Linked by Thom Holwerda on Wed 9th Dec 2009 22:12 UTC
Microsoft "In a much anticipated move, Microsoft has created the Server & Cloud Division within the Server & Tools Business that merges the Windows Azure and the Windows Server & Solutions groups. The move shows that Azure isn't just an advanced development project for the software giant, and the company is ready to make money from it. Microsoft says its strategy is to create 'a single organization focused on delivering solutions for customers that span on-premises data centers and the cloud'. Windows Server, Windows Azure, SQL Server, SQL Azure, Visual Studio, and System Center are all part of this strategy that includes both on-premises and cloud solutions. Microsoft notes it is the only company in the industry that can offer its customers the choice to tap into a server platform, a cloud platform, or both."
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RE[3]: Bad news
by Bryan on Thu 10th Dec 2009 15:01 UTC in reply to "RE[2]: Bad news"
Bryan
Member since:
2005-07-11

To be blunt, Microsoft isn't competing with their partners so much as they're competing with Google and Amazon. Traditional hosting partners are basically "collateral damage".

Although there are still a lot of issues around privacy and trust that need to be worked out, it's clear that cloud/utility computing is going to be one of the key driving trends over the next few years. Microsoft needs to be a major player in that trend to stay relevant and few, if any, of their partners could achieve the same economies of scale that they'll be able to leverage from Azure. This is too important for Microsoft, and their competitors are too focused, for them to just hope that partners will collectively be able to create solutions that can rival Google.

Partners have proven to be a mixed blessing for Microsoft. One the one hand, they play an important role in popularizing the platform, but on the other they often fail to deliver solutions that are as thought through on an end-to-end basis as compared to other companies that own the whole stack--they tend to focus on just their piece, with little thought to the solution as a whole. Compare the PlaysForSure ecosystem (remember that?) with the iPod or crapware-loaded OEM PCs with the Mac. If you're a partner who's invested considerable time in understanding and delivering Microsoft-based solutions, then you need to see Azure as one of the key opportunities to carry those investments into the future, since the alternative would be clinging to the old way of things while your market is eroded by Google, Salesforce, and their ilk.

Also keep in mind that technology by it's very nature is disruptive over time. They way you do business today is by no means guarateed to work in the future. Look at Google Chrome OS. Regardless of whether that particular product succeeds, it's clear that the management-free paradigm it represents is the future, and as that future becomes more fully realized, the entire field of desktop support, as well as most of the home computer services, will evaporate. If you felt you were entitled to maintain your business model indefinitely, you're in the wrong field. The biggest challenge of participating in a field that's built on the premise of delivering ever greater levels of automation is service-driven models inevitably face shrinking markets over time. Your best bet now is to try to understand the consequences cloud computing will have on the industry and align your business to take advantage of the opportunities that will arise as a consequence.

Reply Parent Score: 2

RE[4]: Bad news
by TBPrince on Thu 10th Dec 2009 18:11 in reply to "RE[3]: Bad news"
TBPrince Member since:
2005-07-06

To be blunt, Microsoft isn't competing with their partners so much as they're competing with Google and Amazon. Traditional hosting partners are basically "collateral damage".

I'm sorry but I don't agree about this. When you're using software or services from a company, you usually ensure that they aren't competing with you or, at least, that such company has a different end-users offer than yours. Another way is to provide BIG discounts in order to let your partners be more competitive than you towards end user, so you can channel customers to your partners rather than directly to you.

The reason you do this is because as source for that software or service (and mostly any product) you could ALWAYS be more competitive than ANY partner of yours. You decide to sell your products via partners in order to extend your reach, or reduce the number of subjects you need to have relationships with, expecially when those could be in the millions.

MS has thousands (or tens of thousands) partners instead of having to deal with tens of millions of customers. That includes many practical advantages. So while MS doesn't technically need partners, they better have to keep a lot of them. That's completely different from competing to companies with different products, meaning products which are aimed to same targets but come from different companies.

Microsoft needs to be a major player in that trend to stay relevant and few, if any, of their partners could achieve the same economies of scale that they'll be able to leverage from Azure. This is too important for Microsoft, and their competitors are too focused, for them to just hope that partners will collectively be able to create solutions that can rival Google.

Microsoft doesn't *need* that. Rather, they *want* that. However, that's not fair to partners. They want partners to open the road to customer and then then tease those customers by directly talking to them: "Hey... it's SQL Server and we made it! We can make it work better. Switch to us.". Not fair because that way Microsoft can seize from partners most of the overall margins. And it's a blackmail because by putting partners on the same floor and preventing them from take ANY decision about the technology (because partners cannot control such technology since it's Microsoft hosting Microsoft), they force partners to compete on price only. That is, you turn "partners" into "shops".

Microsoft simply wants to seize margins, probably aiming to a general reduction of costs associated to its Windows platform. To keep earnings while reducing prices, you have to squeeze margins partners get.

Partners have proven to be a mixed blessing for Microsoft. One the one hand, they play an important role in popularizing the platform, but on the other they often fail to deliver solutions that are as thought through on an end-to-end basis as compared to other companies that own the whole stack--they tend to focus on just their piece, with little thought to the solution as a whole.

And that's because partners aren't SHOPS. They have their own soulz and they don't care about how much Microsoft will earn: they care about what they can get. They don't simply "resell", they "implement". If you want people who resell, why don't you just open your own shops, hire people and sell your own products rather than try partners to do this for you and then seize their margins?

Compare the PlaysForSure ecosystem (remember that?) with the iPod or crapware-loaded OEM PCs with the Mac. If you're a partner who's invested considerable time in understanding and delivering Microsoft-based solutions, then you need to see Azure as one of the key opportunities to carry those investments into the future, since the alternative would be clinging to the old way of things while your market is eroded by Google, Salesforce, and their ilk.

Again, I don't agree. Microsoft wants to switch into selling services and that's something which is reasonable for them. So go on and sell services. However, what's not fair is to use partners to drive the way and then crush them by directly competing with them. Again, partners are not shops. If you want MS shops, open those shops. If you want partners, you have to keep up the work to allow partners to choose your solutions because they can get money from them (and not because YOU could get money from them). That looks subtle but it's substantial.

Also keep in mind that technology by it's very
nature is disruptive over time. [...] If you felt you were entitled to maintain your business model indefinitely, you're in the wrong field.

This is not a change of business model. This is a blackmail. But don't worry: we perfectly know what to do to hit back guys who aren't hitting us ;-) I'm not complaining because I don't know what to do, I'm complaining because this is a threat which is not needed. But we're not scared at all: we will simply act in a different way and we will get our margins back. ;-)

When you develop SQL Server AND SQL Server for Azure, who can guarantee to us that SQL Server will match features of SQL Server for Azure and you're using SQL Server to steal customers and then drive them to you by offering something which we could never offer ? No-one can. So what's the answer to this? Simple: we will invest into different technologies which you can't have and support your technologies ONLY to get more customers in specific situations. When a customer will ask me if it's better to get Oracle/MySQL/Postgre or SQL Server, tomorrow I will tell them to get first ones. You could ask: how can you drive your customers ? MySQL = free / SQL Server = higher price tag.

The biggest challenge of participating in a field that's built on the premise of delivering ever greater levels of automation is service-driven models inevitably face shrinking markets over time. Your best bet now is to try to understand the consequences cloud computing will have on the industry and align your business to take advantage of the opportunities that will arise as a consequence.

Thank you but as I said, we perfectly know what to do. And we have plenty of time to do that until Microsoft can get any dime from Azure. And our first move was to cancel any MS-only offering (which had a lower price tag): now if Microsoft wants to sell SQL Server, they must ensure that it has a lower price than MySQL (which is free) or Oracle or VMWare or whatever.

Don't worry: we know what do do. But this was not necessary ;-)

Reply Parent Score: 2

RE[5]: Bad news
by Bryan on Fri 11th Dec 2009 02:24 in reply to "RE[4]: Bad news"
Bryan Member since:
2005-07-11

I'm honestly not trying to be rude here, but from the arguments you've made, it doesn't really sound like you understand what Windows Azure is. I didn't explain it well at all through my examples, and it warrants clarification: Windows Azure is not simply a large collection of VMs running standard Windows Server with standard configurations of IIS and SQL Server running on top of them. If that was all it is, I would agree with you 100% that it would be an incredibly unfair move against their partners. But this isn't simply a landgrab to fill their own coffers at your expense. Azure is not so much a collection of operating systems in the cloud as it is a cloud operating system.

To explain what exactly that means, it's best to really look at Azure and its competitors. I would suggest reading up on Amazon's Web Services [1,2], Google's App Engine [3,4], and then Windows Azure itself [5,6]. As you read more about these, it should become clear that these utility computing services are very different from traditional hosting. Honestly, I think those kinds of services are going to have an increasingly hard time competing against cloud utilities as they mature--regardless of whether your using proprietary or open source software. I'm not saying you should simply give up, but you may have to settle for a niche or look for new business models that work with these utilities rather than ignoring them.

[1] http://en.wikipedia.org/wiki/Amazon_EC2
[2] http://aws.amazon.com/
[3] http://en.wikipedia.org/wiki/Google_App_Engine
[4] http://code.google.com/appengine/
[5] http://en.wikipedia.org/wiki/Azure_Services_Platform
[6] http://www.microsoft.com/windowsazure/windowsazure/

Reply Parent Score: 1