Microsoft Azure Sales Surging Past $1B

CloudsMicrosoft has its fair share of challenges, but cloud computing doesn’t appear to be one of them. The company reports sales of its Azure cloud service has topped $1 billion for the first time, and industry analysts expect Microsoft’s infrastructure services to double annually for the foreseeable future.

According to Forrester Research, 20 percent of the companies using cloud computing are now engaged with Windows Azure in some way. By comparison, 71 percent of companies in the cloud touch Amazon’s Web services. While the disparity is evident, Forrester believes Microsoft’s share will surge to 35 percent within a year.

While Microsoft can be criticized for misreading trends in mobility (smartphones), search and tablets, it scores for correctly interpreting the cloud computing equation. For years, Microsoft said that the key to the cloud is combination of a reliable platform, applications and legacy familiarity. Turns out that the driver of Azure adoption is end user appreciation for the legacy applications and new management tools Microsoft is porting into cloud environments.

Legacy familiarity is only part of the success story. Microsoft is leveraging its massive network of application developers and independent software vendor partners to provide its Azure users with access to cloud-based software that precisely solves individual operational needs. Subsequently, these same partners are promoting Azure as the infrastructure platform of choice rather than porting their wares across multiple service providers.

Probably the turning point for Azure came two years ago when Microsoft transformed the service from a development platform to an infrastructure-as-a-service offering. While businesses – ranging from solution providers to end users – need development platforms for new cloud-based applications, the growth opportunity is in hosting services that can provide reliable infrastructure.

According to the CTTA State of the Cloud Channel 2013 report, solution providers say 35 percent of their customers are asking for infrastructure services. By comparison, only 19 percent are seeking platform-as-a-service. The trend is for businesses to port more of their legacy applications – particularly business-critical software and work flows – into cloud environments rather than developing net-new resources.

For the channel, Microsoft Azure’s growth is a potential boon. The majority of solution providers will not develop organic resources for hosting and delivering infrastructure and applications to their customers. According to CTTA, a program jointly administered by The 2112 Group and Channel Partners Magazine, they will partner with software and infrastructure providers to supply cloud products and capabilities.

In practical terms, this means solution providers will steadily develop stronger bonds with Microsoft and its ISVs. As consumption of cloud applications in the Microsoft network increases, so, too, will the infrastructure consumption needs of the hosted providers. The trickle-up effect is an acceleration of Azure revenue growth to Microsoft. The trickle-down effect is giving ISVs and solution providers replacement revenue for lost on-premises license sales and, eventually, incremental revenue growth.

Again, solution providers can find plenty of faults in Microsoft’s failed strategies and shortsighted programs over the last few years. Azure, it seems, is where Microsoft not only got something right, but proved critics wrong. For solution providers, this is an opportunity to ride on Microsoft’s coattails in a way they haven’t been since the heydays of Windows.