Skip navigation

Microsoft's Bid for Yahoo is a Bet on Cloud Computing

I assume most of you are aware that Microsoft recently presented a $44.6 billion takeover bid to Internet giant Yahoo, an offer that Yahoo's bid rejected 10 days later because it "substantially undervalues" the company. (See my analysis of this offer for more information.) I also assume that most of you believe this deal has nothing to do with IT or the enterprise: After all, Yahoo is overwhelmingly a consumer destination online and has little if anything to do with business users. Right?

Not quite. I feel that Microsoft's attempted takeover of Yahoo has everything to do with you, your business, and the way you'll interact with computers, services, and data in the future. Sure, Yahoo is big on the consumer oriented stuff. But they also own Zimbra, makers of what is widely regarded as the most capable Web-based office productivity suite, a product category I and many others think of as cloud computing. See the SuperSite blog for more information about this new computing trend, but understand that it is only a matter of time before Microsoft finally embraces cloud-based computing. The danger, of course, is that the company will do so too slowly. Because its customer base--especially its future customer base, has already embraced cloud computing.

Yes, cloud computing sounds like yet another trendy buzz phrase. And yes, I suspect most people reading this are going to resist the notion that services and data storage, increasingly, are moving to the Internet cloud. But anyone who's had to configure multiple PCs will admit that the dream of centralized management is still largely a dream. And for those who are less technical--or working within the resource constraints of a small business--the notion of letting someone else handle all the grunt work is just too significant to ignore.

More important, perhaps, the next generation of users has already embraced cloud computing. They check their email from any Web browser, any cell phone, and other devices. They manage and share calendars online. They reach out to others with similar interests on social networking sites like Facebook. They create and collaborate on documents on the Web. They communicate with others, regularly, even constantly, in a variety of ways that make even email look like a 1970's-era rotary phone by comparison: I'm talking SMS, MMS, video chat. And they're "mashing" disparate data sources online into custom UIs that give them the info the want, where and how they want it. For this new generation of users, being strapped to desktop versions of Outlook and Word is as confining as the pre-Internet era was to us. We're the dinosaurs in this equation. And the meteor that's going to take out our way of life is cloud computing.

Now, Microsoft isn't trying to purchase Yahoo just for Zimbra, though I suspect that's certainly part of the equation. Generally speaking, the software giant is trying to reach a scale at which it can more easily compete with the clear market leader in this segment, Google. There will be talk about email and IM, search and advertising, and other areas in which Google and a combined Microsoft/Yahoo will more easily align competitively. But what this is really about is the future: Yahoo, unlike Microsoft, really groks cloud computing. It's part of Yahoo's DNA. And Microsoft realizes that while Windows, Windows Server, and Office are quite successful, it has been unable to make the transition into cloud computing because it's too easy to protect its core businesses, which generation billions of dollars of revenue every month.

Microsoft must walk a fine line between what works today and what will be expected from its user base in the future. As users of Microsoft's systems, our decision is similar: Do we remain in the past or take scary steps into an uncertain future? My bet is on cloud computing. And Microsoft's bid for Yahoo proves that it, too, is betting on that same future.

An edited version of this article first appeared in the February 12, 2008 issue of Windows IT Pro UPDATE. --Paul

Hide comments


  • Allowed HTML tags: <em> <strong> <blockquote> <br> <p>

Plain text

  • No HTML tags allowed.
  • Web page addresses and e-mail addresses turn into links automatically.
  • Lines and paragraphs break automatically.