How Real Are The Cloud Performance Numbers by the Tech Giants?
It has been several years since the top software tech giants started re-modelling their revenue model.
As each filing year went by, financial reports submitted to the stock exchange regulator constantly saw optimistically increasing numbers in cloud adoption to top line growth. Microsoft announced its latest sterling results for last financial year.
And sure, it was tough for most traditional listed software firms during the infancy of their transformations.
But the chasms were seemingly effortless to cross if their results were anything to go by.
The announcement by Oracle in their quarterly financial report piqued some interests to look deeper into the numbers and a quick search from analysts’ reports uncovered some interesting perspectives.
Scepticism surfaced and more prying questions were mooted.
AWS could be the only front runner in cloud computing revenue and perhaps follow closely by Salesforce.com. The rest that follow, might just be hot air!
According to a report by Barb Darrow, a senior writer from Fortune magazine, Microsoft, for example used to include cloud licenses, aka seats allocated to their partners in the top line cloud revenue growth. But has since stopped this practice after being questioned about revenue treatment and recognition.
It was also said that their Xbox sales were lumped together with cloud revenue to make the cloud business segment looked thriving.
IBM allegedly did the same thing with their hardware before they sold off their server business.
One of the bugbears software companies such as Microsoft face is the chagrin of ‘churn’. Where ongoing-paying customers discontinue their subscriptions. And in some of these cases, customers move back to on-prem or perpetual licenses. Or worst, switch out to alternative offerings.
Over the past decade, some of these tech giants, while transforming themselves into cloud-emphasised companies, also included trial and free versions of their per-seat licenses. These were than translated into seat numbers which form part of the metrics that have been thrown around to demonstrate one-upmanship in the leadership board.
As of today, AWS and Microsoft Azure seem the front runners in their cloud revenue models in the compute space.
If you are a retail investors, the information delved with different angles by analysts could help derive better calculations in identifying market value of listed software companies you intend to plonk your hard-earned money on.
As of now with most market observers, AWS and Salesforce.com might be the only cloud companies whose numbers tally up in the absence of legacy baggages.