Microsoft 2011: Cloud Strategy Revisited

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2010 was a tumultuous year for Microsoft’s cloud leadership. First, there was the departure of Ray Ozzie who was the brains behind Azure – the most comprehensive cloud platform around. Then came the somewhat unexpected announcement that Bob Muglia would be leaving the company in 2011. A 23-year Microsoft veteran, Muglia was in charge of the $15 billion Windows and SQL Server division. The group included Azure and its a profit of $5.5 billion for the year ending June 2010.

Experts debated: What do the back-to-back exits of two of the most respected executives portend for Microsoft’s cloud future?

How will giant Microsoft compete and keep giving the cloud upstarts a run for their money? I spoke with Microsoft’s GM of Azure to get the straight story (see below.)

Microsoft’s dilemma — one shared by other incumbents including Oracle, SAP and others—is a notorious problem with a history of well-known failures: how does a big company balance disruptive innovation with legacy technologies, business models and cultural norms?

The megavendors find it hard to let go of legacy models for two main reasons. Firstly, legacy lines-of-business still generate billions of dollars in revenue and high margins; Secondly, change — especially one that is as pervasive as the cloud — is extremely hard to manage. The cloud is not just a minor innovation, it is a disruptive force in the industry and Microsoft is faced with the dilemma of how to embrace cloud without cannibalizing its existing businesses (which, of course, are still all-too PC- and Windows OS-centric and the traditional server OS will increasingly be a non-factor in the cloud).

Despite the critics, I think Microsoft retains a competitive edge with its relatively mature and full-featured (at least compared to the competition) Azure cloud platform, massive-scale datacenters, Hyper-V virtualization technology, and increasingly powerful lineup of cloud-based applications including email, collaboration, and CRM applications. With a large established base of enterprise customers, Microsoft is a formidable competitor which the upstarts will find extremely hard to displace, not withstanding new competitive offerings from AWS (beanstalk) and Salesforce and

All in all, Microsoft can be counted as among the best and most comprehensive cloud vendors in the market today. With the exit of Ozzie and Muglia, however, Steve Ballmer will have to work hard to find competent replacements while continuing to execute on Ozzie’s services vision, and helping the market and customers understand what it is and how to take advantage of it.

We saw some very interesting Azure enhancements from Microsoft at its recent Partner Development Conference, including new cloud offerings across the stack including office in the cloud, private clouds, appliances and so forth.

I spoke with Doug Hauger, General Manager for Microsoft’s Azure business to get the company’s perspective on the build out of the cloud stack, and details about their cloud strategy for 2011 and beyond.

Does Microsoft offer an Infrastructure-as-a-Service (IaaS)? How does it differ from the competition?

Doug Hauger: To be clear, we don’t offer Infrastructure as a Service similar to that of Amazon Web Service (AWS) from our data centers. We offer it through third-party cloud vendors (AWS is included in the sense you can run Windows images on AWS). Many of our partners use the Hyper-V cloud to build their IaaS service (AWS is an exception because they their own technology). Hyper-V cloud is a combination of the latest Windows Server 2008 R2 Hyper-V, System Center, and Virtual Machine Manager Self Service Portal 2.0. These components allow end-customers and Microsoft partners alike to build private or public clouds and gain the benefits of self-service, scalability and elasticity.

These IaaS offerings (including Hyper-V) are built on single-server building blocks (predominantly virtual, but these can also be physical servers) which you can allocate, configure, provision and build on top of. You choose your guest OS (Windows in our case) and use these features to build your infrastructure environment. All this requires significant administration and management effort and time.

Where does IaaS end and PaaS begin?

Doug Hauger: There is a grey area between the top-end of the IaaS layer and the bottom-end of the Platform-as-a-Service (PaaS) layer. In Azure, we offer service functionality called a VMRole. Using VMRole you can move Windows server along with your application as a VHD image to Azure and run that instance in that role. Note that we still automatically manage the underlying host OS, virtual IP space, and networking infrastructure. The crucial difference is this: we won’t update or patch your server image in the guest OS. The responsibility is on you to take care of all the up-keep of that instance. We think of VMrole as a bridge between IaaS and PaaS.

If you don’t want to run your instance on Azure because it is hosted in a MSFT datacenter, you may choose to run it on the Hyper-V cloud behind your own firewall. Of course, in that case you have to manage the entire infrastructure yourself but you get flexibility, control, and the ability to create your own IaaS service for your internal customers.

What is unique about this is that once you have this running in your data center, you can then easily move these instances to a hosted environment with one of our partners (offering Hyper-V cloud). Additionally, you can use the VMRole to extend it to the Windows Azure platform which can interoperate with other virtual machines inside your data center creating a hybrid operating environment.

How exactly does Microsoft address hybrid cloud environments?

Doug Hauger: A hybrid cloud is a very popular use case, a lot more than I had anticipated. We are seeing a lot of demand for that. Customers want to move or extend their traditional applications running in their current physical data center environments to take advantage of scale and elasticity of public clouds. The popular use cases tend to be front-end Web-serving workloads, scale-out compute analytics, or high-performance computing.

To enable this we provide the service bus capability, which is part of Windows Azure AppFabric functionality. Among other things, AppFabric enables bridging your existing applications to the cloud through secure connectivity across network and geographic boundaries, and by providing a consistent development model for both Windows Azure and Windows Server. If you are running Windows Server running Hyper-V in your data center, you already have the AppFabric functionality — no need to install anything new.

What is Microsoft’s view of PaaS inside the firewall? 

Doug Hauger:This is the Azure platform appliance we announced back in June 2010. We are in limited production with one customer: eBay and three partners: Dell, Fujitsu, and HP. The Windows Azure Platform Appliance is an integrated stack of hardware and software that is exactly the same as the Public Azure platform but running in a customer’s data center.

It’s not ready for enterprise use yet. Today, you can’t go to a Dell or HP website and order it online. But Microsoft is incredibly serious about it. There’s no question about it. We want to make sure this works and works well for serious enterprise use before going to the market with it.

If you want to use your existing Windows-based infrastructure, you can certainly use Hyper-V cloud to turn it into an IaaS. But it’s not going to be PaaS. We are moving not all the Azure APIs to the Hyper-V cloud and so you won’t get many feature like Content Distribution Network (CDN) or automatic replication and distribution of storage blobs, and so on.

However, you can take advantage of certain functionality in Hyper-V and Azure in a hybrid sort of way. You will have to re-architect your applications for this to work but it is easier because Azure APIs are essentially extensions of the .Net APIs. You can easily move an ASP.Net application to Azure, often in less than a day. If you have a very complex, line-of-business app that’s running in a non-virtualized environment, then it’s going to take more time to move and re-architect.

We encourage developers to learn about the new paradigm of writing applications to PaaS and design them keeping in mind things like multi-tenancy, scale across compute and storage etc.

Kamesh Pemmaraju heads cloud research at Sand Hill Group and helps companies — enterprises and technology vendors — accelerate their transition to the cloud. Follow him on Twitter @kpemmaraju.

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