EC Microsoft: Strength Upon Strength

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One thing I have observed in my business career is the growing power of entrenched distribution. If a company controls the distribution platform to enterprises, who trust them in this partnership, and also sells its own products and services on this platform, then it will have the leverage to better understand its customer’s needs and sell more of its own products and services. Busy customer representatives will just call them first to see if they offer product or service XYZ instead of spending the time to fully research other options. Strong customer service fortifies this.

Cloud computing is where technology companies provide computing and storage systems to users through internet technologies so they do not have to own and manage some or all of the hardware, and sometimes operating system, that they run on. Most readers are probably familiar with the fact that cloud computing is transforming the information technology (IT) infrastructure of enterprises. Microsoft (MSFT) is a leader in all three cloud computing service models: Infrastructure-as-a-Service (IAAS), Platform-as-a-Services (PAAS), and Software-as-a-Service (SAAS). Let us dig into what this means.

Infrastructure-as-a-Service is where the technology company provides the networking, storage, and servers to the end customer. In this case, the technology company owns and maintains the hardware, essentially leasing it to the customer. The customer runs its own operating system (platform) and applications on this leased infrastructure.

Customers wanting even less IT management responsibility can opt for Platform-as-a-Service which runs deeper than IAAS. Here, the technology company provides the infrastructure and the operating platform. The customer gets a cloud computing platform where it can develop, test, manage, and host its own applications. The technology company providing Platform-as-a-Service, not only takes care of the hardware infrastructure (IAAS covered in previous paragraph) but also manages the operating system including security.

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Disclosures: I am a shareholder of Microsoft.

The information presented in the True Vine Letter is general in nature and designed for do-it-yourself and professional investors. It does not ...

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