A few years ago, most of the cloud-computing headlines were about price cuts, as Microsoft Azure and Amazon Web Services battled to be low-price leaders. Those days are ending, according to Scott Guthrie, executive VP of Microsoft’s Cloud and Enterprise Group — though one prominent analyst partially disagreed.
“For the most part, we (Azure and AWS) aren’t competing on price,” Guthrie said during a 45-minute on-stage interview at a Deutsche Bank technology conference Tuesday. “It’s typically we’re competing more in value, I would say at this point. Which is a difference versus, say, two or three years ago, where I think it was more about cost per VM (virtual machine) or cost per storage.”
By “value,” Guthrie clarified to interviewer Karl Keirstead, he was referring to “the higher level services, the features, the performance and the ability to differentiate or deliver true innovations in a way that isn’t possible on prem(ises).”
But David Linthicum, senior VP of consultancy Cloud Technology Partners in Boston, this morning disagreed with Guthrie, at least partially.
“We’re not seeing press releases saying ‘We’re cutting 10% across the board,'” he said. “That kind of craziness seems to have slowed down. However, we’re seeing price competitiveness occurring in per-deal instances. . . . We’re seeing deeper discounts than a few years ago in large enterprise procurements among AWS, Microsoft and Google. There’s probably not as much discounting for small and medium-sized businesses, because they don’t have to. But they are wheeling and dealing with the larger enterprises, which is something that wasn’t occurring just two to three years ago.”
Nonetheless, cloud computing won’t see a margin-slashing “race to the bottom” in pricing, Linthicum predicted, because “AWS owns a vast majority of the market, and if it becomes the dominant player, it won’t see the need to reduce its prices.”
Here are a few more highlights from Guthrie’s interview, edited for clarity:
On Azure’s geographical coverage: “We have more regions than AWS and Google combined, and we don’t just have broad coverage of regions but also meet unique data-residency promises that no other cloud vendor delivers, whether those are in China or Germany or for the U.S. government and Department of Defense. We can make guarantees around who has access to the data. We make promises that no American and no Microsoft employee has any operational control over those data centers or that data.”
On Azure sales: “We’re seeing tremendous uptake, with about 85 percent of the Fortune 500 companies now taking advantage of the Microsoft cloud, and more than 70 percent taking advantage of at least two elements of our cloud — for example Azure and Office 365, or Azure and Dynamics 365. . . . We’ve got more than 120,000 new customer subscriptions being created every month, about 1.6 million production databases now being hosted in Azure, more than 2 trillion IoT messages each week, 4 million developers. . . . About 40 percent of our overall revenue with Azure comes from startups and software vendors building solutions on top of us.”
On who’s moving what to the cloud: “Especially in the early phases, the vast majority of cloud usage, for us and for AWS and Google, has been net-new scenarios (developing new applications for the cloud). The number of customers looking to lift and shift from the data center to Azure — I’m sure we have some, but I can’t name even one. Now that’s changing. In the past 12-18 months, more traditional IT organizations are starting to move (older apps to the cloud).”
On the total addressable market for cloud computing, with market penetration now in the low single digits: “In theory it’s limitless. Obviously there’s some limit, but there are a lot of zeros in there. It’s going to be bounded less by market size than by our own creativity. We’re at the very beginning of a very long journey.”
On cloud security: “The threat environment is significantly scarier than it was a decade ago. Adversaries are getting more sophisticated. You’ve got to be paranoid, and you can’t take anything for granted. Any vendor who says ‘Use my stuff and you’ll be perfectly secure,’ you should run away from. They either don’t get security or they’re lying.”
On SQL Server vs. Oracle: “Oracle had been able to say, ‘They’re most cost-effective, they’re easier to use, but we’re still the leaders.’ This year we passed them in the Gartner magic quadrant. We’re the top right, the absolute leader in that space. That, plus the total cost of ownership, plus hybrid (capabilities) ends up being a conversation-starter with pretty much everyone.”
On the fate of Windows Server in an increasingly cloud-oriented world: “Windows Server 2016 has built-in containers and native Docker support. It’s a mature market, for sure, but there’s still a lot of innovations we’re able to provide.”
