Microsoft (MSFT) has already proven its potency in the cloud era, and is one of three companies with the scale, resources, and know-how to dominate the booming $100 billion market, CEO Satya Nadella told CNBC.
In his first television interview since becoming the software giant's third CEO, Nadella focused on Microsoft's cloud ambitions. He also talked about why he won't spin off Microsoft's consumer properties and how he's changing the model of the company's prized Windows business.
And for the first time, he answered an interviewer's questions about his controversial comments on women in the workplace. (CNBC will report on his comments later in the day.)
Nadella is nine months into the CEO role, and sought to frame the cloud infrastructure market as a battle between a handful of giants.
"If you're not already spending a lot of capital in the order of four or five billion dollars each year to just grow your cloud, probably it's a little too late to enter the market," he said. "In our case we've been committing it for multiple years and we're not alone. There are at least two other players like that, Amazon (AMZN) and Google (GOOGL) in particular, but we are one of the three in that category. One of the things that we've really invested in is this enterprise cloud-we have data centers in 19 countries. We have made sure we get the certifications to operate under the various regulatory regimes for vertical industries like financial services, or different countries' data sovereignty laws. That's hard work. China is a great example. In fact, we now are the only public cloud company from North America, or global public cloud company, that operates in China. Both Office 365 and Azure. And it's doing very, very well for us."
The comments are controversial in part because "cloud" has become the favorite buzzword in business technology, on par with what "dot-com" was 15 years ago. The term includes three distinct areas: Software as a Service includes companies such as Salesforce (CRM) and Workday (WDAY), which offer their products over the Internet. Infrastructure as a Service includes companies like Amazon and Google that let companies rent resources-such as servers and storage-rather than buy them. And Platform as a Service includes Amazon, Google, and Salesforce, and seeks to provide a straightforward way for companies to write custom cloud software.
Microsoft, Nadella argues, is positioned to do well in all three areas. It already has one of the major cloud software suites, Office 365. Its Azure cloud service also offers both infrastructure and platform as a service.
"In the cloud I would say we absolutely caught the trend. It's no longer about, 'Hey, is Microsoft in the cloud business.' We have a $4.5 billion business that's growing well and it's fantastic to see. It's just that in relation to our success of $70 billion it's a small business. But the overall magnitude of our cloud business today shows that we've caught the trend at the right time, jumped on it with a unique value proposition and we're now further accelerating," he said. "In all of these cases, there will always be some price competition by someone on these various layers. I mean, ultimately there are only two things that I think you compete on. You compete on value, you compete on price. And depending on which layer against which competitor at what time, the equation changes. But our own theory - for example, one of the things that has happened is as we have grown our cloud, especially around infrastructure, one of the things that has grown nicely for us is our server business. It's not, at least in the short term or the intermediate term, zero sum."
Nadella also waved off calls for Microsoft to split its consumer business from its enterprise-focused cloud efforts.
"One of the things that's really been key to our success - the way, even, our footprint in the enterprise grew - is because of what I term as dual-use. People using Windows and Office for their personal use, and taking it to work," he said. "So to us, the way I characterize it is, let's go after the users and their dual use. In fact, I want us to shine, and want to be the best in class around people who are these dual users, who want to use things which are our tools, our platforms for their home as well as work, and it crosses over."