The Cloud – The Microsoft Conundrum


“The future comes slower than we think yet change happens quicker” – Bill Baker, then at Microsoft.  I remember Bill Baker from his days at Microsoft.  He was the business intelligence guy Microsoft recruited from Oracle.  However this particular blog will not be about business intelligence but about the coming era of  cloud computing and the opportunities and challenges it will present to Microsoft.

The idea of the cloud is not something new.  To Bill Baker’s quote it has been envisioned for some time, it has just been slow in coming..  A lot of industry veterans will talk about the early IBM visions of a “psuedo” cloud idea, but that was from a time when the mainframe was king and we did not have browsers but terminals with green screens.  The dotcom era was filled with these type of visions as Application Service Providers (ASP) were all the rage.  I spent a lot of time on planes flying around to meet these young start up’s with big visions.  The problem was the technology was not there yet nor was the band width. This is all in line with the future comes slowly.

Now we enter a time where we have the bandwidth and we have the technology, not to mention we have a generation of end users who spend their days in a web browser.  Before I was let go at Microsoft the economic downturn was enabling a lot of companies to look at cloud platform solutions.  Tight pocket books will cause business customers to always listen to reps and seek out companies who claim they can save them money.  Another big factor is the developer.  As I said in my last blog quoting Boris, “75% of all development is web development”.  This focus on the web by developers has led to advancements in what is capable from an internet app.  When you look at the web today delivering things like Google Apps, SalesForce.Com, Maps – there was a time these type of rich applications were believed to only be possible by leveraging the power of the PC and the desktop OS (Windows).  If you underestimate the web, you rick irrelevance.  Change happens quickly.

The Microsoft Cloud got off to a bit of a rocky start when it was announced at the Microsoft Professional Developers Conference in Los Angeles in the fall of 2008.  This was Microsoft CTO’s Ray Ozzie first big splash since Bill Gates had stepped down to focus on his charitable foundation.  The argument for cloud computing was simple – offload your infrastructure so you can focus on providing business value to your internal customers.  The Cloud would provide developers a set of API’s they could write to.  The developers could then deploy their applications without having to deal with the IT people (I presented this once to MTV in New York and you should have seen the developers eyes light up when the realized they would not need the admins to deploy).  At the time I was in the Developer Platform and Evangelism division, so this was a big announcement.  Ray’s session went well until the name was announced.  Ray announced the name would be “Azure”, pronounced “Aaa-zure”.  What followed was kind of humorous in a scary kind of way.  I think on our office for the rest of the month we all discussed how to pronounce Azure.  In technical terms that is not a good thing.

Microsoft announced its quarterly earnings yesterday which broke all records coming in and $16 billion.  Yet the stock has remained flat despite these earnings just as it has for the last 7 years.  the problem with the earnings is not the number.  It is where the number came from: Windows and Office.  The same cash cows thaT have always carried Microsoft to new heights. In addition these two products are being sold the same way they have been sold for the last 20 years, primarily through the OEM channel and large Enterprise Agreements. But where is the next big revenue growth coming from?  Well Microsoft says it’s going in large part be its cloud computing platform, Azure.  Assuming that is true the next big step for Microsoft will be transition revenue streams from a paid license model to a subscription based service.  Can both exist together?  Perhaps in the short run, but in a world of universal connectivity it is not hard to envision a world where you receive software as a service, when you want it, how you want it.  We are nowhere near the inflection point on the classic hockey stick for Cloud Computing.  The revenue for Microsoft needs to grow in a way that it does not cannibalize existing revenue.   We see today web-based apps like Google’s Apps that could start to take revenue from Microsoft Office (Microsoft has responded with Office Online).  The effort to create a browser-based OS (like Chrome) could start to change the Windows license model and revenue streams.

With all the recent cloud announcements from a variety of companies from Rackspace to Amazon the field is becoming crowded.  It is still very open, though Amazon has received a lot of the early accolades at the end of the day it is a relatively new space for Amazon and there are companies entering (including Microsoft) that have years of experience supporting both small business and fortune 1000 companies.  This area represents a lot of opportunity and something Microsoft is banking the future on (along with Windows 7 phone, but that is another story).  Microsoft has some of its smartest people behind this and some of their best technical luminaries. The cloud is coming after many years of predicting the future and that change will happen quickly.

Good Night and Good Luck

Hans H Hoffmann July 23, 2010 Phoenix, Arizona

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s