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Windows Azure success could determine Microsoft's cloud future

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Microsoft pinned its hopes on Windows Azure success for a cloud future, but are Windows shops taking the bait?

In February 2010, well before Steve Ballmer declared Microsoft to be a devices and services company, the commercial version of Windows Azure made its debut. The newly minted cloud platform was tucked tightly into Windows Server, which owned, and still does, a commanding share of the server operating systems market.

Whatever the strengths or weaknesses of Azure turned out to be, surely integration with Windows Server would guarantee it some measure of success.

But nearly four years later, in a time when Windows operating systems have lost some of their mojo, and where Microsoft faces multi-billion dollar, cloud-focused competitors such as Amazon and Google -- neither of which aspires to own a server operating system -- the pressure of carrying Microsoft's server-based environments and applications business may fall to Azure.

Its burden may not end there. The Windows Azure success, or lack of it, may also largely determine the fortunes of Microsoft's mobile devices, since much of their competitive advantage will be derived from the quality and quantity of Azure-based cloud services.

Mark Eisenberg, an independent consultant to enterprise accounts specializing in cloud environments, summarizes the criticality of Windows Azure's success:

"I'll answer it this way: what could possibly be more important?" he said. "It used to be that Azure was built using Windows Server. Now, every product [Microsoft] builds or service they provide has Azure as its core platform."

A stalled cloud system

However, Microsoft's success in convincing enterprise shops, along with third-party developers, to create applications and services that exploit Azure have been "modest at best," Eisenberg said. Others agree.

"As much as I get my hands dirty in developer engagements in enterprise shops, I am not seeing much movement at all (with Azure)," said Mike Drips, an information architect at CSC in Houston, specializing in supporting cloud engagements in larger shops. "I won't say development for it doesn't exist, but it is miniscule right now."

One reason IT shops are holding back dedicated development dollars for Azure, Drips adds, is outages. The handful of outages Microsoft has experienced over the past year or two have not gone unnoticed.

"Outages can have a hell of an impact, especially if you have a heavily customer-oriented business," Drips said. "It is important for these shops to know they can rely on Azure always being up."

Some, however, have bet heavily on Azure. One is Viewpoint Government Solutions based in Belmont, Mass., which has helped 40 cities and towns migrate various government operations off their legacy systems and onto Azure-based servers. Viewpoint believes the cost benefits of moving to Azure have proved beneficial to many of these city governments.

"These governments were nervous about the cloud because they deal with public data, which has a lot of security issues," said Alex Pajusi, director of innovation for Viewpoint Government Solutions. "But when they do the costs-benefit analysis they realize they can save a lot of money and that there is no compelling reason to operate their own servers for these software solutions."

With the continued popularity of browser-based applications, along with the increasing number of users seriously investigating cloud platforms, Pajusi believes Azure will surpass Windows Server in terms of strategic importance sooner rather than later. This development would put Azure in a better position than many of its competitors to become the gold standard for the enterprise cloud platform.

"Amazon has more of a consumer cloud focus, so Azure has a real opportunity now to become the enterprise cloud platform. I think our client base reflects that," Pajusi said.

A difficult forecast

Microsoft may not be helping its own cause by refusing to offer any specific information about how financially successful the platform has been to date. Even ardent analysts tracking Microsoft's every strategic move have little insight into how the product has performed relative to the competition. Some suspect it is either because the numbers are embarrassingly low or are higher they most think, and so Microsoft doesn't want to alert the competition to how well it is doing.

"At some point they have to tell people when their business becomes material. But for Microsoft, as a $70 billion company, what's a material business?" asked Al Gillin, program vice president, system software at IDC in Framingham, Mass. "I have seen a number of $1 billion thrown out there but it could well be a bigger number than that."

Generally, Gillin thinks Azure is "doing OK in some respects." Why the success of Windows Azure has not been greater at this point likely goes back to Microsoft's decision to build it as a Platform as a Service (PaaS) instead of better positioning it as Infrastructure as a Service (IaaS) environment.

"Microsoft jumped the gun [with Azure] on PaaS. Most people at the time weren't ready to go straight to PaaS; they wanted IaaS first but Azure didn't support it," Gillin said. "So they sold more and more IaaS on Windows Azure even though it is a PaaS environment, which means what [customers] were getting was a VM running on Hyper-V."

Despite Microsoft's mammoth marketing machine, some believe the company has failed to do an effective job positioning Azure as the software capable of tying together its wide-ranging cloud portfolio, from Office 365, to Hadoop, to Office 2013, to its System Center 2012 suite of management tools.

"Azure should be sold as this unifying platform for all the other [cloud-based] products," Drips said. "When you think of Azure, that word should light up in your head, ‘Microsoft in the cloud,' but that is not the case right now."

Recapturing that old Microsoft magic

Even considering the apparent momentum of its cloud archrivals, some believe Microsoft's massive Windows Server and server-based application installed base buys them time. Also in Microsoft's favor is the fact many shops want to avoid the angst and expense of swapping out Windows Server for a competing product.

"Microsoft has a tight lock on Windows users. More than two-thirds of all servers installed are Windows Servers. If users are running Windows apps, those apps need to go somewhere for the next (cloud) deployment," Gillin said. "And if it isn't Windows and Azure, they have to do a full migration to a different solution in a different environment."

Gillen doesn't see Amazon Web Services or Google as major threats to Azure among higher-end enterprise shops, given their consumer focus. The only threat, and it is not a big one, are some of the larger solutions providers specializing in Windows Server and/or Azure-based products.

"No one has as much invested in such a broad range of cloud technologies as Microsoft for the enterprise. They are off by themselves," Gillin said.

What could help accelerate more immediate Windows Azure success would be a more rapid adoption of the cloud-based version of Office 2013. What many users are balking at is paying a yearly $100 subscription fee for the product, as opposed to continuing with their existing physical version which they own, subscription-free. For $100 a year, some users want more out of Office 2013.

"For me, I need more than the application code and data delivered from the cloud. I need real services to come along with the apps to make $100 per user worthwhile," said Mark Whittle, a purchasing agent with a mid-size Kansas City, Mo.,-based transportation company.

To Eisenberg, one measure of Azure's success will come when Microsoft no longer needs to talk about the underlying platform, but only about the products and services delivered by the company's other cloud-based offerings. Users should not have to care where cloud-based services are coming from, only that they are receiving them reliably.

"If Office 365 or Office 2013 runs on Azure, that shouldn't mean anything to the public. Don't talk about Azure, talk about the products and services you are selling," Eisenberg said. "As in [the movie] Fight Club, the first rule of Windows Azure should be: Never talk about Windows Azure."


This was first published in October 2013

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