Microsoft Financial Results: Q1 FY21


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As I think most of us expected, Microsoft’s strong financial results continued in Q1 FY21.

Headline figures

In July – September 2020, Microsoft saw:

  • Revenue up 12% to $37.2 billion
  • Operating Income up 25% to $15.9 billion
  • Net Income up 30% to $13.9 billion
  • Operating Expenses grew by 10% (primarily driven by investments in Azure)

This is a fantastic performance as Microsoft – unlike many of their rivals – continue to grow and thrive during the COVID-19 pandemic. While IBM, Oracle, and SAP are all reporting lacklustre numbers – Microsoft are doing very well. This is mainly due to Microsoft’s wide and varied portfolio – if you don’t want one thing, there are plenty of others they can sell you – but also due to the relevance of their product line-up.

Not only are Microsoft 365 and Azure hugely relevant right now, so are products like the Power Platform and Dynamics 365 as they enable new ways of working and digital transformation. This is a strength many of their competitors don’t have – if you don’t want to buy a big database or an ERP system, that dramatically reduces the options for Oracle & SAP for example.

Product Highlights

  • Office 365 commercial revenue was up 21%
  • Dynamics 365 again grew by 38%
  • Azure saw another quarter of 48% growth
  • LinkedIn was up 16%
  • Surface revenue rose 37%
  • Enterprise Mobility & Security install base has grown to 152 million+ seats

On the flip side – Office Commercial was down 30% showing the move away from on-premises perpetual to cloud-based subscriptions continues apace.

Microsoft also called out “continued weakness” in transactional licensing as they saw a 1% drop in “server products” revenue. To be honest, I’m surprised it isn’t a bigger drop than that…

Another drop in Windows Pro OEM sales (22%) while Windows non-Pro OEM grew by 31%. This will partly be due to organisations de-prioritising laptop refreshes right now but also, I suspect, by users working from home buying themselves new “work” devices. That latter aspect opens up some licensing issues – as volume licensing Windows licenses generally can’t be applied to Windows Home licenses.

Microsoft are in a very strong position and it’s further proof that Satya Nadella has overseen one of the greatest corporate turnarounds for a long time!

Further Reading

https://www.microsoft.com/en-us/Investor/earnings/FY-2021-Q1/press-release-webcast

Microsoft Office 365 Audio Conferencing Extended Dial Out


Microsoft Office 365 Audio Conferencing Extended Dial Out for US and Canada is an add-on license that offers “virtually unlimited” calling minutes for North American users. Although subject to a fair use policy, users with this add-on won’t deduct capacity from their organisation’s pool or Communication Credits.

The license is available via EA/EAS, EES, CSP, and via the web for commercial, Edu, Non-profit and US GCC customers. I haven’t seen pricing info yet but you can see a little more info from Microsoft here.

Microsoft SharePoint Syntex – what is it?


SharePoint Syntex was added to the Microsoft Product Terms in October 2020 – but what is it?

Image by PublicDomainPictures from Pixabay

Project Cortex

First of all – we need to consider Project Cortex. This is a Microsoft program to weave Artificial Intelligence (AI) into a range of their products to help users and serves as something of an “umbrella”. SharePoint Syntex is the first product “from” Project Cortex but there are clear plans from Microsoft for several more to follow.

What does SharePoint Syntex do?

Introducing the concept of “topic centers”, SharePoint Syntex aims to automatically replicate the way that humans process documents including recognizing content, extracting information, and applying metadata tags. It works across Office docs, PDFs, and images and is another example of Microsoft’s move towards Robotic Process Automation (RPA) – alongside their advances with the Power Platform and Microsoft 365 E3.

For organisations processing a lot of data within documents – such as CVs, proposals, articles etc. – this could represent a new way for them to work smarter, not harder. Utilising AI to perform many of these tasks will free up human users for higher value projects. Microsoft are working on connectors to enable organisations to pull data from 3rd party systems into the Microsoft Graph and then utilise it within SharePoint Syntex.

At launch, it only supports English and Microsoft plan to add additional languages “in 2021”. They do say however, that you can create bespoke “topics” in any language and that certain functions, such as processing forms content, are language agnostic.

Taken from https://www.microsoft.com/en-us/microsoft-365/enterprise/sharepoint-syntex?activetab=pivot:overviewtab

Licensing

SharePoint Syntex is available as an add-on license for commercial Microsoft 365 customers and costs $5 per user per month. It appears to be available for the Microsoft 365 Business SKUs as well as the Enterprise suites.

Anyone who will be “using, consuming, or otherwise benefitting from” the capabilities of SharePoint Syntex will need a license. Microsoft list out a range of scenarios that require licenses including where users:

  • Access a Content Center
  • Create a document understanding model in a Content Center
  • Upload content to a library where a document understanding model is associated (whether in a Content Center or elsewhere)
  • Manually execute a document understanding model
  • View a library where a document understanding model is associated
  • Create a forms processing model via the entry point in a SharePoint library
  • Upload content to a library where a forms processing model is associated
  • View a library where a forms processing model is associated

This creates a whole new set of circumstances for organisations to become under-licensed and to have those wonderful, bordering on the philosophical conversations with Microsoft like “What IS the definition of benefiting?”, “What exactly is a “capability”?” etc 😁

Further Reading

Free trial and buy here

Microsoft Teams customer promotions


To help drive adoption of Teams, Microsoft have announced a couple of customer promotions:

Audio Conferencing for free

For Enterprise Agreement customers, the offer is available immediately until January 21, 2021 and licenses are free until the end of your enrolment.

For purchases via partners and the web portal, you get the licenses free for 12 months. Offer starts October 1, 2020 and ends March 31, 2021 and isn’t available in China or India.

35% off Teams Advanced Communications

Available now for Enterprise Agreement customers (ends January 31, 2021) and “coming soon” if you buy via partners or the web portal. This is available worldwide.

See Microsoft’s post here.

Microsoft Security name changes – September 2020


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Microsoft have always enjoyed a good name change and nowhere has this been more true than their rapidly growing security portfolio. You’ll be pleased to know the pace of change continues following Microsoft Ignite 2020!

What’s changed?

Old nameNew name
Microsoft Threat ProtectionMicrosoft 365 Defender
Microsoft Defender Advanced Threat ProtectionMicrosoft Defender for Endpoint
Office 365 Advanced Threat ProtectionMicrosoft Defender for Office 365
Azure Advanced Threat ProtectionMicrosoft Defender for Identity
Azure Security Center Standard EditionAzure Defender for Servers
Azure Security Center for IoTAzure Defender for IoT
Advanced Threat Protection for SQLAzure Defender for SQL 

So gone are the various ATPs and Security Centers but now, like Marvel, we’ve got a bunch of Defenders to contend with!

There have also been a range of new features additions which will continue to strengthen Microsoft’s security offering including support for Amazon AWS and Google Cloud.

Further Reading

Microsoft SIEM & XDR features and name changes

Microsoft FY20 Financial Results


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Microsoft had, as expected, a great Q4 with revenue up 13% to $38 billion, which closed out an equally good fiscal year. Overall revenue of $143 billion, and operating income of $44.3 billion, was driven by revenue increases in all Microsoft’s key areas:

  • Office 365 was up 19%
  • Dynamics 365 was up 38%
  • LinkedIn increased by 10%
  • Azure was up 47%

Although the Azure growth was lower than previous quarters, it still seems healthy enough for now.

Microsoft called out some interesting points during their earnings call, some of which give a good indication of future direction including:

Slowdown in transactional licensing and flat on-premises server revenue: While this may be down, at least in part, to the impact of COVID-19 – it is also where Microsoft are heading. This is also shown by the fact that Office Commercial (on-premises Office) was down 34% -which Microsoft attributed to a combination of COVID-19 and the move to annuity licensing.

As long as those transactional licenses and on-premises server software are being replaced by CSP, Microsoft 365, and Azure – Redmond will be happy. I’ll be keen to see if this numbers start to rise again as the economic situation stabilises.

Bigger, longer Azure contracts: They stated “material growth” in Azure contracts over $10 million which is good news for Microsoft. For everyone in this new subscription based world, locking customers in to longer term deals is a key aim as it makes it easier for the vendor to forecast and budget.

Increased ARPU for Office 365: Average Revenue Per User (ARPU) is a key metric for many of today’s organisations and an increase means Microsoft are making more money per user. This could be as they upgrade to higher level plans (E3 to E5 for example) or purchase add-ons to their existing licenses. The Office 365 seat count increased and the ARPU increased, which are both positive for Microsoft.

All in all, a very positive performance from Microsoft that clearly shows their focus on cloud continues to pay off. Looking ahead to this financial year, FY 21, I think we’ll see more focus on E5 – particularly for security and voice workloads, Power Platform continuing to appear in new places, and increased pressure on those organisations looking to remain on-premises.

See the Microsoft press release and figures here.

Slack make antitrust complaint about Microsoft Teams


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In a move that’s got some strong late 90s/early 2000s vibes, Microsoft are the subject of a new EU antitrust complaint. Slack have accused Microsoft of:

illegally [tying] its Teams product into its market-dominant Office productivity suite

and go on to say that they are:

“force installing it for millions, blocking its removal, and hiding the true cost to enterprise customers

Slack’s VP of Communications and Policy, Jonathan Prince, says they’re “confident” that they beat Microsoft when it comes to the merits of their product but that they:

can’t ignore illegal behavior that deprives customers of access to the tools and solutions they want

Their statement about the complaint makes it clear they see this as a proxy for a larger battle, referring to it as “gateways versus gatekeepers“. It feels a bit like they’re playing on the old trope of “EVIL MICROSOFT” here – implying that Microsoft are not open or innovative and treat their customers unfairly, and in fact saying that “Microsoft is reverting to past behavior“. Let’s take a look if that’s true…

A look at the claims

  1. Slack describe Teams as a “weak, copycat product” but is that correct? One could argue that Microsoft’s history of products such as:
  • Office Communication Server
  • Lync
  • Skype for Business

predates Slack by several years and that Teams is a natural progression from those.

2. This is a weird way of “blocking its removal” – https://support.microsoft.com/en-us/office/uninstall-microsoft-teams-3b159754-3c26-4952-abe7-57d27f5f4c81

ZDNet’s Ed Bott has a great article here that provides some great extra info on Microsoft’s previous antitrust cases, and shows I’m not the only person who thinks this is much ado about nothing too 😄

Welcome, Microsoft

It’s fair to say that Microsoft Teams has improved massively in the years since it’s launch, particularly in the last 6 months or so – with many additions driven by increased usage due to COVID-19 remote working. The improvements – and the fact that so many of these new users have gone to Microsoft rather than to them – have clearly worried Slack, as their tune has changed significantly since they ran a pretty confident advert in the New York Times almost 4 years ago which said:

You’re not going to create something people really love by making a big list of Slack’s features and simply checking those boxes.

We know that playing nice with others isn’t exactly your MO “

If you want customers to switch to your product, you’re going to have to match our commitment to their success and take the same amount of delight in their happiness

They finished their letter to Microsoft by saying:

So welcome, Microsoft, to the revolution. We’re glad you’re going to be helping us define this new product category. We admire many of your achievements and know you’ll be a worthy competitor. We’re sure you’re going to come up with a couple of new ideas on your own too. And we’ll be right there, ready

It looks now that they’re not quite as happy to have Microsoft around! Ever since the early days, Microsoft have been very good at coming to a product area behind other organisations but, eventually, becoming the #1 in that area – Windows, Office, and Active Directory are all examples of this and they certainly seem to be on their way to doing the same in this collaboration space…hence Slack’s apparent worries!

As well as the above, many of Slack’s other claims can be taken with, at least, a pinch of salt – the 75 million daily users show that Microsoft are giving customers what they need/want and there’s a dizzying amount of third-party software and tools that you can add into Teams.

All in all, I don’t think there’s much to this but it will be interesting to see how seriously the EU take this complaint and what, if anything, comes of it.

Further Reading

Slack statement

Slack advert

Microsoft July 2020 licensing changes


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It’s just a few weeks into their new financial year and Microsoft are already making changes.

Perpetual software via CSP

Continuing their focus on the CSP (Cloud Solution Provider) program becoming the primary licensing model for the majority of organisations, Microsoft are now making perpetual software aka ‘software licenses’ available via CSP – although Software Assurance (SA) will not be available. This includes products such as:

  • Office Standard/Professional 2019
  • Exchange Server 2019
  • SharePoint Server 2019

The software must be run on hardware dedicated to the customer and downgrade rights are included.

Aimed primarily at those customers who purchase via Microsoft Open licensing, this new offering is intended to reduce the need for organisations to have CSP and another license agreement. From July 1, 2020, a select set of “indirect providers and their indirect resellers” will be able to transact these new additions and then it will open up to all CSP partners from January 2021.

E5 gets calling minutes

UPDATE AUGUST 1,2020: Microsoft have announced they’re cancelling the introduction of both the Enterprise Voice SKUs AND adding Calling Plans to E5.

Shoutout to Rob Quickenden for highlighting this change in Twitter.

Microsoft say in their updated post that they’re no longer launching ” due to rapidly evolving market conditions” and that they will “continue to assess the market and sales data to determine whether the launch will be rescheduled”.

This seems like a strange move. The additions made a lot of sense and have been well received by most people that have already heard about it! I wonder what Microsoft’s logic is?

See more here: https://docs.microsoft.com/en-us/partner-center/announcements/2020-july#10

August 1, 2020 will see the introduction of “Microsoft 365 Enterprise Voice” – a combination of:

  • Phone System
  • Audio Conferencing
  • Domestic Calling Plans

Which will be available in ‘Plan 1’ and ‘Plan 2’ flavours – ‘Plan 1’ will include 120 minutes of domestic outbound calling while the number of minutes in ‘Plan 2’ is still to be revealed.

These will be available via Enterprise Agreement (EA & EAS), CSP, and Web Direct for all countries where Calling Plans are currently available – except for the United States and Puerto Rico. License pre-requisites are M365 F3/E3 or O365 F3/E1/E3.

Additionally, 120 minutes of domestic outbound calling will be added to:

  • Microsoft 365 E5/A5
  • Office 365 E5/A5

At no additional cost – although it will require a new SKU.

Further Reading

https://docs.microsoft.com/en-us/partner-center/announcements/2020-july

Microsoft Product Terms: June 2020


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June is the last month of Microsoft’s financial year but they’re still made a few changes worth noting in this month’s Product Terms:

  • 5 year reservations for Azure VMs are added – with a 35% early termination fee
  • Azure Hybrid Rights for SQL have been expanded so now:
    • on-premises SQL Server Standard licenses can be used to run SQL Server Enterprise VMs in Azure
    • on-premises SQL Server Enterprise licenses can be used to run SQL Server Standard VMs in Azure
  • Changes to the eligibility for Office 365 and Microsoft 365 F1 & F3 licenses

SQL Server

The core conversion ratio is different for the two new scenarios:

4 x SQL Server Std on-prem cores w/SA = 1 x SQL Server Ent Azure core

1 x SQL Server Ent on-prem core w/SA = 4 x SQL Server Std Azure core

You can see the above table, and the info, on pages 54-54 of the June 2020 Product Terms.

F1/F3 changes

Microsoft have again changed the rules around who is eligible for a “Firstline” SKU. The new requirements are that to qualify for an F1/F3 license a worker must satisfy at least one of these conditions:

  • Uses a primary work device with a single screen smaller than 10.1”
  • Shares their primary work device with other qualifying Microsoft 365 or Office 365 Firstline Worker licensed users, during or across shifts
    • Other licensed Microsoft Firstline Worker users must also use the device as their primary work device
    • Any software or services accessed from the shared device requires the device or users to be assigned a license that includes use of those software or services

The previous guidance, updated in November 2019, was:

“A Dedicated Device is a computing device used for work with a 10.1” screen or larger, used by the user more than 60% of the user’s total work time during any 90-day period.”

These new rules should make it a bit easier for everyone to police but, for organisations already licensed for F1/F3 prior to June 1, 2020, you can continue to license based on the previous rules until your next renewal.

Microsoft Cloud for Healthcare


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Microsoft have introduced their first vertical specific cloud offering – Cloud for Healthcare. Currently in public preview, the stated aims of this are to:

  • Enhance patient engagement
  • Empower health team collaboration
  • Improve insights

and, considering the current Coronavirus situation, focusing first on healthcare makes sense. They highlight that over 1,600 “COVID-19 bots” have gone live since March across 23 countries and we’ve already seen a huge rise in Azure usage during the last couple of months. The offering will span Azure, Microsoft 365, Dynamics 365 and more.

What’s next?

I look forward to seeing which other verticals are next to receive their own cloud and also, over the long term, if we start to see features and licensing differences between them. As cloud goes from being presented as one monolithic thing that everyone uses to separate, discrete offerings tailored to different industries, it will be much easier to introduce commercial differences. I imagine we’ll see some more about these at Microsoft Inspire in July.