What is behind Microsoft’s and other IT Vendors’ Cloud numbers?

Microsoft just announced its third quarter result and as part of Wall Street said:

"Blockbuster numbers on Cloud and disappointing results on the traditional business including Windows and Office."

Talks are about how Microsoft now needs to show actual consumption (usage) of their Cloud offerings like Azure and Office 365 and not only sold as part of existing Enterprise Agreements.

Nadella has been quite convincing in his presentation to Wall Street and others showing how Microsoft is succeeding moving customers to Microsoft’s datacenters. The Microsoft Sales Machine is moving fast, but what is really going on under the hood?

Office 365 – double digit user numbers and growing fast. But how does Microsoft count the revenue? Many of the Office 365 subscribers have included and paid for the right to install Office on their devices to run the Office package in the traditional way. Is Microsoft counting this as Cloud revenue? I would not be surprised though this usage has nothing to do with Cloud, but all to do with moving your business from upfront payment to recurring revenue.

On the Consumer side of Office 365 one could ask – Is the Cloud the driver or is it in fact subscription based Office that drives the growth?

And SPLA – the Service Provider License Agreement - the monthly fees Hosting and Service Providers pay to Microsoft to use Microsoft’s technology in their datacenters – is that included in the Cloud revenue of Microsoft? Is Microsoft taking credit for this as their own direct Cloud success?

Many more questions could be asked to get the real story behind the numbers, but I will leave that up to Wall Street. And while doing so – ask the same line of questions to all of the “Legacy” IT companies trying to convince us all of great success in the Cloud. The success might just be many re-labeled offerings adding up the numbers to satisfy the shareholders.