Microsoft's Cloud Vision Reaches for the Stars but Is Grounded in Reality
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1 Research Publication Date: 4 November 2008 ID Number: G Microsoft's Cloud Vision Reaches for the Stars but Is Grounded in Reality David Mitchell Smith, Neil MacDonald At Professional Developers Conference (PDC) 2008, Microsoft announced Windows Azure and the Azure Services Platform as the basis for the company's cloud platform strategy. This represents a highly ambitious approach to cloud computing that will affect many IT decisions. Key Findings Microsoft's cloud strategy is ambitious and will take years to be realized. The offerings announced at PDC lie at various layers in Gartner's cloud platform taxonomy and offer more services than competitive cloud offerings that focus on a single layer (for example, Amazon Elastic Compute Cloud [Amazon EC2]). Several cloud offerings from Microsoft are available today (for example, Exchange Online) and do not depend on Azure. The technologies underlying Microsoft Dynamics CRM (the services formerly codenamed "Titan") represent a significant, but unrealized, opportunity for Microsoft. Recommendations Windows Azure and the Azure Services Platform, at this point, are technology previews, not final offerings. Don't expect a production-ready release of Azure or the applications that support it until year-end NET developers should experiment. In the short term, explore how on-premises applications could be improved with the use of cloud-based application services (such as the.net service bus). In the longer term, look for the transformational use of cloudnative applications. Don't wait to evaluate. Exchange-hosted services and SharePoint-hosted services will be available in 2008, do not depend on the Azure Services Platform and offer the potential for significant cost savings for enterprises now. For workload support, consider Amazon EC2 and similar services. Put pressure on Microsoft to support Windows applications through Azure-hosted virtual machines or via partners. Reproduction and distribution of this publication in any form without prior written permission is forbidden. The information contained herein has been obtained from sources believed to be reliable. Gartner disclaims all warranties as to the accuracy, completeness or adequacy of such information. Although Gartner's research may discuss legal issues related to the information technology business, Gartner does not provide legal advice or services and its research should not be construed or used as such. Gartner shall have no liability for errors, omissions or inadequacies in the information contained herein or for interpretations thereof. The opinions expressed herein are subject to change without notice.
2 WHAT YOU NEED TO KNOW Azure represents a highly ambitious vision and road map for Microsoft. There is no shortage of balancing acts for the company: consumer and enterprise, on-premises and cloud-based, hosted by Microsoft and hosted by partners, rich client applications and increasingly rich Internet applications, development and deployment. No other vendor is attempting to deal with the cloud in all these dimensions simultaneously. The key to Microsoft's success is in execution, and this won't happen overnight. The business model for Microsoft is unproved and contains a significant amount of fixed costs to build out its data centers and other supporting infrastructures for its Azure Services. EVENT Event Facts On 27 October 2008, at PDC, Microsoft announced its cloud platform and cloud services offerings, named Windows Azure and Azure Services Platform, respectively. Microsoft's offerings are hosted in Microsoft data centers and provide operating-system-like services and a set of developer services that can be used individually or together. Analysis At PDC 2008, Microsoft outlined its cloud platform strategy and provided early access to many of the services, along with software development kits for developers. Microsoft's offerings span many layers in Gartner's framework for cloud computing. Although Gartner research identifies several layers of functionality, ranging from system infrastructure to business process, Microsoft's offerings include services in three areas: System infrastructure services: Microsoft calls this "Windows Azure" and refers to it as a "cloud operating system" that provides raw computing, storage and service management services. Windows Azure is essentially a modified version of Windows Server 2008 and a modified version of Hyper-V supplemented with cross-system "fabric controller" (the real cloud-operating-system-like function) software designed to host and scale cloud-based applications and services, and to provide computing and storage as a service, competing with Amazon Web Services and others. Application infrastructure services: Microsoft calls these the Azure Services Platform and includes.net, Live Services (including Live ID), SharePoint and Dynamics CRM (code-named "Titan"). These join the renamed BizTalk services (now called the.net service bus) and expanded SQL services, workflow services and identity framework (code-named "Geneva"). This layer competes more at the level of offerings like Force.com (from salesforce.com) and Google App Engine. Application services: This layer features applications and services, many of which are designed to be directly consumed by people, such as Windows Live, Office Live Workspace, Exchange Online, SharePoint Online and Microsoft Dynamics CRM Online. Microsoft refers to these as "finished applications" that will be built on the Azure Services Platform. Not all application services must be consumed directly by people, because programmatic extension is possible at this level also. Publication Date: 4 November 2008/ID Number: G Page 2 of 6
3 These offerings will be available in commercially supported versions at various times throughout the next one to two years, with delivery of most services in production expected in the second half of Microsoft also provided early access to Windows 7 (expected in the second half of 2009) and gave more information on additional user experience technologies, such as Silverlight, Internet Explorer and Windows Mobile. The user experience functionality is part of Gartner's view of cloud/web platforms, which is not limited to back-end-only environments. The announcements demonstrated the choice provided by Microsoft's Software + Services strategy. All demonstrated the choice in the deployment dimension (on- and off-premises) and in user experience (rich client to browser client to mobile devices). As a result, the strategy is visionary and pragmatic, and takes into account not only investments by Microsoft but also those of enterprises and consumers. Significant Challenges and Opportunities Lie Ahead Some of the bigger challenges Microsoft faces are: There can be fragmentation of messaging and target audiences. Even at the application infrastructure services layer, there are, in effect, multiple platforms: Live for consumer applications,.net (including some existing services) for enterprise applications, SharePoint and Dynamics CRM for other types of applications. Another challenge is potential credibility in demonstrating use. In addition to fragmentation/specialization at the application infrastructure layer, Microsoft faces a challenge in demonstrating the use of its underlying technology. Much of Microsoft's platform success has been a result of the company's demonstrating its commitment to its underlying technologies, and demonstrating the possibilities created by the platform. Historically, Microsoft has done this by writing its own applications to make use of its platforms. Although Microsoft's cloud applications (Business Productivity Online Suite, Office Live Workspace and others) use underlying Microsoft technologies, they do not currently use the system infrastructure services (especially compute services) and the services enabling applications to be "enlightened" so that they can scale and be managed by the lower levels. Given the limited details available today, it is not clear whether these types of applications would be better-implemented in this way. Gartner believes that the technologies underlying Dynamics CRM represent a significant, but unrealized, opportunity for Microsoft. Thus far, little emphasis has been placed on this technology, which has the potential to be a mainstream offering that will compete with salesforce.com's Force.com platform at what Gartner calls application platform as a service, a type of cloud/web platform application infrastructure service. Dynamics CRM services represent the only tool/off-the-shelf technology, as part of the Azure Services Platform, that facilitates the building of multitenant applications without the use of the fabric controller and the virtual machines underneath. Larger questions remain about the specific applicability of multitenant application servers, and Microsoft apparently has not made final decisions about this yet. However, Dynamics CRM services represent a potentially underinvested, undermarketed alternative to morecomplicated comprehensive approaches. Gartner believes that Microsoft does not want to be the main provider of computing to the world. Although the company wants to be a main provider of software and to continue its business models as much as it can (while seeding additional models, such as advertising), it must maintain good relationships with third parties while moving in this direction. Microsoft must bring independent software vendors (ISVs) and hosters along. Publication Date: 4 November 2008/ID Number: G Page 3 of 6
4 ISVs need incentives to make the needed investments to move their applications to Microsoft's cloud. Hosters need to have the business models and opportunities provided for them. The ability to build and support an ecosystem is a critical Microsoft capability that can be leveraged toward the success of its cloud strategy. Microsoft must provide more details to potential customers of its cloud services about how the security and privacy of information in a shared environment where data centers are primarily U.S.-based. For example, digital-rights-management-based encryption could be incorporated with many services at no additional cost, or simple file-level encryption services for less-granular protection of data. In either case, no details were provided. Furthermore, Microsoft must expand its relationship with regional telecommunication and other providers for local hosting of the Azure Services Platform. No details of this strategy were announced at PDC Service-level agreements (SLAs) are a challenge. SLAs and the associated penalties for not delivering against the SLAs are critical, yet few details were provided, other than Microsoft stating that differing levels of service would be provided and charged for accordingly. In this area, there are few standards, and customers must beware of relying solely on cloud-based services. SLAs become less manageable when non-microsoft and Microsoft services are combined into a composite service or application. The business model for Microsoft is unproved, and no specifics on pricing were discussed. Microsoft's margins on its services will be lower than on its traditional software business model, with the incorporation of a significant amount of fixed assets, such as data centers, servers and other physical infrastructures necessary to support these services. In addition to fixed costs, when an organization consumes something like Exchange Online, Microsoft must account for the loss in revenue not only of Exchange Server but also of the underlying Windows operating-system platform. Microsoft also has multiple opportunities: Microsoft's single-biggest differentiator, from an enterprise IT perspective, is its enterprise installed base and ability to deliver services that span the enterprise and the cloud (for example, an organization can choose to host the central Exchange implementation on-premises and can use Microsoft's cloud-based Exchange Online services for branch offices). A mixed environment will be the norm for most enterprises for many years. A hybrid environment will make a mixed environment more flexible and will enable movement more easily between on- and off-premises implementations. Its unique hybrid model enables organizations to move when and if moving makes sense for them, helping protect Microsoft's business model and margins as long as possible and easing the transition and migration path. Microsoft can leverage hybrid environments and bring cloud technologies to the enterprise, as well as enterprise technologies to the cloud. Most vendors are bringing enterprise technologies (for example, virtualization) to cloud and cloud-like environments. Microsoft is doing this, as well as bringing cloud approaches into enterprises. Cloud leaders, such as Google and salesforce.com, may provide good, pure cloud solutions, but are not attempting to bring the actual technologies into a hybrid environment. Microsoft's vision includes enabling "private cloud" implementations, as well as workloads that can run partially on-premises and "in the cloud." For Microsoft.NET developers, the integration of cloud programming models and tools into Visual Studio and.net will leverage skills in languages across environments, as well as metadata. This should appeal to businesses with such investments and with an interest in hybrid environments. Publication Date: 4 November 2008/ID Number: G Page 4 of 6
5 Although the initial tools were released for.net, Microsoft's cloud strategy is designed to be language-, protocol- and platform-neutral. There is no technical reason why a non- Windows device (inside or outside a browser) can't access most of Microsoft's cloudbased services, providing a way for Microsoft to "monetize" Linux and other non- Windows platforms that want to consume Microsoft services. For developers targeting their cloud-enabled and cloud-based applications and services to consumers (and some small businesses), Microsoft could make instrumentation with advertising as simple as a check box using back-end integration with its advertising platform. However, no such plans were discussed. Even for developers writing feebased applications and services, Microsoft could provide billing services, which also were not discussed. RECOMMENDED READING "Live Mesh Is a Step Toward Microsoft's Cloud and Web Platform" "Web Platforms: Web-Centric Delivery Models for Infrastructure, Applications, Data and Business Services" Publication Date: 4 November 2008/ID Number: G Page 5 of 6
6 REGIONAL HEADQUARTERS Corporate Headquarters 56 Top Gallant Road Stamford, CT U.S.A European Headquarters Tamesis The Glanty Egham Surrey, TW20 9AW UNITED KINGDOM Asia/Pacific Headquarters Gartner Australasia Pty. Ltd. Level 9, 141 Walker Street North Sydney New South Wales 2060 AUSTRALIA Japan Headquarters Gartner Japan Ltd. Aobadai Hills, 6F 7-7, Aobadai, 4-chome Meguro-ku, Tokyo JAPAN Latin America Headquarters Gartner do Brazil Av. das Nações Unidas, andar World Trade Center São Paulo SP BRAZIL Publication Date: 4 November 2008/ID Number: G Page 6 of 6
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