Daily Archives: August 15, 2011

Microsoft, Tech, Windows 7, Windows 8

Microsoft: We make more money on cloud-based Exchange than legacy email

Per-user income greater in cloud, or so Microsoft claims

microsoft Claims it earns more money per user from cloud-based Exchange email accounts than it does selling the legacy version of Exchange Server most businesses deploy today.

 


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That’s what Microsoft investor relations GM Bill Koefoed said at the Oppenheimer Annual Technology, Media & Telecommunications Conference Tuesday, according to a transcript on Microsoft’s website. Customers who purchase Exchange as part of the Office 365 cloud service pay roughly $10 per month, less than they would in the back-end costs of running their own Exchange servers, but nearly all of of it goes directly to Microsoft, he said.

Hosted productivity suites: Google Apps or Microsoft Office 365?

That doesn’t mean Microsoft actually makes more money in the cloud than it does with its traditional business of selling software licenses. For one thing, Microsoft’s cloud customer base is mostly small businesses. To gain the kind of per-user profits Koefoed is talking about, Microsoft needs Office 365 to lure in big enterprises.

“Within an enterprise, let’s say it costs $15 per user per month today to run Exchange, and that’s about $2 for Microsoft, and that’s $13 in rent, power, the data base administrator that’s running the thing, the hardware and all the kind of services that are associated with kind of running Exchange in your premise,” Koefoed said.

“With Office 365, or with Exchange Online, the Exchange part of that, we charge $10 per user per month,” he continued. “So, that ends up being a savings to the CIO of roughly 33%, and we make 5X more revenue and our profit ends up being somewhere, $3 or $4 per user per month. So, we make more revenue and we make more profit and we save our customers money.”

The profit ends up being $3 or $4 per user per month because it costs Microsoft $6 or $7 per user to run the data centers powering the cloud service. “We can do that at scale,” Koefoed noted. “Interestingly, one of the things that we’ve learned in our search business is how to run data centers at scale.”

Koefoed gave the example in response to investors’ questions about how Microsoft’s revenue in the cloud compares to its traditional business model of selling software licenses. The popularity of Google Apps with small businesses is among the factors that forced Microsoft to expand its Web-based offerings, but investors are likely concerned these offerings will cannibalize Microsoft’s existing revenue streams.

Koefoed’s example leaves out the fact that Office 365 is appealing mostly to smaller businesses with few users. The small business version of Office 365, which includes Exchange, SharePoint, Lync and Office Web Apps, costs only $6 per user per month. An actual Exchange Server license, meanwhile, costs $700 for a standard edition and $4,000 for an enterprise edition, plus extra charges for client access licenses.

Enterprises can lessen the financial hit because of their scale, making the economics of running their own servers worthwhile for the customer, which is why Koefoed can say enterprises pay Microsoft only $2 per user per month to run Exchange. For small customers, the per-user cost of running Exchange Server without a cloud subscription would be higher, and therefore more profitable for Microsoft. Whether Microsoft actually makes more per-user profit from cloud services than packaged software is therefore questionable.

Apple, Tech

China stops fake Apple stores from using trademarks

The Chinese city of Kunming has been in spotlight for counterfeit Apple stores

The Chinese city of Kunming has stopped 22 fake Apple stores from illegally using the company’s iconic trademarks after Apple lodged a complaint with authorities.

 

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Kunming authorities found 20 unauthorized Apple resellers, according to a Friday posting made on the city government’s website. Currently, 11 of those resellers are being investigated. Two other stores were discovered for related violations.

IN PICTURES: Fake apple stores?

The city ordered all unauthorized Apple vendors to cease using the Apple trademarks by August 10, this past Wednesday. This included any decorative logos found on door entrances and clothes. All 22 stores complied with the demand.

Kunming authorities launched the investigation after Apple’s Shanghai office sent a complaint about the fake stores on August 2, according to the government posting.

Apple did not respond to comment. Kunming’s industry and commerce bureau could also not be reached.

News of Kunming’s fake Apple stores appeared last month when a blogger posted photos from one of the vendors. The stores were built to closely match the decor of Apple’s own official retail outlets, with employees even dressing similarly. The products sold, however, were said to be real.

Since the blog posting, the fake Apple stores have received unwanted attention from both the media and authorities. Kunming officials had launched an earlier investigation, in which they had found five unauthorized stores illegally using the Apple logo. Two stores were ordered to be shutdown.

Apple has become one of the most popular brands in China, according to analysts, with the company’s products proving to be a hit among consumers. Last month, Apple COO Tim Cook said the company’s revenue from China for this past quarter increased by more than six times from the same period last year.

But while Apple uses its own network of resellers in the country, the company only has four stores on mainland China, two located in Shanghai, the other two in Beijing. Long lines have formed at those retail outlets in the past when Apple launched its iPhone 4 and iPad 2 products, creating shortages for the products.