How Microsoft Is Revolutionizing The Cloud: Satya Nadella’s … – Forbes
(Note: After an award-winning career in the media business covering the tech industry, Bob Evans was VP of Strategic Communications at SAP in 2011, and Chief Communications Officer at Oracle from 2012 to 2016. He now runs his own firm, Evans Strategic Communications LLC.)
CLOUD WARS — While Microsoft’s posting of $5 billion in quarterly cloud revenue was a remarkable achievement, that milestone’s already been forgotten in Redmond as Satya Nadella’s company redefines how business customers think about the cloud and raise their expectations for what they can demand—and receive—from their enterprise-cloud vendors.
The silly myth that Amazon is the runaway kingpin of the cloud—a fantasy some media cheerleaders can’t seem to grow out of—is a classic product of Silicon Valley bubble-think, in which “cloud” somehow equates to IaaS and only IaaS. And public IaaS, to put too fine a point on it.
But business customers that are surging into the cloud as the foundation for digital transformation are increasingly seeing the cloud in multiple and interdependent dimensions: elegant, powerful and modern applications that run the global economy; platforms that give businesses greater IT flexibility, nimbleness and security than they’ve ever imagined before; and core infrastructure with levels of soaring performance and downward prices so extreme that they’re hard to comprehend.
No cloud company on Earth aligns more precisely with that new model than Microsoft, and under CEO Nadella, no company has done and is doing more to continue to push the customer-centric POV and potential of enterprise cloud computing.
So in light of the news from Microsoft late last week that it had generated $1.7 billion in cloud revenue in the month of September—let me repeat that: $1.7 billion in cloud revenue in the month of September—we would perhaps do well to look at just why that extraordinary performance is taking place.
And those of you who would attempt to rationalize Microsoft’s achievements by whining that “It’s all Windows and PC stuff,” you’re hopelessly wrong, and you’re only deluding yourselves. You may not have to like how Nadella and Microsoft are turning the cloud business upside-down, but that doesn’t negate the reality.
So let’s hear in Nadella’s own words how his company’s outflanking even mighty Amazon—a terrific company for which I have the highest respect—in the cloud, via Nadella’s comments during last week’s earnings call with analysts.
- A focus on seamless architecture across the entire “digital estate.” “We have been focused on addressing the real-world needs of customers with our differentiated approach to the cloud – architecting for hybrid consistency, developer productivity, AI capabilities, and trusted security and compliance. Moreover, customers are choosing the Microsoft Cloud for its operational consistency, productivity and security that spans the entire digital estate, including Windows 10 cloud security and management, Dynamics 365, Enterprise Mobility & Security, and Azure.” My POV: Nobody does this as well as Microsoft, or at Microsoft’s scale, or with the customer-first mindset that Nadella has infused across the company.
- Azure revenue has grown 90+% for four straight quarters because it delivers what business customers crave: consistency. “To support the emerging Intelligent Cloud and Intelligent Edge application pattern, you need a consistent stack across the public cloud and the edge. Merely providing co-location service or connectivity between on-premises data centers and the public cloud is not sufficient to meet customers’ needs. You need consistency across development environments, operating models and technology stacks. Azure provides this consistency across the entire stack inclusive of identity, data, app platform, security and management – all at the edge and in the cloud. Our hybrid cloud is one reason nearly every Fortune 500 company has chosen to partner with Microsoft. Costco recently chose Azure as its hybrid cloud platform, and we are excited to partner with them on their digital transformation.” My POV: Any cloud competitor that assumes Azure is booming in the enterprise because it “works well with Windows” is being silly at best and foolish at worst—this is a world-class platform, and here’s more proof of that.
- Azure’s winning huge chunks of market share among global corporations for their most-strategic workloads. “I think what has happened is the change—even in the financial-services industry, the segment that you all represent—in the kinds of workloads that are now moving to the cloud—that has qualitatively changed. In the past we participated, but a lot of Tier One workloads were not on Microsoft’s stack, whereas now a lot of Tier One workloads are, in fact, increasingly on Microsoft Cloud. And so to me that represents a qualitative change and so the type of dialogue we have, whether it’s with an auto company or a financial services company, or a retail company, is much deeper, much broader. And I would use the word we are deeply “partnering” with them. It’s no longer just simple vendor relationships, because as they’re trying to build their own software capability, they need a trusted partner who is more interested in making sure that they can build their own technology capability—and that’s what we are investing in.” My POV: Many—most?—cloud vendors are in a race to sell more services than a secular competitor. But Microsoft has the breadth and commitment to focus on winning strategic business customers for long-term relationships built around business success and business innovation in the cloud.
- Hybrid’s not a transfer point—it’s a strategic destination: intelligent cloud, and intelligent edge, centered on AI and IoT. “When we say hybrid, we never thought of it as some kind of a temporary state, but we always thought the edge and the cloud was going to be where the application pattern was, in fact, going to get to. In fact, I’m very excited about some of the new workloads. If I look at whether it’s IoT or AI, the two workloads that are new, both of them require both computation and intelligence on the edge, and a very new way to do even computation, which is this event-driven computation. So we feel good about new workload growth. We feel good about these “lift, shift, modernize” motions that are happening. We feel that we are well positioned for both meeting today’s realities of our enterprise customers, but most importantly where on a secular basis I believe hybrid computing is going, which is to this architectural pattern of intelligent cloud, intelligent edge.” And from CFO Amy Hood: “Our unique ability to provide a distributed hybrid model for the intelligent cloud and intelligent edge continues to attract customers to Microsoft. Symantec, the industry’s largest security vendor, has adopted a company-wide hybrid strategy with Azure, including delivery of its Norton consumer products to a global community of more than 50 million people. And financial services firms like Bank of America, TD Bank and Sumitomo Mitsui Banking Corporation are all using Azure and its data services to improve customer experiences.” My POV: No one else in the cloud is talking about this advanced-digital vision for customers—absolutely no one else.
- Yes, we think our technology is super-cool, but what we really focus on is ensuring it helps you become capable of creating your own super-cool software.
“One of the things we emphasize is not about our technology, but our ability to transfer that capability to our customer. Because they are increasingly becoming—whether they’re in retail, in oil and gas, or financial services, or other industries—every one of them is trying to build their own software capability and we are uniquely capable of helping them do that.” My POV: Again, Amazon Web Services is an excellent business—but can they help companies do this sort of thing?
- AI is the new heart of competitive advantage. The core currency of any business going forward will be the ability to convert their data into AI that drives competitive advantage. Azure SQL DB makes it possible for customers to take SQL Server from their on-premises data center to a fully managed instance in the cloud, with no code changes. And SQL Server 2017 is now broadly available on Windows, Linux and Docker containers with everything built in – including the ability to run AI compute close to the data with Python and R. Azure Cosmos DB is the first globally distributed, multi-model database that enables developers to write apps for IoT and other event-based, serverless applications. We are accelerating our innovation to help every developer be an AI developer, with approachable new tools from Azure Machine Learning Studio for creating simple ML models, to the powerful Azure Machine Learning Workbench for the most advanced AI modeling and data science. We continue to enhance our Cognitive Services to give every enterprise powerful building blocks to create their own AI applications.” My POV: And Nadella is putting enormous resources behind his belief in AI: a year ago, he created a new AI division with more than 5,000 computer scientists and software engineers—again, commitment at a scale no other cloud vendor can even approach.
- In SaaS, Dynamics 365 takes an entirely new approach. “The way we designed Dynamics 365 both on the technology front as well as on the business model front was to get away from what I would describe as the old school suite-based selling or suite-based building of these things, whether it’s CRM or ERP or SCM, because we realized that for example you take any IoT project that is starting in Azure. It first translates into an analytics workload that pulls through some Azure higher order analytics services, and then immediately after you do something like preventive maintenance and you need field service. And all they need is just a very robust field service module that’s cost effective and efficient. And so we’re able to attach that to that project. Similarly on talent, if you start on LinkedIn with hiring, you want to be able to do the onboarding and talent management…. So the growth is actually across the board: it’s coming in customer service, it’s coming in sales, it’s coming in talent, it’s coming in operations—and we have some very competitive price points there.” My POV: Not only a rejection of the suites-for-everyone mentality, but also this: Dynamics 365 connects beautifully with Microsoft 365 to elegantly interconnect the entire “digital estate”—is anyone else doing that?
- The advanced services Microsoft is building on and around the Azure platform are extremely appealing to businesses—as evidenced by 13 consecutive quarters of triple-digit growth for Azure Premium Services. “The premium services, for example the way we think about them is in everything related to our data, and especially the higher level databases. I’m not talking about raw storage, but this is Cosmos DB or Azure DB or any of the data services, our IoT services, our AI services are all the premium services. And there is a path. Every customer sometimes just starts with infrastructure as a service and some storage, and then the lift/shift turns into lift, shift and modernize. And that’s where these premium services get activated. So they definitely are margin-accretive for us, but most importantly they add a tremendous amount of value to the customers.” My POV: The cloud is a hugely powerful force in digital transformation, and Microsoft is seamlessly tying in advanced technologies that are turning AI and IoT into real-world contributors to revenue and profit rather than just topics at wonky strategy meetings.
- Of those advanced technologies Microsoft has interlaced with the Microsoft Cloud, none is more strategic than AI. “This month we also introduced Windows Mixed Reality broadly. Mixed reality – which is a voice, gaze and gesture interface – will fundamentally change the way people and teams collaborate. Our work with Ford is a great example of this promise. Ford’s designers are using mixed reality to blend 3D holograms digitally with both models and physical-production vehicles, allowing them to experiment and iterate on design much more quickly.”
- And Microsoft is expanding, deepening and accelerating the infusion of AI into not only everything it makes, but also everything its massive community of developers make. “This past quarter, we launched a wave of innovation across Microsoft 365. The Windows 10 Fall Creators Update empowers people with new AI-first interfaces ranging from voice-activated commands through Cortana, inking, immersive 3D content storytelling and mixed reality experiences. Cloud sharing and co-authoring experiences are now natively enabled with OneDrive files on demand. And we’re making Windows 10 more accessible for everyone with new features like Eye Control, which gives people the ability to operate a PC using just their eyes.” My POV: Eye control, eh? I can’t wait until the 4-letter-acronymers start yapping about “ECaaS.”
So: for AWS and IBM and Salesforce and SAP and Oracle and others, there’s still plenty of time and opportunity to unleash massive innovation and fresh initiatives in the cloud. But when it comes to Microsoft, you’d better understand what you’re up against: a competitor that is performing at an incredibly high level.
And it’s only just beginning to hit its stride.