Microsoft’s chief architect Ray Ozzie has figured out that cloud margins aren’t gonna be the same as the margins derived from on-premises software. “The margins on services are not like the margins on software so [cloud computing] will increase our profit and it will increase our revenue, but you won’t have that margin,” he’s quoted as saying at the Churchill Club last week.

“The margins at the low level, at the Azure level, are going to be lower than the top level, where you’re delivering a solution or something like Exchange. You’re pricing that solution around a business value more than cost so the margins are still very, very good.”