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I'm on the fence on this. From one angle it looks like a conflict of interests, from another one looks like the opposite of a conflict. 1. Conflict: Microsoft
by credit_guy 4y ago
I'm on the fence on this. From one angle it looks like a conflict of interests, from another one looks like the opposite of a conflict.
1. Conflict: Microsoft becomes a large shareholder in company X, then uses their seat to steer that company into using Azure rather than AWS, despite AWS offering a better deal. Bad.
2. Alignment: Company X wants to get Azure cloud services. It tells Microsoft if their offering is so great, are they willing to get paid in stock rather than cash? If Azure lowers the company's compute costs by tens of millions per year, then the company will show an improved income statement, analysts will love that, the stock will skyrocket, and Microsoft ends up better with the stock than with cash. Microsoft is incentivized to provide the best user experience. Good.
- robertlagrant 4y ago> Microsoft is incentivized to provide the best user experience. Good. I don't see how this follows. If they own the company, or using Azure is imposed by C-Suite, what incentive is there to improve their product at all?
- credit_guy 4y agoThey don't own the company. They own shares in a publicly traded company. Those shares go up and down in price. If they provide an outstanding service, the shares appreciate in price, and this shows as profit on Microsoft's balance sheet. And Microsoft, like all companies, are incentivized to show profits rather than losses.
- robertlagrant 4y agoI think this is probably going to be subject to the principal-agent problem. The bits of Microsoft that would make Azure better might be quite a long way from the bits that would like this intangible asset to appreciate. And they'll report them separately anyway, so as long as Azure is getting the revenue, low-performing assets won't drag down Azure's numbers.