Microsoft is trying to court business customers of competing cloud services by offering its own products for free in a new promotion starting today. The deal, which remains active until June 30th of this year, will let corporate customers of competing enterprise software suites from Box, Dropbox, and Google switch to OneDrive, with Microsoft waiving the bill until a business pays off its existing contract with a cap set at three years. Microsoft also says its dedicated FastTrack team will work with any new customers to help migrate businesses to OneDrive and Office 365. The deal is only valid for businesses that are not currently customers and are willing to commit to a 500-user minimum.
It’s a solid promotion, and it’s sure to lure some customers away from storage, productivity, and other cloud computing providers, with Microsoft eating the short-term contract revenue in hopes of gaining a long-term subscriber relationship. The broader strategy here is one many people are familiar with on the consumer side of the equation: ecosystem lock-in. Many of Microsoft’s products these days work well together, especially for businesses. Getting a company to move to OneDrive for storage or Office 365 for productivity is the first step in converting an organization to more lucrative contracts like Azure for hosting or infrastructure.
Cloud computing remains Microsoft’s fastest growing revenue segment and the most promising new money maker among all its divisions. The Azure, Office 365, and OneDrive platforms are the driving forces behind CEO Satya Nadella’s long-term vision for the company in a world in which PC sales have shrunk and software like Office apps and the Windows operating system are either given away for free or sold through a subscription.
Because while the dominance of Windows on desktop PCs results in lucrative quarterly revenues for Microsoft, the company has moved to protect its position under Nadella by investing in the cloud computing business. The goal has been to modernize Microsoft’s products by moving them to the cloud, giving Windows away for free, and making Azure a robust alternative to Amazon Web Services. (The company also makes money from LinkedIn, Bing, and its Xbox and Surface product lines, but those pale in comparison to Office, Windows, and the cloud.)
Shortly after he first took on the chief exec role back in 2014, Nadella set a $20 billion-per-year milestone for Microsoft’s cloud computing division to be hit by 2018. The company hit that milestone with time to spare last fall. Last quarter, Microsoft’s Azure platform posted a staggering 98 percent jump in revenue, showing just how much Microsoft’s cloud computing business can continue to grow. Deals like the one announced today are clearly designed to continue pushing the growth of Microsoft’s cloud sector, even if it means poaching customers from competitors with generous limited-time promotions.