How Azure cloud is conquering the enterprise public cloud

Azure Cloud and Enterprise market: it is always difficult writing about one product’s strengths and “momentum” in a market of competing players. The risk of bias to one product or company is always high.
Without any specific reference to a public report, we already know that Amazon, with AWS, is currently first in the public cloud market. Amazon is the first company, the one that created the market. Financial reports confirm that Microsoft, with Azure, is the second major player in the field, with billions of dollars in revenues, but still a negative margin. Why? Microsoft is always “late” in many markets, and public cloud is one of them. At the moment, Microsoft is trying to catch up, and sacrificing profitability. Why are they making this sacrifice?
Spending on public cloud IaaS hardware and software forecast to reach $38 billion in 2016, and grow to $173 billion by 2026. SaaS and PaaS portion of cloud hardware and infrastructure software spending are projected to reach $12 billion in 2016, and grow to $55B by 2026 (Forbes). This is a good market to point and to look ahead.

Azure Cloud
Azure Cloud Enterprise public cloud market share. (Source: Forbes)

Some issues have slowed down Azure Cloud adoption in the last years

One is about reliability. Failures happen every day in a cloud data center, but the structure and organization of each facility should be resilient to them. Rarely, some failures are able to affect network trunks bigger than a “fault domain” (as a rack of computers is called inside Azure), most of the times caused by human mistake doing maintenance. Because of them, Azure Cloud had some major outages in recent years in different regions, scaring many potential customers from moving to the cloud or inviting them to move them to the Amazon cloud. Microsoft has not the same reliability numbers on Infrastructure as a Service solutions, where Amazon is already a consolidated winner. But it cannot retreat from growing and narrowing the gap.
Another issue is Microsoft’s late acknowledgment that Linux operating system is not “evil”. It is the preferred platform for Internet-born solutions. Only since Satya Nadella became Microsoft CEO and the “Microsoft Loves Linux” campaign, the Redmond-based company embraced the penguin OS and all Open Source movement, with interesting results, adoption, and services.

Empowering and extending the on-premise Cloud infrastructure

To compete with AWS, Microsoft needs to play to its strengths. The starting point for Microsoft Azure Cloud is the enterprise market, what we currently refer to the Private Cloud space. The Private Cloud is made up of companies that do not run the business on the Public Cloud. They have their business on premise, and the public cloud is a platform used to minimize capital costs and avoid obsolescence. Microsoft is a leader in running enterprise private infrastructure, and the Windows Server market is still profitable. In addition, more companies using Microsoft applications on premise are moving Windows Server on the AWS cloud.
 

Hybrid_Azure_Cloud
Hybrid Azure Cloud Implementation (Source: MSDN Blog)

Moving away from on-premise servers and embracing the cloud is a far more complex and long-term process for larger companies. It is a multi-year process. The enterprise market is a win for Microsoft because the hybrid cloud is the pervasive strategy in the entire Windows Server business, on an operating system it controls. Yet the new Windows Server, System Center, Active Directory, and the bestselling relational SQL Server database all allow IT pros to seamlessly manage their overall infrastructure without worrying if a server is still on-premise or in the cloud. Besides that, all services now are resilient to failure, backing up on-premise services to the corresponding cloud one.
On the SaaS side, Microsoft’s cloud offering is completed by the Office 365 online suite, a market that Microsoft shares with Google. AWS has no equivalent offering. Office 365 complements Windows hybrid strategy, starting from authenticating users with Azure Active Directory, synchronizing with on-premise authentication, and giving a Single Sign-On experience. (We should also consider that Microsoft is waging another battle on SaaS platforms against SalesForce with Dynamics.)
At this point, from the enterprise point of view, a big difference between Amazon and Microsoft is that the company was founded more than forty years ago. It wages different battles on many fronts, among on-premise infrastructures (or private cloud), offline and online productivity platforms, and the public cloud infrastructure.
Then there is another battlefield for the no-more-windows-only company: the custom software field, where developers play an important role.

The Platform-as-a-Service focus

In general, developers do not focus on developing services for the cloud, but developing services that are portable and interoperable. Portability is the need to run the service over Windows or Linux with minimum effort. On the client side, the focus is the Web, consumed via browser or on mobile devices, in an eternal fight among iOS and Android operating systems. Microsoft Windows recently “killed” its Windows-based mobile market. The company still runs on different flavors of Windows, including old Windows XP installations, successful Windows 7, and the disappointing Windows 10.
In this scenario, developers focus on two major pillars. The first pillar is the application lifecycle management. This means running all the development processes in a sort of agile methodology that allows you to develop new functionalities continuously and with quality.
The second pillar is a consequence of the first: a software solution is (or should be) made up of prebuilt functional blocks (services) that implement standard patterns .
These two pillars lead to the third major pillar of cloud computing: Platform as a Service (PaaS). To reduce costs and increase productivity, developers should focus on the problem, not the infrastructure. Cloud development should not focus on Infrastructure and Virtual Machines, but on vertical, configurable and integrable services (via standard internet REST API).
Development and developers are two major aspects where Azure performs well. Some key points:

  • The PaaS service offering is powerful, complete, and modular.
  • All services are accessible via REST APIs, with specific client libraries for all major classic C# and .NET languages, and open source languages like JavaScript, PHP and Python to invite non-Microsoft developers to bring their application on Azure.
  • Developer experience is always at its highest levels with .NET – Visual Studio experience on Windows platform , and now cross platform with .NET Core and Visual Studio Code.

PaaS is the most difficult and expensive way to approach cloud but is also the most strategic to develop a tailor-made software platform to enhance a company’s specific value points.

Internet of Things wave

There are many more scenarios, outside of the hybrid cloud, where Microsoft is playing a major role.
Another one is the Internet of Things. In the last few years, embedded technology has made a giant leap forward, enabling “things” with powerful microprocessors, pluggable sensors, and actuators that are able to connect to the Internet, generating tons of data to understand what is happening (telemetry) and receiving feedback (commanding). This has caused some big waves:

  • Big data, as all data generated from sensors, cannot be handled on premise, and so should be pre-processed by on cloud analytics to isolate meaningful data;
  • New markets that reuse devices: wearable, smart city, manufacturing, connected cars, just to cite the most famous ones;
  • Worldwide markets: Cloud allows any company to reach any country in the world with minimum latency, as data centers, regions are distributed all over the world;
  • A more mature and consistent data platform that can process, store, and visualize streaming data and data at rest, with intelligence provided by Machine Learning algoritmhs;
  • A platform to manage devices, ingest data, and integrate devices (Azure IoT Hub) over renowned standards (HTTPS, MQTT, AMQP);
  • A platform to develop devices (Windows 10 IoT Core

Internet of Things is the next “big thing” for all manufacturing companies that typically didn’t build their business online but now can create a full new set of services connecting their products to the cloud. That is why Microsoft is concentrated on long-term investments more that current profitability. In Q4 2016, Microsoft has up to 30 data center regions worldwide, with 6 more announced, more than AWS and Google combined.

Conclusions

Microsoft has changed, but not overnight. It has a lot of inertia with 100,000 employees, and many interests, products, and services in many IT fields. Microsoft was not the first in the Cloud, but now its leadership is focused on taking back its leading role in this market. Azure Cloud is growing fast, and a lot of Azure services, covering the most disparate topics and scenarios, are reaching the market in an agile way.
AWS is still the first player, but Microsoft is rapidly bridging the gap between the two major players by continuously investing in the cloud platform as well as on-premise software.
Cloud Academy will soon publish the first Azure Learning Path for Azure Cloud certification exam 70-532 and by the end of October 2016, the Learning Path for certification exam 70-534 will be officially released.

Written by

Marco Parenzan is a Research Lead for Microsoft Azure in Cloud Academy. He has been awarded three times as a Microsoft MVP on Microsoft Azure. He is a speaker in major community events in Italy about Azure and .NET development and he is a community lead for 1nn0va, an official Microsoft community in Pordenone, Italy. He has written a book on Azure in 2016. He loves IoT and retrogaming.

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