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At Microsoft Ignite last month, there was a decent mix of information for those interested in cloud and data center. But there is a profound gap between what will be possible using Microsoft's software in the cloud and what's possible using applications deployed inside the data center.
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Industry watchers, myself included, have predicted that while Microsoft has committed to serving on-premises and cloud customers, the increasing capabilities of Office 365 and Azure cloud services, as well as the improvements in big data and machine learning, mean that Microsoft cannot build the same types of features into on-premises releases as it can into its cloud operating environments.
For example, Office Delve bubbles up common documents and email threads from colleagues into a central location. This enables end users to see what is most relevant to them. Office Graph is the engine that powers that relationship, and it grabs data from Exchange Online, SharePoint Online, Lync Online, Azure Active Directory and more. It requires tremendous scale to run the graph database, which few companies are likely to have.
In addition, how would you ensure each of those sub environments for SharePoint, Exchange and so on were configured in the exact way necessary to let a version of Office Graph work on site? What functionality would you give up to make that work?
So, while the virtuous cycle of bug fixes and stability improvements may continue and future on-premises editions of Windows Server, Exchange Server, SharePoint Server and Skype for Business Server -- and more may well be informed by these operational improvements -- it is difficult to see a future in which features that lie in the middle of these applications when running in the cloud make their way down to a DVD you can install in your own server room. What we may find, perhaps sooner than we anticipated, is a growth dead end in on-premises feature parity.
There is a certain stickiness to some of these solutions: Once you start in the cloud game and migrate one workload, it is easier to double down on that bet and add some more. For example, if your email lives in Exchange Online, it becomes easier to work with SharePoint Online -- especially if end users are using Outlook Web Access and in Office 2016, the new Office 365 Groups feature (which, as you might suspect, only works in the cloud). All of this stuff just works, after you input your credit card and go through a few details. To its credit, Office 365 and Azure cloud services are pretty much best in class from a functional perspective. Support is another matter, but the offerings themselves are solid. That's what makes them attractive.
Finally, you need to factor in upcoming price hikes for on-premises software. Client access license (CAL) costs for many enterprise software products from Microsoft will increase by 13% by the end of this year, adding to the cost of staying on-premises. This is after a 15% price hike last year -- new users, new divisions and new versions all require new CALs. You cannot trade them in.
Meanwhile, a low monthly fee gets you all-you-can-eat software until you stop paying the bill. Once you work up a couple of cost proposals and run them by your company's numbers people, you will find a lot of raised brows and questioning when you try to justify continuing an on-premises deployment.
I see an increasing willingness on the part of most IT departments to embrace more workloads in the cloud than just email, but not because they necessarily are excited about the benefits. It is more that they would be left with a decreasing list of satisfactory choices: If an upgrade must happen, then why not upgrade to a full-featured release? If new versions of on-premises software are largely going to be service packs and bug fixes, then how does IT move business forward? And if it becomes increasingly expensive to keep funding an on-premises deployment, if new licenses become prohibitively expensive especially in relation to the value they provide, then what choice do you have as an IT pro with moving forward?
The answer now seems to be Azure cloud services -- whether people want to accept that or not. And that's good for Microsoft, but is it good for everyone?
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