By ALLAN KRANS, special to Local Tech Wire

Editor’s note: Allan Krans is a senior analyst with

HAMPTON, N.H. – Microsoft’s (NYSE: MSFT) messaging around cloud is becoming increasingly aggressive, but its execution in traditional businesses had revenue pouring in during 2Q10.

Total revenue topped $16 billion for only the third time in company history, as Microsoft reported double-digit revenue growth across all of its business divisions during the quarter. After enduring three consecutive quarters of revenue declines during the recession, the seeds Microsoft sewed are bearing fruit, as Windows 7 and Office 2010 have generated significant growth despite the ongoing economic uncertainty.

Cloudiness will gradually roll in

As Microsoft itself admits, the company and perhaps even the entire industry is fortunate the transition to cloud is not going to occur overnight. After being talked about for years, adoption is occurring, but it will take time for customers to grow comfortable with the new technology. In the meantime, Microsoft has a wealth of opportunity to continue generating revenue through its traditional offerings.

Microsoft estimates that Windows 7 accounts for 15 percent of the existing PCs in the world. The company is clearly pleased with the adoption of Windows 7 so far, but also believes the remaining 85 percent of PC customers that are running Vista, XP, or an older operating system represents a huge opportunity.

Using even conservative math, the revenue opportunity for Microsoft to convert the remaining 85 percent of PC users to Windows 7 approaches $50 billion. Beyond Windows, Microsoft has significant market opportunities in Office, SharePoint, Windows Server, and multiple other product areas that will sustain its financials for years.

Cloud is important and is capturing a large amount of Microsoft’s investment and messaging, but its existing business will sustain revenue and profit for quite some time.

Microsoft looks for partner buy-in on its cloud “all-in” strategy

Although traditional products will carry the day for Microsoft financially, the pressure is on to lock in the partner community for its emerging cloud strategy. The first wave of cloud computing growth was led by direct sales led vendors Google, Amazon, and, but TBR believes partners will play a much larger role in driving the next wave of cloud computing adoption.

Microsoft is seizing this opportunity early, as IBM and Cisco, amongst others, are also vying for partners to commit to their cloud strategies. Of all Microsoft’s strategic assets as an organization, its partner channel may just be its most valuable and not one it can afford to let slip as customers transition to the cloud.

During its Worldwide Partner Conference, Microsoft took great strides to communicate what changes the cloud will bring to their business, both good and bad, and lay out a path for partners to begin adjusting. Formalizing this effort, Microsoft introduced two new designations within its partner program specifically focused on cloud – Cloud Essentials and Cloud Accelerate.

Few IT vendors have cloud-specific designations, so Microsoft is ahead of the market at this early stage. However, we anticipate additional cloud programs and refinements over the course of 2010 in the ongoing effort to transition Microsoft’s partner advantage to the cloud.

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