Is Microsoft Betting Too Much on the Cloud?

Microsoft International President Jean-Philippe Courtois earlier this month told Bloomberg that the company will spend a whopping 90 percent of its $9.6 billion research and development budget on cloud computing this year.

That brings up the question: Is Microsoft putting all its eggs in one basket? Sourya Biswas asks that same thing in a blog post this week. A proponent of cloud computing and, according to his LinkedIn profile, an MBA student at the University of Notre Dame and a former risk analytics manager at Citigroup,  Biswas wonders if Microsoft is throwing the baby out with the bathwater. He writes in his blog:

Make no mistake; I believe that cloud computing is the technology of and for the future. But allocating 90 percent of the research budget on an emerging technology without paying adequate attention to established products in which it has dominance is too big a risk in my book. Especially since that dominance is under threat, with the rise of Firefox and Chrome against the Microsoft Internet Explorer, and the growing popularity of Linux versus Microsoft Windows.

I believe there may be a sense of hubris in the way Microsoft is neglecting its established revenue lines. While its Windows still powers more than 80% of the computers in the world, there are several complaints against the operating system. In fact, many would argue that a lot of that $9.6 billion R&D should have been allocated to making the next edition of Windows bug-free, resource-light and malware-resistant.

Despite Microsoft's preaching that it is "all in" the cloud, the company has taken a measured approach at emphasizing that users will continue to work on local client devices and have access to their data offline.

While keeping its eye on rivals such as Google, Salesforce.com and Amazon Web Services, Microsoft needs to keep investing in technologies such as Windows, Office, SharePoint and Lync. Even if they all ultimately have substantial cloud components, the offline world will remain a critical component to users and Microsoft customers will expect significant investments in technologies that support the local device. I think Microsoft knows and understands this.

Time will tell what Microsoft's R&D emphasis will bring. But Biswas' point that Microsoft needs to invest in Windows and Internet Explorer is important. Do you think that Microsoft's plan to invest 90 percent of its R&D budget on cloud computing is going too far? Or is the company just putting a cloud tag on everything it does? Drop me a line at [email protected].

Posted by Jeffrey Schwartz on April 21, 2011