A few days ago Microsoft hosted its annual VC Summit. The event, now in its tenth year, provides a valuable opportunity for VCs to hear from Microsoft executives, including CEO Steve Ballmer, about the company’s technology initiatives, areas of focus and business direction. One of the topics discussed in this year’s event was cloud computing and the upcoming launch of Azure. I spent some time talking with a few Microsoft executives about cloud computing, PaaS and Azure. It should be obvious by now that PaaS is a topic of great personal interest due to its ramifications on existing and future SaaS application companies. Here are some of the discussion points which I found interesting:
- Microsoft sees cloud computing as a technology enabler for the next generation of several product lines such as enterprise computing, data management, communications, etc.
- Business model conflict. Like other vendors with large revenue streams coming from on-premise software, Microsoft has been grappling with the financial impact of cloud-based systems to their core business model. However, rather than trying to deny the impact, the company appears to accept the coming business model cannibalization and is trying to stay a step ahead of it by starting to appropriately condition their sales force. The approach appears to be that if the model is going to be cannibalized anyway they may as well lead in the cannibalization effort rather than wait until it’s too late.
- Market adoption of cloud computing. Corporations are interested to hear about using private clouds as well as public clouds. They are already starting to think about what workloads (and associated data) they will push to private clouds and what workloads to public clouds. Microsoft claims that successful vendors will need to support both styles of cloud computing.
- PaaS/Azure.
- Cloud computing requires a new programming paradigm. Very few companies understand this. Azure will help developers to adopt the right programming paradigm and create scalable applications but it won’t come overnight.
- It will take 4-5 years before large scale, enterprise class applications can be developed on top of PaaS platforms such as Azure or Google Apps Engine. In addition to the programming model for new applications, it will be important for PaaS vendors to help customers migrate existing, currently on-premise, applications to the cloud.
- PaaS vendors must demonstrate 2 areas of expertise: developer support and data center support.
- Need for well-defined SLAs. Current PaaS vendors don’t talk enough about their platform SLAs (such as data security, uptime, disaster recovery, etc.) but just programming features. Developers using PaaS and IaaS platforms are starting to worry about SLAs because their own customers are forcing the think about the topic.
- Competition. In addition to the usual suspects, it was interesting that VMWare came up as a PaaS competitor. While recognizing that virtualization is an important technology for cloud computing but in itself doesn’t make cloud computing, Microsoft feels that with the addition of SpringSource, VMWare can evolve into a strong Azure competitor.
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