The era of BIG numbers is continuing. In my June 2018 blog, I already wrote about big numbers and big data, mentioned Microsoft’s market capitalization and predicted that the Azure Cloud financial figures probably would look great.
It was not so difficult to predict that, and it was even an understatement as headlines proved after Microsoft announced their financial results. Here is just one example:
On 12 July, Microsoft market capitalization exceeded $800bn for the first time. But there is always big, bigger and biggest. 1.000.000.000.000 is the number we saw passing by in August and September, the market cap of both Apple and Amazon reaching those highs. Clearly, Apple won the race to reach $1 trillion in market capitalization. Mad Money according to CNBC’s Jim Cramer. Well, give me a piece of that mad money and I would be more than happy with it.
These market cap figures are larger than the national income of the majority of countries in the world and the respective CEO’s are potentially more powerful than most political leaders of these countries. These companies have become so big that raises questions. Do they cause antitrust issues? Is there enough regulation in place to make sure they don’t hold too much economic and political power? For this money, you can buy 15 of the most expensive companies in Germany, including SAP. BTW, is it a coincidence that the 6 most expensive companies are all cloud companies? Oracle, IBM, and SAP are following as software vendors and service providers. There is a nice clickable visual on this website.
The Dynamics growth figures were even higher than I expected, and Microsoft’s revenue is more diversified than any other cloud company.
“The law of large numbers is kicking in,” Evercore ISI analyst Kirk Materne told CNBC in an interview, referring to Azure’s growth. “The base is getting bigger. It is growing faster than Amazon Web Services did when it was at a similar size. This is probably a $9 billion business growing at more than 80 percent.”
All Microsoft partners gathered mid-July to attend Microsoft Inspire in Las Vegas, the traditional kickoff of Microsoft’s new fiscal year. If you have been following the Microsoft news, then most of the Inspire 2018 news has already been highlighted, but there is 1 sentence of Satya Nadella worth mentioning again. This is the 1 short sentence with which he summed up what the difference is between Microsoft and Apple or Amazon. On stage, and earlier in a recent interview with Cnet, Nadella shared some insights into the inner workings of Microsoft, including what he has tried to change about the company. On the quest of hiring the best employees, Satya’s said, “You join here, not to be cool, but to make others cool.”. Please read the full analysis here.
The shift to subscription-based services will further increase. I already noticed the same concepts for the fashion, airline and many more industries. But I also see a risk of a subscription disease. In my personal life, I am getting fed up with all these subscriptions like Spotify, Netflix and more, leading to a high level of continuous returning variable base costs. Also, with the power and market dominance of the software companies mentioned above the risk of price increases is not far away. Microsoft already announced changed pricing for Office 2019 and Windows Server Version 2019.
On another note, the cloud promise and constant evergreen upgrades without disruption are nearly there. Microsoft has announced the way they modernize updating Microsoft Dynamics 365. Please read the message and think of this for a while. It at least means that the pace of our newsletters updates is slower than the updates Microsoft will implement! Compared to doing an update once per 3, 4 or 5 years this is going to happen each month. There is no other business application vendor in combination with a platform that can deliver that. What does this mean for add-ons and customizations? It makes more sense to take the ISV business serious, not only from the ISV perspective but also from a Customer and Partner perspective. Microsoft is exactly doing that. Only dedicated and focused ISV’s can keep hold of Microsoft’s speed of updating. Similar to constant updates I talked about constant acquisitions earlier. The market of enterprise software and service provides is following the automotive market, where there are only a few large players with multiple brands left, trying to distinguish themselves more on emotion and image than on product. How can software vendors do that? “We are here to make others cool.”.
So, the number of players in the world of software vendors is getting smaller and smaller and the same is true for the number of partners in the Microsoft Dynamics 365 world. The number is smaller, but the size of each partner is getting larger. So, if you as a company are looking for a new solution it is getting easier and more difficult at the same time. The same is true with elections and chances of winning. As we have seen above magic is in the numbers and as you may know, numbers always attract me. Politicians and companies can learn from mathematical challenges.
Here is the story of Pete and Mary playing a game which I read in a column of Ionica Smeets. There are 4 vases filled with 5 marbles. Each vase has 4 white and 1 red marble. They both may pick 4 marbles from 1 or more vases blindfolded. The person with the largest number of red marbles wins the game. Pete may start and decides to pick a marble from each vase. Mary decides to pick the remaining 4 marbles from 1 vase. Who do you think has the biggest chance of winning? Pete seems very smart as Mary can only pick 1 red marble at max and he has a chance of picking 4 red marbles!
Let’s calculate their chances and start with Mary’s point of view. Her chance of picking a red marble is zero (0) or one (1). The chance of her picking zero red marbles is one-fifth (1/5), because that is the chance of Pete picking that 1 red marble from her vase. If that is the case, then Pete always has a higher chance of picking the most red marbles. This way his chance of winning is 1/5.
But now let’s look at it from a different perspective. Mary has a chance of 4/5 to pick a red marble. Then there are 3 more potential results:
- If Pete did not pick a red marble at all, Mary wins
- If Pete exactly picked 1 red marble, they end equally
- and if Pete has more than 1 red marble he wins
In case 1) the chance of Pete not picking a red marble out of the first vase is 4/5. The vases are independent and the chance of Mary winning is 4/5 x 4/5 x 4/5 x 4/5 = 256/625 or around 41 %.
In case 2) Mary has 1 red marble and the chance of Pete picking one red marble from the other 3 vases is 3 x 1/5 x 4/5 x 4/5 = 48/125 (need to multiply by 3 since the red marble may come from any of the 3 vases). And then further multiplied by the chance of Mary picking 1 red marble makes it a chance of 192/625 or ± 31% to equal.
In case 3) the chance of Pete beating Mary with a larger number of red marbles is 52/625 (feel free to make the calculation 😊 and if you enjoy doing this, then do this again with vases filled with n white marbles and 1 red marble). Adding the 1/5 chance of Mary picking zero red marbles makes Pete’s chance of winning 177/625 or ± 28%.
Double check: 41% + 31% + 28% = 100 % (Yes!). So: Mary by far has the best chance to win with the strategy she followed. Having 1 red marble is often enough to win. The lesson for politicians and companies: it is better to win by forming a coalition and win with a narrow majority than with trying to gather a huge majority for only a few of your proposals, topics or products.
To bouncer off in sports, we see it is hard to reach the top and it is even more difficult to stay there. Last week I attended the HSO UK Advance 2018 customer day in the beautiful Williams F1 Conference Centre and the theme was about driving high performance into your digital future.
Richard West was one of the presenters and talked about the need to focus on continuous performance improvement and gave some nice insights in the F1 industry. Richard is the co-author of ‘Performance at the Limit – Business Lessons from Formula 1 Motor Racing’ (Written by Jenkins, Pasternak, and West and Published by Cambridge University Press).
I have often made the comparison between sports and business. Richard made very clear to me that it makes sense by quoting the owner of the Williams F1 team Sir Frank Williams: ‘For two on a Sunday afternoon it’s a sport, the rest of the time it’s business!’…
Richard talked about things that form the basis or prerequisites of becoming a successful team. It’s about people, winning team culture, focus, behavior and continuous performance improvement with a plan-do-review cycle. The original book may be a bit older, but the lessons are so true. Yesterday I attended the introduction evening for parents of my youngest daughter who is now going to middle school and the director said: “You cannot not learn”. Focus is related to constant learning and to a winning culture described in The Performance Pyramid which is nicely explained in this video of professor Mark Jenkins:
To repeat the lesson mentioned earlier: it is better to win by forming a coalition and win with a narrow majority, than with trying to gather a huge majority for only a few of your products. I enjoy being a Microsoft partner.
On behalf of Dynamics Software