In the cloud wars, Microsoft often comes off as second best to Amazon Web Services. But when it comes to established enterprises Azure wins more often than not. Here’s why.
As the old IT truism goes, nobody ever got fired for buying IBM. Now, in the cloud era, many are starting to apply the same logic to another well-known vendor: Microsoft.
For enterprises with extensive Microsoft footprints—spanning Office, Windows, Dynamics, Outlook, and other popular business applications—turning to Microsoft Azure services as part of a cloud strategy can certainly look like the path of least resistance.
“If you have to move to the cloud with constrained resources, it is a safer path to go with Microsoft and use many of the tools your employees are familiar with,” said Carla Arend, senior program director for software and infrastructure at IDC in Europe.
While Amazon Web Services (AWS) remains the clear market leader for pure cloud infrastructure, Microsoft is catching up. And the lingering effects of the pandemic are helping it gain ground fast.
In a January 2021 earnings call, Microsoft CEO Satya Nadella touted record cloud earnings—which includes revenue from Office 365 and other business applications—of $16 billion for the quarter, which was up a staggering 34% year-over-year.
Azure has since reached a 20% share of the cloud infrastructure market, according to Synergy Research, up from 10% in 2017. Microsoft’s ability to flex its sizable sales muscle and leverage its partner ecosystem to cross-sell Azure has helped it grow the cloud division into one of the primary providers in the market.
“Digital capability is key to both resilience and growth. It’s no longer enough to just adopt technology. Businesses need to build their own technology to compete and grow. Microsoft is powering this shift with the world’s largest and most comprehensive cloud platform,” Nadella gushed. Despite his self-interested enthusiasm, there is truth to what Nadella said about Microsoft’s place in the cloud.
Better the devil you know, and for many that devil is Microsoft
Microsoft’s deep roots in the enterprise, mainly around user-facing technologies, certainly appeals to midsize enterprises that may be lagging in their digital strategies and that are looking for a trusted partner to help ramp up their cloud usage. “For midsize and conservative organizations, the business tends to be Azure’s to lose,” said Paul Miller, a principal analyst at Forrester Research.
“Trust” is a word that comes up a lot when taking about Microsoft Azure. “The last part is around trust, how trusted is the partner? Microsoft has built out certifications and compliance and invested a lot to build that trust,” IDC’s Arend said.
“That sense of trust was absolutely critical,” said Andrew Proctor, pro vice-chancellor for digital at Staffordshire University, which in 2017 decided to go “all-in” on Azure as part of a broad partnership. “It was a strategic decision at an executive level based less on technology and more on what would be the opportunity for us,” he said.
Staffordshire University in the north of England has plenty of heritage when it comes to technology, with a sizable computer science department, a digital institute in the Queen Elizabeth Olympic Park in London, and having broken new ground as the UK’s first university to offer a degree in e-sports.
At the time the university made its “all-in” decision, Microsoft had an established foothold across the UK education sector, so the university decided to build its future capabilities around the vendor and its partners. “We looked strategically at how we could establish a platform for transformation and worked with Microsoft to do that,” Proctor said. “There is always that inherent familiarity with Microsoft products within an IT team, so that would have helped with the migration.”
Government is another area where Microsoft has been able to find good momentum. It has recently signed wide-ranging deals with the UK government and secured one of its biggest ever deals in this space by beating out AWS and other rivals for the controversial $10 billion Joint Enterprise Defense Infrastructure (JEDI) contract from the United States Department of Defense in 2020.
Leveraging your existing Microsoft skills
The familiarity with Microsoft tools and technology can help ease a cloud transition. “Those with a large legacy estate that are starting a digital journey will see Microsoft as the least disruptive, because they have the skills and partnerships and commercial relationships already,” said IDC’s Arend.
This was certainly the case for the Danish shipping and logistics giant Maersk, which has been steadily transitioning to the cloud since 2016 as part of a broader organizational shift toward being a more integrated logistics company.
On the architecture side, this meant shifting from a heavily on-premises setup, where each business unit had its own data center footprint, to becoming a more centralized, cloud-first company.
“A lot of the skills coming in at that time were Microsoft-based, both on the server side and Azure and on Microsoft development tools and techniques, so there was a natural fit there,” said Will Wigmore, head of enterprise architecture at Maersk. About a third of all company workloads are now running in the Azure cloud, both IaaS and PaaS, including a major project to shift Maersk’s existing SAP HANA system to run on Azure infrastructure.
Upgrading to Azure step by step
The first incremental steps with the Azure cloud tend to manifest as an upgrade to an existing Microsoft system, such as Active Directory or Dynamics being moved to the Azure cloud. This gives Microsoft an entry point its rivals do not have, either by helping a customer dip its toe in the water by moving an existing SaaS application to the cloud or by providing an Azure platform as a service for developers to build and rearchitect applications on.
“For companies that have been Microsoft shops, it has been made easy,” said Forrester’s Miller. “If you are a very structured IT organization, there is no way for a developer to go and try AWS themselves; it has to go through a central procurement process, which gives [Microsoft] a huge in-built advantage.”
This fit-for-purpose strategy has shifted the target buyer for enterprise cloud usage, a fact that AWS is clearly aware of as it tries to tweak its messaging to appeal more to business decision makers rather than its core customer base of software developers.
“The buyer persona has shifted,” said Ed Anderson, a research VP at Gartner. “AWS did well in that early adopter phase where customers were more willing to embrace disruption and new models. That’s not typically the buyer profile today, which is more conservative and want to take a more incremental path to the cloud. Microsoft has marketed well to that.”
Using hybrid and multicloud to onboard customers—and keep them for the long term
Microsoft has also helped itself with the middle market by providing plenty of effective onramps for organizations to get to grips with its services.
Unlike AWS, which has long pushed back against what are commonly known as hybrid cloud systems, and Google Cloud, which has never had the same enterprise sales muscle as its rivals, Azure has long helped customers run applications where they want them to be.
This gives customers a convenient entry point to the cloud and a good reason to stick with Azure long term, even if they reconsider putting all their eggs in one basket to limit their exposure.
After going all-in on Azure in 2017, Staffordshire University has since shifted to a multicloud approach with some AWS usage, to protect against vendor lock-in. But it retains a significant portion of its cloud stack on Azure.
Likewise, Maersk has a multicloud strategy, running various workloads with its longtime partner IBM and also on Google Cloud. But most of its cloud adoption is being driven by a five-year strategic partnership with Microsoft Azure, which is set to run through to 2022.
The launch of Azure Stack in 2016 let customers use a set of resources and similar functional experience to the Azure public cloud, but from the comfort of their own data center. Azure Stack lets more conservative organizations slowly ramp up their comfort level as they start to identify the best workloads to move into the public cloud proper.
Microsoft continued to build on this approach in 2019 with the release of Azure Arc, which aims to help customers manage both on-premises and containerized resources in a cloud-like way, similar to what Google Cloud is doing with Anthos. AWS has made some moves in this direction, but has stopped short of full multicloud support.
Microsoft has also had some success with industry-specific offerings such as its healthcare and retail options, intended to ease cloud adoption in those specific sectors using the same incremental approach.
Is Amazon a friend or foe? That question colors AWS investments
Another under-the-radar factor that can help Microsoft when dealing with certain industries, especially in sectors like retail and logistics, is an organizational suspicion of Amazon as a competitor preparing to eat their lunch.
“As the ambitions of Amazon’s CEO expand into additional markets, the boards of directors for companies in potentially threatened verticals have directed their IT organizations to avoid the use of AWS where possible,” note the authors of Gartner’s 2019 Magic Quadrant for cloud infrastructure as a service. “IT leaders in these verticals should consider a contingency plan for board-level directives,” the Gartner analysts wrote.
Take Maersk as an example. “If I go back to 2017, we weren’t sure if Amazon was a friend or a foe in terms of the supply chain business,” Wigmore admitted.
Watch out, AWS. Microsoft is coming on strong
Depending on whom you talk to—and your appetite for knotty financial accounting questions like “Is Office 365 cloud?”—AWS and Microsoft Azure are the clear cloud market leaders today, and will be for the foreseeable future.
What is clear is that the various levels of familiarity and expertise Microsoft can bring to enterprise engagements enables the company to provide a comfort blanket that is greatly appreciated by more risk-averse organizations.
This not only puts Microsoft in a strong position to snap up the next wave of cloud adoption, but also suggests a changing of the guard when it comes to cloud buyers, from developers with a corporate credit card to CIOs and architects with a clearly defined strategy, one that will play neatly into Microsoft’s master plan.