TechEd2014: Commodity cloud services are on a race to zero - Microsoft

Microsoft's GM of cloud and enterprise, Steven Martin, acknowledged AWS's first mover advantage but remains confident on the outlook for Azure

We are just at the starting point when it comes to price wars between competing global cloud providers and customers will continue to benefit from falling costs, according to Steven Martin, GM for cloud and enterprise at Microsoft.

“The prices will continue to come down,” Martin said. “We made a commitment to match Amazon on commodity services, like compute, storage and bandwidth. I personally stated this in a blog post and we will stand by that. We will match Amazon on those services. We are not going to be undersold there. Our prices will continue to come down.

“We are just in the beginning and we are clearly in a race to zero. I think one of the most interesting things is what is going to happen after you get there. The price for a core hour of computing has been cut in half since we started in this business and it will continue to get cheaper, which is great for customers.

“Ultimately the things that will differentiate one technology provider from another will be your ability to run in a scalable, 24/7 manner. One of the things that is going to happen in the next few years is that we will get away from talking about SLAs. It is not that they are not important. They are important. But even more important than an SLA is your track record. SLAs are just a financial guarantee to a customer that you will pay them something if you don’t meet their need – it says nothing about your actual ability to do it.

“The second thing is the worth of higher value services. Commodity services for compute, bandwidth and storage are going to race to zero or near zero. As we continue to evolve and move higher and higher up the stack, there is an opportunity to sell higher value services to customers that solve a bunch of problems that they have,” said Martin.

Speaking to Computerworld NZ before the start of Microsoft’s TechEd conference this year, Martin said that these higher value services would mean that customers were thinking more on outcome levels, and less of the technology underneath it.

“We continue to raise the level of abstraction higher so that you can start at places that are more meaningful. Sometimes it is uncomfortable for some customers. They really want to take traditional approaches, and we have got great options there, but we really do encourage customers to begin experimenting with some of these higher value services that we think will make their lives easier and ultimately add more value.”

“We encourage customers to bet on prices coming down. And then think, what would you do on the big data side, analytics and machine learning if compute and storage continue to get cheaper? What does that open up to you? There are lots of things that you might do if the process continued,” said Martin.

Talking about the focus areas for the near future, Martin stated that the Azure team was working on making existing services more robust and also adding new services to the cloud platform.

“Initially, we saw a lot of customers using us for development and test environments and some lightweight production stuff, but workloads that are moving to the cloud are getting more and more sophisticated. Customers need a variety of things and they need very high levels of availability and failover. We are working on a bunch of things that will allow those scenarios. ”

“We are not falling back on innovation. We are working on net new services, which we will talk about later this fall, but customers can expect that we will mature the existing services so that they are even better for high availability or large production scales,” he said.

Speaking candidly about the competition, Martin accepted that Azure still had some catching up to do to become the commercial leader in its space.

“We still haven’t figured out a way to overcome a first-mover advantage. Amazon was the first mover in that space. That is just true. We think that we bring a couple of things to the table that we know Amazon doesn’t. First the focus on hybrid. We really want to help the customer be successful on both sides — inside the firewall as well as what they are doing in the cloud and wherever they are using the technology.”

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“The second thing is we are not just a cloud provider. We will help them manage all the way through to the app and make sure that they are successful on all pieces. We will continue to do things to make sure that it is not just cloud. It is an infrastructure that is fully certified and managed and you can treat it like a logical extension of your datacentre,” said Martin.

Setting up data centre presence outside the US is part of its strategy to beat its rival. Microsoft will soon go live with its Azure datacentres in Australia, but is currently not planning any in NZ.

“Generally with data centres we are talking about hundreds of millions of dollars of investment. The more distributed you get, the worse off you are from a cost perspective. So there is a constant trade off that we do. We could be even more cost effective and offer even lower prices if we had just one datacentre in the world. The more distributed you are, the more it is not going to be the case.”

“If you ask a CIO, would you rather have a cloud provider that is in your country? The answer is yes. In your town? Yes. In your building? Yes. Are you willing to pay 10 or 15 times as what you would pay a global provider that isn’t right next door and that is when we get to what I consider to be the adult stage of the conversation. If you want the world’s cost model, then we have to be conscious about how distributed we are,” said Martin.

He added that Azure would beat AWS’s first mover advantage, but shirked from giving a timeline for the milestone.

“I have no idea when. We will know when we get there,” he stated.

Martin will be taking to the stage at Microsoft’s TechEd 2014 to deliver one of the three keynotes, which will start the official proceedings in the late afternoon today. He will be focusing on 'The Next Five Years in Computing' in his keynote.

Much like earlier years, this year’s TechEd conference, which will run for four days in Auckland, will bring together IT developers, tinkerers, vendors and partners to discuss the latest developments in Microsoft and its technologies.

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