Cloud Pitch Puts Microsoft on Firmer Ground

Earlier this week in Washington, D.C., at its Worldwide Partner Conference (WPC), Microsoft made clear that it is serious about maintaining an industry-leadership position as businesses and enterprises make the transition from conventional data-center computing to cloud-based alternatives.

At the forefront of Microsoft’s pitch was the Windows Azure Platform Appliance (WAPA). Appliances aren’t new concepts. As hardware-based software-delivery platforms, they’ve been around for some time. But Microsoft’s conception of WAPA deviates from any conventional definition of a standard networked appliance. Although Microsoft calls it an appliance, its exact form factor has yet to be defined precisely.

Initially WAPA is likely to take the form of containerized infrastructure for data-center deployment. In time, much of its functionality might get squeezed into a rack. We just don’t know.

There’s a lot we don’t know about WAPA. The form factor, availability dates, pricing, how it will be sold to customers — all of that is to be determined by Microsoft and its partners.

Speaking of which, partners were and remain key considerations in Microsoft’s plans for cloud computing. Microsoft’s channel partners are critical to its success, and Microsoft needs top-drawer technology partners to bolster and disseminate its products and technologies in the marketplace.

Microsoft’s latest proclamations, then, should be viewed as a concerted bid to get partners under its cloud-computing tent. Channel partners, who have been concerned about the implications of cloud business models on their current revenue and margins, also have grown anxious about whether Microsoft might encroach on their turf. Accordingly Microsoft was at pains this week to demonstrate that cloud computing is good not only for Microsoft but for its partners, too. Quoting from Computer Reseller News:

In a later keynote, Stephen Elop, president of Microsoft’s Business Division, sought to dispel the idea that channel partners can’t make money reselling Microsoft services. He cited a study the company made of 40 sales contracts for Microsoft Online Services through channel partners (average deal size $24,000) and concluded that each generated $167 per seat in revenue for solution providers. That included $35 per seat for providing managed services such as desktop management, $66 per seat for business consulting and customization work, $46 per seat for migration and integration services, and $20 per seat for provider-of-record fees.

“It is no longer a question of if, but when our customers should move to the cloud,” Elop said. “Increasingly our customers are purchasing suites of online services. Customers are speaking with their wallets.”

As for technology partners — Dell, HP, Fujitsu — Microsoft needs them to have skin in the proverbial game. It needs them to derive benefits not only from providing enterprise cloud services but also from selling their own hardware and software into enterprise accounts that favor private clouds rather than public ones. (And there are a great many enterprises that aren’t ready to take a blithe hop, skip, and jump toward the public cloud.)

The super-sized appliance approach gets three big system vendors onside, each of them offering unique complementary value and market coverage. Microsoft clearly has given this some thought, and it’s tapping Dell, HP, and Fujitsu for very specific reasons. Dell has been with Azure from the inception, providing the hardware and considerable assistance for Microsoft’s first Azure data center; HP has global services coverage and direct access to well-heeled enterprise customers; Fujitsu is strong in Asia and Europe, and it brings its own technological resources to the table.

In fact, what impressed me about Microsoft’s Azure announcement earlier this week was that it was so coherent, focused, logical, and purposeful — all the attributes typically absent from Microsoft’s consumer forays. True, Azure has advanced unevenly, and Microsoft still has to provide considerably more detail before we can evaluate it thoroughly, but I see an acuity and confidence from Microsoft that is at odds from its awkward and ungainly posturing in consumer markets.

This is an area where Microsoft can compete effectively, where it can leverage its installed base, corporate resources, expertise, and institutional knowledge. It’s where Microsoft needs to put more resources, not less. When one compares the smoothness and viability of this narrative with the stuttering tales Microsoft spouts on behalf of its Windows Phone 7 and slate/tablet misadventures, one finds it hard to believe they’re coming from the same company.

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