Microsoft will invest $5 billion (£3.5 billion) in the Internet of Things (IoT) over the next four years, the company announced late Wednesday, just a week after a major shake-up that puts its “intelligent cloud and intelligent edge” products at the heart of future growth.
“We’re now seeing the kind of increased adoption and exponential growth [in IoT] that analysts have been forecasting for years, and we’re just getting started” Julia White, corporate vice president of Microsoft’s cloud computing service Azure, said in a blog post.
The decision comes as Windows for personal computers has dropped from first to third place in terms of revenue drivers for the company; behind Office software and the company’s business technologies – including databases and its Azure cloud-computing service.
The company has not disclosed current spend on IoT. In its last annual report (which disclosed operating income of $22.3 billion for the financial year), Microsoft CEO Satya Nadella emphasised the company’s introduction of “hundreds of new Azure services, including new cognitive services APIs for vision, speech, text, translation and emotion”.
It has previously showcased client stories like that of Tetra Pak, the world’s largest food packaging company, which is using Azure to enable its IoT-connected machines to predict exactly when equipment needs maintenance. Service engineers then use Microsoft’s HoloLens (which it describes as “the first self-contained, holographic computer” – essentially augmented reality goggles),to access experts who can remotely guide them through repairs.
Microsoft’s commercial cloud annualized revenue ended 2017 at over $18.9 billion, up more than 56 percent year-on-year. The company is targeting $20 billion in commercial cloud revenue in fiscal 2018. The company’s aspirations are clear: “With our IoT platform spanning cloud, OS and devices, we are uniquely positioned to simplify the IoT journey” White said.
The investment will support R&D spending on IoT, development tools and intelligent services for IoT, as well as investments to grow the company’s partner ecosystem, she added.
Citing A.T. Kearney research that predicts IoT will lead to a $1.9 trillion productivity increase and $177 billion in reduced costs by 2020, Microsoft described IoTs impact as set to be “pervasive”.