Microsoft is one of the best stocks for capturing the big secular trends in IT spending, according to analysts at Morgan Stanley. These trends include buying computing power, storage, data analytics, machine learning, security identity, productivity apps, front office apps and core financials.
Microsoft has a number of advantages as it tries to beat out competitors such as Amazon, Alibaba, Oracle, Salesforce, IBM, Apple, HP and SAP. It has a commercial customer base of 100 million, a global distribution channel comprised of 275,000 partners, about 6 million developers on its open source platform .Net, and about 30 million developers co-operating on GitHub.
Nevertheless, the enthusiastic welcome for Orrock in Seattle tells you something has been slipping through the cracks in the Microsoft ecosystem.
Not enough effort has been put into bringing ISVs into the Microsoft family.
There are about 175,000 ISVs globally and about 71,000 are cloud based, according to Orrock.
The strategy being pursued by Future Now Ventures will involve investing in ISVs and accelerating their growth. It will seek to bring ISVs operating on other platforms on to the Microsoft cloud.
Orrock and Lee will bring their expertise to bear on helping ISVs to develop sales and marketing skills, improved operations and better governance.
Future Now Ventures has already invested in 25 companies, including consulting firm Barhead and integration platform Reekoh. It is in the process of raising about $100 million from high-net-worth investors and family offices to fund further investments. It is a private equity-style fund that will invest for about four years in each company.
Orrock has formed an advisory board made up of former successful executives, including former AGL chief executive Greg Martin, roll-up expert Evan Griffiths, non-executive director Kat Foster and former Macquarie banker Doug Ross.
Nadella has said he wants Microsoft to lead in three key technologies: mixed reality, artificial intelligence, and quantum computing. These are long-term goals.
In the meantime, he knows that the profit margins in the Azure cloud business and associated commercial apps are much fatter than in the “old” Microsoft businesses. He can obviously see the upside from partnering with someone like Orrock.
If the industry forecasters are proven correct the global revenue from cloud computing services will grow from about $145 billion to $278 billion by 2021.
Orrock knows how much money can be made from tying your fortunes to a fast growing global software company. He has done this twice before.
His two most successful tech ventures were Okere, a CRM systems integration business based in New York, which was sold to Fujitsu for $US17 million, and Cloud Sherpas, a consulting company that was sold to Accenture for $US400 million.
Okere was a specialist in the customer relationship management software sold by Siebel Systems, while Cloud Sherpas specialised in selling software as a service using Salesforce software.
Orrock is proof of the theory championed by American author David Epstein that the way to succeed in any field is by “sampling widely, gaining a breadth of experiences, taking detours, experimenting relentlessly and juggling many interests”.
Epstein’s book – Range, How Generalists Triumph in a Specialised World – could have been written for Orrock.
He has worked as a mechanic, a bartender, an inventory systems manager, a director of engineering, a systems integrator, a technology consultant and an early stage venture investor.
Orrock has fond memories of his time fixing equipment in an underground gold mine 400kilometres north of Kalgoorlie in the 1980s, even though he once woke up with an axe stuck in his front door.
“The boys used to get a bit wild over there,” he says. “There were a lot of nomads who used to go there to work in the middle of nowhere, earn some money and come back to reality.”
Orrock won’t discuss his personal wealth but tech insiders believe he has a net worth of between $300 million and $500 million.
Disclosure: The author’s self-managed super fund owns shares in Microsoft.
Source: Australian Financial Review