Microsoft this week announced the general availability of Azure Infrastructure Services. This marks a notable course correction for Microsoft, which initially provided Azure solely through a Platform-as-a-Service (PaaS) model. While many market observers assume that public cloud IaaS in the enterprise is now a three horse race between Amazon AWS, Rackspace and Google, they may be selling Microsoft short. Why might they be underestimating Azure Infrastructure Services?
Enterprises like Microsoft (compared to other legacy vendors) – Microsoft overall seems to have more traction and credibility with enterprise buyers of cloud services. One of the focus areas of the recent joint survey by Everest Group and Cloud Connect on enterprise cloud adoption was around buyer perceptions of public cloud PaaS / IaaS vendors. Compared to other “legacy” enterprise IT vendors Microsoft actually has quite an advantage. Azure has 3x the number of public cloud PaaS / IaaS customers than other legacy enterprise IT services vendors, including IBM, HP, CSC and others. The number of enterprises that would consider Azure is also higher than for any of the other major legacy enterprise vendors. While Azure Infrastructure obviously faces significant competitive headwinds from Amazon AWS, Rackspace, Google and others, it will likely have an advantage among enterprises who may decide to stick with established vendors. These more “risk-averse” enterprises may end up at the end of the day representing a substantial percentage of the overall enterprise cloud market.
They’re matching Amazon AWS pricing – for enterprises eyeing Amazon AWS, Microsoft took several steps to ensure market competitiveness with Azure Infrastructure Services. Microsoft is price matching Amazon AWS on core compute, bandwidth and storage services. New VM pricing matches AWS for both Windows and Linux VMs, and represents a 21-33% price reduction for Azure. Beyond pricing parity, Microsoft is also offering an enterprise SLA with 99.95 percent uptime for Azure Infrastructure Services. While parity on some pricing and service dimensions won’t make Azure Infrastructure a slam dunk for public cloud IaaS, it makes the decision a bit tougher.
Microsoft still has a big .Net developer base – as many cloud providers have already discovered, winning the hearts and minds of developers is critical in PaaS and IaaS services. With the number of .Net developers worldwide numbers in the millions, everyone has always assumed that Microsoft had an inherent advantage with Azure. We really haven’t seen that advantage materialize yet, with estimated Azure revenue still only roughly half that of Amazon AWS. The ability of Azure to now provide a common platform for running applications either on Azure or private clouds built on Windows Server and Systems Center may help Microsoft now start to build momentum.
At the end of the day Azure Infrastructure Services will likely be most attractive for enterprises looking to migrate existing .Net applications running on Hyper-V to public cloud services, effectively extending their existing data centers. An interesting dynamic to watch will be whether enterprise .Net developers will go the Azure public cloud PaaS route for new application development, or the private PaaS route for .Net apps as recently seen at JP Morgan Chase.