How Microsoft is thinking about Industry Clouds (and acquisitions)

December 14, 2022
Microsoft increasingly is going vertical when it comes to selling its cloud services. Here's a bit of the why.
A doctor looking at her computer screen

Microsoft execs make occasional appearances at various banking-industry tech conferences. And sometimes these appearances include some interesting insights into the company's thinking on a variety of topics.

Dave O'Hara, who is the Chief Financial Officer for Microsoft's Commercial business, all-up, was the Microsoft guest at the Deutsche Bank Technology Conference a few months ago. When asked about Industry Clouds (members)—Microsoft's growing family of (mostly) vertically focused cloud bundles for the financial, healthcare, retail, manufacturing, non-profit, and "sovereign"/government markets—O'Hara said Microsoft execs think of these as vehicles for "onboarding to Azure." He acknowledged while these clouds are industry-specific, they aren't "super deep," functionality-wise.

"It's really just industry, some industry functionality runs on Azure and gets people onboarded under our cloud," he said. Microsoft's goal is to leave plenty of headroom for partners to build on top of these clouds, he added.

O'Hara told conference attendees that he spent a lot of time on thinking about Microsoft's $19.7 billion Nuance Communications acquisition, both before and after it happened. He said Nuance is both an app and a platform, in that even though it can be embedded in other apps and services, it also provides an industry-specific base layer that partners and ISVs easily can build on top of.

"Would we do more stuff like Nuance? I think to the degree that we can have something platformy that works with the ISV community and provides differentiation that they want, yeah, absolutely," he added.

"I think before, historically we might have done a lot of product acquisitions, a lot of tuck-ins, and we still do some of those, but now I think we'll probably be just looking for stuff that's differentiated, strategic and impactful. We're buying fewer companies, maybe slightly larger, but they need to fit culturally and they need to fit strategically. And they probably are going to be adjacent to something we're already doing, because I just don't think we're going to run that far off field," O'Hara said.

Microsoft increasingly is focusing on verticals when it comes to marketing and selling Azure, Microsoft 365, Dynamics 365 and its Power Platform wares. Just recently, the company moved Corporate Vice President Alysa Taylor from her previous role, in which she oversaw marketing for the Business Applications (Dynamics) side of the Microsoft house to Azure + Industry.