14 DAY TRIAL // Microsoft is seeking smaller prices for the servers it purchases from partner HP, while also pushing for its in-house cloud server design that would help reduce its dependence on other companies.
While this strategy perfectly makes sense for the Redmond-based software giant, it actually represents a strong hit for HP, which is now recording dropping sales because Microsoft was one of its biggest clients for servers. At the same time, it also signals that the impact of cloud services on its server business is increasing, as more large companies invest in this area, including Microsoft itself and Amazon.
Chief Executive Officer Meg Whitman was quoted as saying by Bloomberg that the company experienced substantially fewer orders from a tier-1 service provider, which, according to the source, is typically a cloud and telecom company.
Microsoft’s investments in cloud
It’s believed Microsoft is the company that HP’s CEO was referring to, especially because the software giant last year presented an in-house cloud server design that opened the door to hardware produced by smaller companies, thus leading to a more competitive market for giants like HP and Dell.
“Within Tier 1 we had a much lower demand from a single large customer. The Tier 1 business is very competitive, and we’ll see what happens there,” Meg Whitman was quoted as saying.
Microsoft’s push for cheaper servers is part of the company’s investments in cloud services, which are becoming one of the top cash cows for the firm every quarter. Last quarter alone, Microsoft Azure revenue increased by no less than 93 percent, according to data provided by the firm in its financial report.
“This past year was pivotal in both our own transformation and in partnering with our customers who are navigating their own digital transformations,” said Satya Nadella, chief executive officer at Microsoft. “The Microsoft Cloud is seeing significant customer momentum and we’re well positioned to reach new opportunities in the year ahead.”
We’ve reached out to Microsoft for comments on this and to find out if it was indeed the firm that reduced orders for HP servers and we’ll update the article when a response is offered.