Five Companies Shaping Cloud Computing: Who Wins?: Page 2

Microsoft: Transformational Changes to Play Catch-Up

Conventional wisdom says that Microsoft needs to worry as customers migrate to the cloud. The software giant makes the bulk of its cash the good old-fashioned way, from pre-installed PCs and shrink-wrapped applications. Can the 500-pound gorilla maintain its status as the world shifts underneath its feet?

But the company is ready, or at least is in the process of getting ready. In the last few years Redmond has touted its ‘software plus services’ mantra, which was kind of an either/or strategy. (I interviewed a Microsoft exec about it.) You could certainly buy software in the classic on-premise model, and you could also add in some of their online products. Some of the pieces are substantial – like Office Live Small Business and SharePoint Online – yet ultimately ‘software plus services’ looked like a holding pattern until Redmond assembled a full-fledged cloud approach.

In late 2008 Microsoft formally unveiled Azure. In summary, Azure lays the foundation for an integrated online-offline heterogeneous environment, integrated with the Windows OS and the Microsoft development platform.

To say that Azure is ambitious is like saying Los Angeles is little crowded in rush hour. Azure is a sprawling, complex effort that has a cloud-based answer for every question – and takes a jab at every competitor. If Azure is successful it will make Microsoft more dominant than ever before, in both the business and consumer markets.

The Azure vision, which ideally will become reality over the next two years, includes:

• System infrastructure: Dubbed “Windows Azure,” this is a cloud-based operating system that offers remote computing power, storage and management services. It’s based on a version of Windows Server 2008 and includes the company’s free virtualization product Hyper-V (making it a blow against pricey virtualization competitor VMware). Because Windows Azure offers actual computer-processing power from Microsoft datacenters (not just software) it competes with Amazon Web Services and other vendors with physical datacenters.

• Application infrastructure services: Known as “The Azure Services Platform” this is Microsoft’s software-as-a-service offering for enterprise customers. It includes Microsoft development platform .NET along with business-oriented software tools like SharePoint and Dynamics CRM. This arm of Azure competes with cloud-based application development environments like Salesforce’s Force.com and Google App Engine.

In a measure of how seriously Microsoft is taking the cloud, Azure even does what is unthinkable for Microsoft: it will be (essentially) platform and OS interoperable, so a non-Windows machine will, in theory, interface seamlessly. It’s conceivable that some day an open source business will tap into Azure. Translated: Redmond understands there’s dollars in open source and doesn’t want to lose a single one, even if it means admitting they won’t win every battle.

Perhaps the most eyebrow raising aspect of Microsoft’s cloud strategy is the massive datacenters the company is building. This is a huge investment. Its facility in San Antonio, for instance, covers an impressive 11 acres. (The one in Chicago is reportedly twice the size.) Preliminary reports indicate the company will build two dozen of these $500 million, 500,000-square-feet facilities.

These mega-centers will ostensibly enable Microsoft to dominate in the brave new world of the cloud, when businesses will buy computing power remotely instead of maintaining in-house data centers. In other words, Microsoft is so committed to the cloud that it’s spending a royal sum on hardware – an unusual course for a software company that has always left hardware to someone else. This shift from selling software alone to selling software and utility computing power is a transformational change in Redmond’s approach.

“I think they’re taking a big bet on the fact that a lot of enterprise apps are going to move into the cloud – they just want to make sure it’s their cloud,” says Jeffery Lindsay, an analyst with Bernstein Research. “I think [Microsoft Chief Software Architect] Ray Ozzie’s got them betting big on it. If he’s right they’ll do great, and if he’s not right then you know…”

“I think Ray Ozzie’s vision is that they can make a developer environment and then tie that right into the operating system on the computer,” he says. This online-offline hybrid will link into Microsoft enterprise libraries through .NET and SQL, with the whole environment powered remotely by Microsoft’s mega-datacenters. This interlinking of development platform and utility computing will maintain and even strengthen Windows as a top brand, the company hopes.

One skill set of Microsoft’s that will likely help them lead the cloud – and this is critical: “Microsoft understands management,” says Andi Mann, an analyst with Enterprise Research Associates.

“Google doesn’t, Amazon doesn’t, Salesforce sort of does.” In contrast, Microsoft has a full management platform. “They’ve got systems set-up, they’ve got security management, application management, uptime, availability, recoverability – they have management capabilities.”

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