Economics
Case Study 6, Chapter 6: Turbulent Air in Those Azure Clouds
Introduction
- Cloud computing is a model computing network where an application program manages and
runs on connected servers instead of a local device such as a personal computer. Cloud
computing is a process that runs on several connected computers uniformly or at the same period
of time. This concept is known as virtualization.
Microsoft problems stem from the knowledge that their competitors like Apple and Google have
outsmarted them in the development and advancement of the cloud connectivity application
software and they are tracing them from behind instead of leading from the front the way they
are used to. Apple seems to be many years ahead of them in terms of research that they
(Microsoft) have opted to purchase Skype in an effort to gain lost ground. - It’s cheaper to operate a mid range server than a windows server while the marginal costs for
Microsoft are still higher.
2 Economics
- The costs reduce 10 times
- The marginal revenue for office 365 is $6 per month per employee = $120 per month or $1440
per year. For 8760 hours @ 10 cents equal to $876. Now for 2000 people it would be 12,000 per
month and the costs of Microsoft license and hard ware. Office 365 is more profitable than
Microsoft. - Microsoft acquisition of Skype was an effort to improve its financial position from the
inherent threat of cloud computing through mergers and other acquisition activities.
Complimentary companies increase the competitive nature of companies while also expanding
its products to the global market. Skype is a soft ware that is available for free and facilitates
voice and visual communication between computers over the internet. It was founded in
Luxemburg in the year 2003. The major strategy of Microsoft’s acquisition of Skype was the
reduction of the cost of improving and building its internet phone which targets to improve its
competitive advantage in IT innovations globally. Microsoft has developed its current X-Box
console, Lync of IP telephone services and outlook to compete effectively with its major rival
Google. Skype has alliances with Facebook, Comcasts among others. Microsoft targets to utilize
all these connections to its advantage in an effort to outdo its major challengers. (Hausmann &
Hidalgo, 2011) - Independent Software Vendors (ISVs) are companies that specialize in developing and selling
the software. These soft wares are designed for specific niche markets or mass market. For
example oracle products may be incorporated in other soft wares through ESL (Embedded
Software Licence) (Popp and Meyer, 2010)
3 Economics
The future development of ISV is under threat as Microsoft has opted to purchase Skype a soft
ware program that facilitates telephone and visual communication from the owners of the soft
ware instead of requesting a similar one from ISVs shows that it’s harboring a sinister motive
and its questioning the ability of the ISV to develop such a soft ware. If I were an ISV I would be
seeking the attention of other platforms like IBM or better still develop independent soft ware’s
that work like Skype in the market. (Deventer, Imai, Mesler, 2004)
- I would invest more in cloud connectivity and acquire more companies like Skype that
facilitate cloud connectivity and invest more on research and development and also on its
infrastructure.
References
Deventer, D., Imai, K., Mesler, M. (2004). Advanced Financial Risk Management, An
Integrated Approach to Credit Risk and Interest Rate Risk Management. John Wiley & Sons
Hausmann & Hidalgo. (2011) The Atlas of Economic Complexity . Cambridge MA: Puritan Press
