Microsoft’s Satya Nadella: Don’t worry about inflation, just buy more of our stuff

The productivity trap

It's not hard to see that the U.S. economy is going through some things. Supply-chain disruptions are leaving home improvement projects stranded off San Pedro Bay, new cars are nearly impossible to get and used cars are more valuable than ever thanks to chip shortages, and disruption in the labor markets is forcing companies to pay employees actual living wages in order to compete.

If you're Microsoft CEO Satya Nadella, you see an opportunity for even more new business. As investors fret about inflation — which, while up, is still well below even recent historical crisis levels — Nadella once again made a case that cloud computing can fix everything.

"Digital technology is a deflationary force in an inflationary economy," Nadella said earlier this week after Microsoft reported yet another incredible quarter of revenue and profit growth. "Businesses small and large can improve productivity and the affordability of their products and services by building tech in density."

• The personal and business disruption caused by the now 18-month-long pandemic drove enormous purchases of cloud computing technology in 2020 and well into 2021 as businesses realized they needed to revamp sales channels and adopt workplace collaboration tools across a distributed workforce.
• Nadella thinks that cloud-based productivity tools — like the ones Microsoft happens to sell — can also help companies steer their way through periods of inflation.
• "In an inflationary environment, the first place any business should go to is how to really ensure that they're able to get productivity gains," he said on Microsoft's earnings call, according to a transcript provided by Seeking Alpha.
• This is one of the earliest justifications for the cloud: Why pay a person to manage a data center or massive software package for you when you can pay a company to manage it better at scale?

However, we should never describe software as a "solution," as a former editor of mine would insist, because software arguably causes nearly as many problems as it solves, cloud-based or not.

• Companies are already having trouble finding value in their cloud purchases, according to a survey conducted by PwC earlier this year.
• Some of the gap can be chalked up to setting the wrong goals, or not understanding that moving applications to the cloud usually involves embracing a different operating model.
• But either way, it's not the tools alone that could eventually make those companies more productive; it's the people inside the organization who understand how to take advantage of cloud services.
• You can't simply spend your way to productivity through "digital transformation," as much as Nadella and Microsoft might like.
• And the relationship between productivity and inflation is also not as clear cut as some might think.

One thing is clear for businesses of a certain age: Smaller, newer competitors are building their own businesses based on the latest-and-greatest cloud technologies because they're starting fresh without having to support legacy applications that run key areas of their businesses.

• In order to keep up with the upstarts, those older companies need to find a way to match their speed and agility.
• Cloud computing services can offer immense value to companies, but they won't single-handedly gas productivity without people and processes that understand how to utilize them.
• That's a very in-demand labor market, and while cloud services might allow companies to operate more efficiently with fewer people, those people will likely be more expensive and harder to find in less-sexy industries.
• In the long run, most people in this industry believe Nadella is right: Depending on how effectively they're implemented, cloud services will likely reduce business expenses and improve productivity compared to the cost and burden of operating your own data centers.

But as they say, in the long run, we are all dead. Spending your way to productivity through cloud services is a lot harder than it looks.

— Tom Krazit

A MESSAGE FROM DIGITAL REALTY

Designed by practitioners for practitioners, our Digital Workplace Blueprint helps companies accelerate deployment and improve infrastructure precisions to scale a business globally. Download it now, and learn more about the make-up of a Pervasive Datacenter Architecture (PDx™), including software for guiding migration of information technology from centralized datacenters to decentralized centers of data exchange.

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A MESSAGE FROM DIGITAL REALTY

Designed by practitioners for practitioners, our Digital Workplace Blueprint helps companies accelerate deployment and improve infrastructure precisions to scale a business globally. Download it now, and learn more about the make-up of a Pervasive Datacenter Architecture (PDx™), including software for guiding migration of information technology from centralized datacenters to decentralized centers of data exchange.

Learn more