Microsoft Corp., Oracle Corp. and IBM—looking tostoke demand for cloud computing services—are said to beshifting incentives for their sales representatives, pushing themto ensure customers become active users over the long haul.

Microsoft in July revamped the way it pays its salesstaff to tie incentives to how much customers actually usecloud-based software—rather than how many sign a contract for cloudservices, according to sales chief Judson Althoff. Oraclehas been rolling out new rewards for at least some employeesthat also are connected to customers' use of its cloud services,according to people familiar with the matter. And InternationalBusiness Machines Corp. in the past year has restructured its cloudsales team and tied compensation more closely to usage, accordingto other people with knowledge of the matter.

Traditionally, companies would ink large software deals based onfactors such as the number of a customer's devices—and notactual subsequent use of the products.

The cloud business is a crucial growth area for the traditionalenterprise technology pioneers, battling against rivals Amazon.comand Alphabet's Google. The public cloud services globalmarket is likely to increase more than 18% to $260.2 billionthis year and almost double to $411 billion in 2020, according toGartner.

Microsoft, for example, said last week it had generated $20.4billion in commercial cloud revenue on an annualized basis.

Tying usage to sales incentives should help keep customers onboard when it's time to agree to a new contract, said StephenWhite, an analyst with Gartner.

“The behaviors of the salespeople need to be more in tune withwhat a customer actually is going to need and use,” White said. “Itcertainly makes the renewal discussion easier.”

Oracle and IBM declined to comment.

Previously, Microsoft had been bundling cloud services, such asAzure for storing and running data and cloud applications, withmany of its multiyear deals. Althoff said the shift in payincentives is a significant change.

“We did have ill-informed behaviors,” he said. “We tried to sellAzure the same way we tried to sell everything else at Microsoft,which is adding it into our enterprise agreement. People were like,'Do you want fries with that? Do you want Azure with that?' Thatdidn't drive any meaningful work.”

The incentive plan change fits with CEO Satya Nadella's aim toencourage Microsoft's products to be used and loved rather thanmerely paid for and tolerated.

IBM has been emphasizing selling cloud infrastructure servicesand software and tools geared toward specific business processesand industries such as health care and finance.

Oracle has been turning its focus to the cloud as well andinvesting in staff. The company said in August it was adding morethan 5,000 people, including in sales, for its cloud business,following other related hires earlier in the year in the U.S.

While Amazon remains the largest provider of cloud computinginfrastructure, the traditional companies are showing signs ofimprovement. In its last quarter, Microsoft's Azure service grew90% while Office 365 increased 42%. Oracle reported that itsoverall cloud sales expanded by more than 50% during its lastperiod to $1.5 billion and IBM's sales in the market jumpedabout 20% in its third quarter to $4.1 billion.

From: Bloomberg News

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