiar with the matter.   people familiar with the matter said: "Don't get me wrong, some customers really like Azure and do a lot of things with it." "But in some sales regions, less than 20% of enterprise customers contribute 90% of their azure usage.   The new system is good for salespeople who have contributed to those 20% deals, but it's a little bad for other salespeople.   General situation? Another person close to Microsoft said the problem was not universal.   After looking at thousands of EA and azure protocols, he found that only a handful of them included azure credits that businesses didn't want or use, the person said.   When it comes to discount issues, the person who knows, the discount method described above will also apply to other products so that Microsoft can count on azure revenue, but he does not think this is a common issue.   "We didn't give Azure a discount, we discounted other products so that we could generate revenue for Azure included in the EA. But the proportion of this situation is very low. "The person familiar with the situation explained.   He said Microsoft would not "lose money" on these contracts.   "In fact, customers pay for things they don't use (Azure). The azure protocol lasts for a year, so if it's included in their EA, they have one year to use the service. If they do not, they pay, but they do not enjoy the value of the service. "Yes, we will ask salespeople to attract customers to use azure because that's the real channel we charge for Azure,"   the person said. "  However, other salespeople have told us that this pattern of binding to Azure is actually very common. Cynthia Farren, a   software licensing consultant, also confirmed this Cincia Fahren when we reported on it last November.   She said to us, "I also heard from some Microsoft sales people that all of the EA agreements they were responsible for included some cloud computing services, but not all of them were using those services." "  The key to the question is that some insiders are starting to notice this and asking Microsoft to disclose more details.   When Microsoft CEO Satia Nadra Satyanadella said in January this year that the company's cloud computing business would become an annual revenue of $5.5 billion, many industry experts called for more details.   "What I really want to know is the actual number of active users. I want them to be able to disclose this data in a more transparent way, such as active users. "Fallon said to us before. The same is true for   Wall Street analysts.   In Microsoft's earnings call this January, Walter Plittschard, a Citi analyst, asked Nadra and Microsoft CFO Ami Hud (A***hood) about the actual number of Office 365 users-people familiar with the situation revealed to us Enterprise users of this service are increasing rapidly.   "Can we talk about deployment rates?" I know you have a lot of contracts, but how many users are actually using this service, using email, SharePoint, and other cloud computing services? Plittschard asked at the time.   Microsoft management shied away from the problem, and Hood did not disclose the number of active users, but said: "The real goal is to show users the cloud services and then get them to the service as quickly as possible." "  Pressure increase obviously, Microsoft is nowThe sales staff are being pressured to ensure that the service is actually used by the user.   "The fundamental challenge is that Microsoft is motivating the sales team to sell Office365 and azure aggressively, regardless of whether the customer needs, wants, or even plans to use these services. "One person familiar with the situation said to us. In the past, sales bonuses were linked only to the number of customers who agreed to increase cloud computing services in the contract, according to   people familiar with the situation. Now, Microsoft is starting to list "consumption" as a benchmark for salespeople and sales managers-even if they have already signed a contract.   "The new payroll incentive are bad because the customers they sign don't have ' consumer ' cloud services. Many regions will start a ' consumer business assessment ' every month or two weeks in order to motivate salespeople to complete their tasks. People familiar with the situation said. The so-called "complete tasks" of   insiders refer to the use of all cloud computing services that customers pay for, and more.   While some salespeople worry that they can't really use Microsoft's cloud computing services, Amazon and Google are starting to frantically dig corners of cloud computing talent from Microsoft.   people familiar with the situation said Microsoft had suffered a serious loss of talent when it encountered Google's massive poaching of Amazon at an inappropriate time.   Industry consensus in fact, other companies are also trying to change their minds, not simply attracting users, but starting to focus on actual cloud usage.   HP CFO Kessi Reysjak (Catihe Lesjak) this year in January, the company is also launching such projects.   Last year's software revenue fell 5% per cent compared with the latest earnings released by HP in late February. "We will continue to shift our portfolio and operations model to SaaS and subscription services." The adjustment of consumer behavior and sales motivation will also have an impact on short-term revenue. "She admits.   At the same time, Salesforce CEO Mark Benniof, the "King of Cloud Computing", Marcbenioff the company's use of cloud computing services at the end of February when it announced its financial timekeeping. Salesforce is one of Microsoft's biggest rivals in cloud computing.   "We have handled 177 billion transactions for our clients this quarter, an increase of 68% yoy. You can see that our usage rate is soaring. Customers use our products more often than ever before, with an average of about 3 billion business transactions per business day. This is a space in the Enterprise technology field, no one enterprise Big data analysis platform can achieve this level. "he said.  salesforce has been publishing the company's usage statistics over the Internet for many years.  

Now, Nadra is also under pressure to start disclosing data analysis software usage details. But before disclosing the information, he clearly wants to accumulate some real data to get shot.

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Microsoft's little secret: A large number of cloud users are only registered not to use