Microsoft President Stephen Elop says the cloud has created a "constructive disruption," in the market, creating an opportunity to offer Microsoft Office on the Web at no cost.
It also looks like the cloud is disrupting Microsoft's pricing structure quite a bit. The issue: cloud computing may be the future but the margins will drop.
In an interview with Bloomberg, Elop said future updates to the Web-based Office suite may add Twitter-like functions that allow users to post short messages.
Elop is an interesting guy. The Bloomberg story is as much as a profile of this newcomer to Microsoft as a story about the the margins that will get squeezed by cloud computing.
Elop looks at the issue philosophically. From Bloomberg:
"In that cloud environment, we are not only selling them software but we are also saying, 'We'll take care of your networking, your hardware your operations, your customer support,'" Elop said in an interview. "We're doing much more work for the customer. What that does is increases revenue and allows us to participate in more profit."
Elop comes from Macromedia where he made Dreamweaver the most popular web-page authoring application in the market. You can tell he sees the market from a different viewpoint.
Many companies we cover look for ways its products can work on any device and perform on any or browser. Microsoft is different. Elop's role is to walk the path that balances the need to prepare for the future while supporting Microsoft Office, a product worth billions.
Elop's Office unit is Microsoft's biggest business, accounting for a third of the company's $58.4 billion in sales last fiscal year. The shift to Internet-based versions of Office may cut margins by 5 to 10 percentage points, said Matt Rosoff, an analyst at Directions on Microsoft in Kirkland, Washington.
'Have to Do Something'
"Elop's challenge is to move carefully and not undercut the traditional software business," Rosoff said. "You don't want to give everybody free Office over the Web because that jeopardizes a highly profitable business, but you have to do something."
It's not an easy road. Elop is right. The cloud is disrupting the market. And he seems like the right guy to guide Microsoft through the complexities that Microsoft and the rest of market faces in the months and years ahead.