Morning Report: Microsoft’s Subscription Push Makes Windows SaaS

Morning Report: The industry-wide shift to SaaS products picks up another convert: Windows.

Calling Windows a service isn’t new. Heck, even I pulled it off back in 2015. But today is still a notable day in the progression of Windows towards being a service.

From The Verge this morning, Tom Warren has the goods on Microsoft’s latest Windows news:

Microsoft is announcing Microsoft 365 today, a new way for businesses to purchase Office and Windows together. While the software giant has sold Office 365 and Windows 10 to businesses in many different ways, Microsoft 365 Enterprise combines Office 365 Enterprise, Windows 10 Enterprise, and Microsoft’s Enterprise Mobility and Security features into a single subscription.

So Microsoft 365 is Office 365, with Windows bolted on, for a single subscription price. For Microsoft, this means that two of its biggest historical profit centers — Office and Windows — are in the process of shedding their permanent license legacies. Office, with its popular Office 365 SaaS product, is already well-along the way. That fact matters, as it means that Windows, in this case, can piggyback off of the success of Office 365, joining forces to create Microsoft 365.

Why do we care when we tend to focus more on startups and private capital? Mostly to show that the largest players in the tech industry are making the shift to SaaS en masse.

It’s reasonably common to read about SaaS as if only small and mid-size players are pursuing the concept (Salesforce aside). However, that simply isn’t the case, as Microsoft’s continued evolution shows.

And the above Microsoft news comes on the heels of some Adobe metrics that underscore our point. Observe the following chart, tweeted by Sarah Guo, a venture capitalist at Greylock:

Your reaction to that should fall between “hot dang” and “holy bonkers!” The clean move over just four fiscal years is stunning–subscription revenue consumes perpetual incomes in a complete inversion of Adobe’s prior revenue mix.

I think that we will, eventually, look back at the ability of some major tech companies — platform providers and not — to shift their top line to subscription incomes and not die in the process to be as impressive as Facebook’s revenue shift from desktop to mobile, and IBM’s shift from whatever it was to Watson PR Factory.

All this makes the value of recurring revenue, and its gyrations thereof, all the more interesting.

Homework: If we can tease out the value of various bigtech SaaS revenue, how applicable should those multiples be to startups of various stripes? And just late-stage startups?

From the Crunchbase Daily:

Global VC funding rises in Q2

• Investors put an estimated $47.8 billion to work across seed, venture and technology growth rounds in the second quarter of this year, according to Crunchbase projections. That marks an increase of about 16 percent over the prior quarter and a slight dip from the year-ago period. Read the full quarterly report here.

Partech Ventures closes $450M fund

• Paris-based Partech Ventures has raised $450 million for its seventh venture fund, which will focus on Series A and B financing rounds for companies in Europe and the United States. The fund closing caps a busy period for Partech, which says it has made 110 investments and secured a dozen exits over the past year-and-a-half.

Online lender Dashu raises $118M

• Dashu Finance, a China-based online provider of small loans, has raised $118 million in a Series C round led by PAG and Primavera Capital Group. The new investment brings total funding for three-year-old Dashu to more than $200 million.