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    Trillion-dollar Microsoft is gearing up for another potentially 'unprecedented' growth spurt

    Abstract:Microsoft is striking up smart cloud partnerships as it prepares for the end of Windows 7. There's a lot of cloud business on the horizon.

      Microsoft has been crushing it lately on wins for its cloud.

      On Tuesday, Microsoft announced another enormous victory: A new partnership with cloud software giant ServiceNow. Under the deal, the two companies will integrate their products, and ServiceNow will bring its software onto Microsoft's cloud.

      This follows a string other agreements with companies that have traditionally been Microsoft rivals.

      But there's an even bigger event rolling towards Microsoft's customers that will force them into salespeople's arms: Microsoft will be ending support for Windows 7 in a matter of months.

      There's a lot of evidence that Microsoft is gearing up to use that to sell customers on its cloud software package, called Microsoft 365.

      Click here for more BI Prime stories.

      On Tuesday, Microsoft announced yet another enormous partnership for its cloud business.

      It signed a deal with ServiceNow that will stitch its cloud software more tightly into Microsoft's services.

      ServiceNow is known for self-help tech support software. But the company's latest spiel is what it calls “digital workflows,” where companies can automate just about any repetitive task, from employee onboarding to end-of-month reports.

      Integrating ServiceNow with Office 365 and Dynamics — Microsoft's competitor to Salesforce — could create a lot of interesting new cloud services for their joint customers.

      More importantly, ServiceNow said that it would be moving its entire tech stack onto Microsoft's cloud Azure, in addition to continuing to run its own data centers.

      Terms of that part of the deal were not announced but ServiceNow spent a over $10 million last quarter on its data center between buying new equipment ($8.5 million) and expansion costs ($2.9 million), it said in its earnings statement.

      A string of surprising partnerships

      This deal follows another brilliant new partnership between Microsoft and Oracle, where the database giant will make its new cloud database work well with Microsoft's cloud Azure.

      It's an enemy-of-my-enemy-is-my-friend scenario, where Microsoft and Oracle are teaming up to take on Amazon Web Services. The idea is that Oracle's database customers can use Oracle's cloud for their database and Azure for their other needs, one of Oracle's CEOs, Mark Hurd, explained last month to Wall Street analysts.

      Read: Top execs at longtime rivals Microsoft and Oracle explain why they just came out of nowhere with a new cloud partnership: 'This is the start of a beautiful friendship'

      ServiceNow also follows in the footsteps of Microsoft's similar partnership with Adobe announced last year.

      Similarly, Microsoft has an agreement with SAP — although SAP is partnering with multiple cloud providers to host its software, including Google and Alibaba, rather than building its own cloud.

      To a lesser extent, Microsoft's new and surprising partnership with VMware falls into a similar bucket.

      VMware CEO Pat Gelsinger made it clear that this partnership with Microsoft is considered second fiddle to its partnership with Amazon Web Services. But, all the same VMware software can now be used on Microsoft's cloud Azure with VMware's formal consent.

      (Notably, Microsoft was already working on doing this without VMware's okay.)

      'Unprecedented' opportunity from Windows 7

      But perhaps the biggest looming opportunity of all for Microsoft's cloud centers around Microsoft's old Windows operating system, Windows 7.

      Formal support for Windows 7 ends in less than six months, on January 14, 2020. And companies are still using a lot of Windows 7 PCs.

      Windows 10 only overtook Windows 7 in popularity back in January. Today, roughly 38% of the PCs on the internet are still using Windows 7, according to NetMarketShare, a site that tracks such stats.

      Roughly 40 million PCs will have to upgrade, Intel executive Jason Kimrey told CRN.

      Kimrey called the opportunity “unprecedented” in terms of the PCs and devices, consulting, software and other services the Microsoft ecosystem will be in a position to sell to so many customers.

      Whenever a Microsoft customer upgrades operating systems, salespeople have a chance to sell them more wares. In this case, Microsoft is preparing to push a bundle known as Microsoft 365, reports ZDNet's Mary Jo Foley.

      Microsoft 365 is a suite that includes Windows 10, Office 365 and a smorgasbord of other enterprise cloud software ranging from videoconferencing and Teams (Microsoft's Slack competitor) to security and analytics.

      Foley reports that Microsoft has been, all year long, reorganizing various sales teams, particularly in its commercial sales business, to focus less on software and piecemeal cloud apps, and more on cloud, particularly Microsoft 365.

      Ironically, this push toward the cloud could also be good for a few of Microsoft's old-fashioned back-office software offerings as well.

      Companies may use this time to upgrade to a new Microsoft database, new Microsoft software development tools and new Windows Server licenses. Windows Server may be running their custom and homegrown Windows apps.

      Long-time Microsoft bull Keith Weiss of Morgan Stanley believes that Microsoft's back-office software could become a dark horse driving growth in the months to come.

      That's because Microsoft is selling a new kind of license called Azure Hybrid Benefits, which lets Windows Server and database customers use these products on Azure at discounted rates.

      Microsoft's chairman explains the post-Windows world

      Microsoft is the only old-school enterprise software company to have successfully crossed the chasm and become a cloud powerhouse. And Microsoft chairman John Thompson tells Business Insider that it used its old-school on-premises software as its springboard.

      He says Microsoft's cloud success is “clearly attributable” to CEO Satya Nadella who understands “that while Windows was a very powerful platform for the company for many, many years, it clearly has evolved. And that it's not just about cloud, it's about what services you offer in the cloud.”

      He added, “in Microsoft's case, one of the important leverage points that Satya and the team were able to take advantage of was their on-prem presence as they migrated customers to the cloud.”

      This final push of the Windows 7 holdouts represents another opportunity to use that playbook.

      Gearing up its partners

      We're seeing other evidence of how Microsoft is mobilizing to bring more of its customers onto more of its cloud with the news announced ahead of Microsoft's next big events, happening next week in Las Vegas.

      Microsoft is hosting its Ignite conference for its worldwide partners, and simultaneously holding its annual internal sales conference that kicks off its new fiscal year, which begins in July.

      As we previously reported, Microsoft is telling partners that they will soon no longer get free Microsoft software to run their own businesses and that it wants them to specialize in more areas of the cloud.

      The idea of allowing partners to use Microsoft software made total sense in yesteryear. Those who sell, support and write custom apps for Microsoft software should use it themselves.

      But as Microsoft downgrades the importance of software and elevates the importance of cloud, it no longer sees the benefit of giving its software away, essentially for free, to its qualified partners.

      They should be moving to the cloud — and most of them won't get to do that unlimited, for free, either, Business Insider has learned — just like it wants customers to stop buying three-year software licenses and start buying never-ending software subscriptions.

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