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Phil Wainewright

Assessing Microsoft's Cloud Intentions

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Last week, Microsoft revealed more about how it intends to compete with cloud rivals including Amazon Web Services, Google Apps and Zoho, when it announced details of its pricing for the Windows Azure cloud computing platform and said it would offer its online versions of Word, PowerPoint, Excel and OneNote for free to some users.

At first glance, this looks like a huge competitive threat to the cloud players from the software industry's richest and most powerful vendor. But is Microsoft really aiming to become the leading cloud provider in those spheres? I'm sure the Azure and Online Services teams are ambitious for their own products, but Microsoft as a whole has to balance their aspirations with those of other business units, many of which bring in much larger revenues. No such considerations hold back Amazon in formulating the business strategy for its cloud computing services, or Google as it promotes its Google Apps offering to enterprises. It's pretty clear what these companies are trying to achieve. Whereas Microsoft's intentions are always liable to ambivalence, compromised by the demands of other, more established product lines.

Take the Web Office offering, for example, which Microsoft last week made great play of saying would be free-of-charge. As Michael Hickens, writing later in the week, pointed out, it's only free to consumers who sign up for the Windows Live service. Business users will still have to pay a subscription to Online Services or have a volume licensing agreement for Office client access licences (CALs). In addition, he adds:

"A Microsoft spokesperson told me that customers will need to buy a SharePoint server, which ranges from $4,400 plus CALs, or $41,000 all CALs included, if they want to share documents using the online version of Office 2010."

To my mind, such mixed messages are an inevitable consequence of Microsoft's 'software-plus-services' strategy, which (as I've often complained) sees services as an add-on to its core software product set rather than as a core offering. And so long as Microsoft puts software first, it will never be truly competitive against vendors that are single-mindedly focused on cloud services.

At first sight, Azure has been priced to marginally undercut the price of a Windows instance on Amazon EC2 (although Amazon's Linux machine instances come in cheaper still). But Azure is not designed to capture the market as a whole, it's intended more as a defense that stops Microsoft's customers migrating elsewhere. Its main purpose in life is to provide a cloud home for .Net applications, most of which are interacting with installed Microsoft server licenses running on its customers' premises. Even for those applications that don't have an on-premise component, I'd be interested to see some analysis of the all-in cost of running applications on Azure, taking into account additional services such as .Net messaging.

Comparing individual prices for machine instances makes for good headlines, but it doesn't take into account how each platform is architected to support complete applications. I'm confident that Amazon is motivated to provide the most cost-effective platform for its customers. But Microsoft? Isn't it more motivated to encourage continued sales of its established licensed software? These are the questions and doubts that will always surround its cloud intentions in the minds of many customers.

Phil Wainewright blogs about how businesses are using the Web to get better plugged into today's fast-moving, digital economy.

Phil Wainewright

Phil Wainewright specializes in on-demand services View more

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