Why Microsoft Azure may be the key to Microsoft’s future success

Microsoft was slow to understand cloud’s importance

As is the case with many legacy software leaders like IBM (IBM), Microsoft (MSFT) didn’t realize and understand the importance of cloud. By the time, it took steps to have a pie of the billion-dollar cloud, Google (GOOGL), Amazon (AMZN), and Cisco (CSCO) already had strong positions in the cloud space.

Microsoft Azure gaining pace

The above picture shows Gartner’s magic quadrant for infrastructure as a service (or IaaS) providers. Gartner reported that in 2014, apart from Amazon, only Microsoft Azure could make the leaders category. This is also the first time Microsoft Azure has made the category.

Gartner described Microsoft Azure as one of the two leaders in platform as a service (or PaaS). Salesforce.com (CRM) topped the category as the leader in PaaS. Microsoft strategically partnered with Salesforce.com to expand its presence.

Microsoft Azure is the key to Microsoft’s hybrid cloud

Initially launched as a PaaS, Microsoft Azure is a principal component of Microsoft’s hybrid cloud strategy, Cloud OS. Cloud OS runs on multitenant instances, combining Microsoft Azure, Windows Server, Microsoft System Center, and the public cloud. Multitenancy refers to the sharing of cloud services among multiple customers. Microsoft Azure provides disaster recovery options and eases the task of moving and running virtual machines. To date, Microsoft has 12 data centers to support Microsoft Azure. The company plans to increase to 16 data centers by the end of 2014.

Microsoft Azure is independent of the underlying computing hardware configuration that enables it to be accessed using any end-user device. In March 2014, Microsoft unveiled Enterprise Mobility Suite (or EMS), a cross-platform cloud-based mobile device management platform. Company officials stated that more than 50% of the Microsoft Azure customers use EMS. This bundling and providing of economic alternatives to customers for managing identities, information, and devices are expected to go a long way in increasing subscription licenses to Microsoft.

Microsoft Azure has a strong presence in China

Microsoft Azure has a strong foothold in China. It was initially launched as a limited edition but went completely live in March 2014. Microsoft Azure is delivered through a partnership company, but Microsoft provides the software licensing. Some of Microsoft Azure’s customers include Coca-Cola China, Lineong Entertainment Technology—a mobile games company—and state-run China Network Television.

The above chart shows the price per database core of various players, including Microsoft. According to Value Prism Consulting, price per database core provides a view to understand the performance of each appliance as a factor of total price. Microsoft is the winner, as it gives high performance at economical prices.

Issues

According to Gartner, Microsoft Azure appeals mostly to .NET developers. Also, there is a big price war among Google, Amazon, and Microsoft—all leading players in the market. So, any slashing down of prices by one player is promptly followed by the other two players. This could hurt Microsoft Azure’s profits.

Microsoft Azure might not be a leader, but it is expanding very fast in terms of applications and geography. Its hybrid cloud approach offers some hope regarding its future in the cloud space.